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Hargreaves asks QC to probe HMRC tax rebate ruling
by Jun Merrett on Apr 25, 2013 at 14:09
Execution-only service platform Hargreaves Lansdown has sought legal advice on whether to challenge HM Revenue & Customs (HMRC) decision to tax rebates.
In March, HMRC ruled that rebates constituted annual payments and so were subject to income tax, which it began levying from 6 April.
Ian Gorham, chief executive of Hargreaves Lansdown, said the firm had asked a QC to review the ruling. He said Hargreaves wanted to know whether the ‘loyalty bonus’ it pays clients out of rebates would be caught by the rule because it was paid on a discretionary basis and so, arguably, was not an annual payment.
He said the company would also look at whether there was a case for the platform industry to fight the ruling, something it would talk to other platform providers about.
‘The issue falls into two: whether it’s challengeable from a platform industry perspective, or whether the Hargreaves Lansdown way of doing it is challengeable, or both,’ he said. ‘We think any discount should be free of tax because it is a return of money clients would have otherwise paid in charges, so effectively it’s [clients] own money. We can’t see how it’s particularly different to Tesco Clubcard, so we think it’s worth a challenge.
‘We’ll see if our QC’s advice applies to the wider platform world, and have a think about how to go on from there.’
Gorham said any legal process would take one or two years, and Hargreaves would collect tax for HMRC in the meantime, but refund clients any reclaimed tax in the future.
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