Fund Platform Rebates to Become Taxable!

Lokolo

Can I ask who that is to? Just I would be interested in the response if it is HL.

dunstonh

It appears that Skandia are rolling over on this and going to move to clean share prices. They are the biggest platform and one of the few left that were operating a hybrid model on the IFA side (you cant operate a fully bundled platform in the advice world as you can DIY). So, the hopes of a challenge are fading if one of the major beneficiaries of the rebate system is going to roll over that easy.

jamesd

I deliberately removed the provider name. In part because I don't want to make it grossly obvious to the provider who I am and in part because I think it's useful for people to ask their own providers to show that there is some interest in this subject.

Rollinghome

This is clearly another wizard wheeze from the person who advised Osbourne on the wonderful pasty tax.

They had to act with only two weeks notice because it's likely that after the FSA announces the new RDR rules for commission to platforms by the end of April there won't be many of the old commission paying funds around - so this was the last chance for HMRC to have a bit of fun before the chance was gone.

Although there's not likely to be much extra tax taken, because of course everyone will just move a bit earlier to clean funds, there will be a lot of extra work changing systems, calculating how much to deduct and sending out statements and all that means more to pay out in wages - so generating extra income tax and NI. And there'll be plenty of extra overtime at HMRC. Think of it more of a job creation scheme.

When everyone has moved to clean funds the same team will come up with their new wheezes: tax on Quidco rebates, tax on all those perks to shareholders such as the goody bags at AGMs and discounts on ferryies and hotels, and all "free" cups of coffee received during meetings with financial advisers will be taxed as benefits in kind.

Linton

jamesd wrote: »

I deliberately removed the provider name. In part because I don't want to make it grossly obvious to the provider who I am and in part because I think it's useful for people to ask their own providers to show that there is some interest in this subject.

I have sent a note to iii asking why they dont pay into the ISA giving the HMRC guidance you provided - thanks.

dunstonh

The FSA was looking at 2014 for the platform review and was expected to allow rebates as long as they were in the form of units and not cash. It was also only expected to apply to new business after the platform review. HMRC did start consultation in December but the outcome and the timing is totally unexpected as well as applying it retrospectively (as in purchases rather than back taxing).

Either this is put a spanner in the works of the FSA platform review or they were in secret cahoots and allows the FSA to get an outcome they really wanted even though everyone else thought their position was restricting consumer choice.

IronWolf

Linton wrote: »

I have sent a note to iii asking why they dont pay into the ISA giving the HMRC guidance you provided - thanks.

I've had trouble with iii with this sort of thing also. And they still refuse to accept W8-BEN forms.

After April Im moving my ISA from them, just not good enough and not even the cheapest anymore.

grey_gym_sock

i'd like to think this is a cunning attempt to promote clean funds, but i can't convince myself ...

Rollinghome

This article from last year throws a little more light on the thinking behind it: http://www.out-law.com/en/articles/2012/december/tax-clarifications-required-before-platform-rules-are-finalised-says-fsa/

jamesd

Going to be even harder for iii to say HMRC don't allow paying rebates into an ISA soon:

Hargreaves Lansdown has replied to me saying that they are going to change the ISA so that rebates (Loyalty Bonuses) from April are paid into the ISA directly, not into the Loyalty Bonus account outside the ISA. This avoids the tax and also means that the rebates will increase the money in the ISA without counting against the ISA annual allowance.

The SIPP rebates already go into the SIPP. The Fund and Share account ones will remain subject to the tax and HL is planning to legally challenge HMRC on the issue.

The Investment Times issue for 6/7 April will have an announcement about this.

HL also say that they intend to offer clean funds but are waiting until the FSA's final platform rules so don't expect to announce anything until later this year.