Hargreaves Lansdown has launched a legal challenge against HM Revenue & Customs' (HMRC) decision to tax rebates.
In April our sister publication New Model Adviser® revealed that the execution-only platform had asked a QC to review the ruling following HMRC's decision that rebates constituted annual payments and were subject to income tax which it began collecting from 6 April.
The company has now moved to launch legal action against the taxman, which is expected to last months.
Ian Gorham (pictured), chief executive of Hargreaves Lansdown, branded the tax a "discount tax" and attacked its impact on the company's loyalty bonuses.
'The introduction of the "discount tax" was extremely disappointing news and an attack on the small investor. The "discount tax" is anti-competitive. Loyalty bonuses have been hugely popular with investors and helped them save money on investing in their favourite funds,' he said.
'We have saved investors over £1 billion in the form of discounts and loyalty bonuses, helping clients benefit from lower costs. Money that has gone straight to the investor without any need for it to be declared on a tax return or shared with HMRC.
'We feel it’s important to take a stand on behalf of investors. When we introduced loyalty bonuses we consulted on its tax position and it was clear, as a refund of charges, it should not be subject to taxation.'
Hargreaves said if its legal challenge is successful it will add this provision back into clients' accounts where applicable.