A It’s a tax on the money you get back from the funds you invest in. When you put your savings into a investment fund, it normally pays you back some of your money in a rebate. There’s about 1,000 funds around which pay a rebate. But the so-called “loyalty bonus” you get is quite small, about £10 a year.
Q So HMRC is taking back the money I’m due?
A Sort of. It has started to tax the payment. It announced plans for the tax in March and started collecting it in April. The rebate, which is paid back to you usually every month, is an annual income and therefore should be subject to income tax, HMRC says.
Q What are Hargreaves Lansdown getting involved for then?
A If you’re a customer, it passes on the rebate to you. It says it wants to “take a stand” for its investors. It says it’s anti-competitive and could set a precedent for other cash back schemes used on things like TVs for example. HMRC, however, says the payment should be subject to income tax.
Q So Hargreaves Lansdown is going to court to make sure the tax collectors stop taking the money?
A No. They’ve decided they’re going to just stop paying it full stop. The tax due to HMRC is being held in a fund while the issue is sorted. The revenue is expected to launch a legal challenge to enforce the payment.
Q How will it end?
A In court. Hargreaves will either be forced to pay the money to HMRC or, if it wins the argument, return it to clients.