UK’s HM Revenue & Customs (HMRC) has issued a number of clarifications on the updated tax rebate position following requests from providers.
HMRC ruled in March 2013 that tax would be payable on platform rebates from 6 April 2013.
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The guidance note confirms that trail payments received by advisers will not be subject to income tax unless a proportion is passed onto consumers. It also confirms HMRC’s approval of Standard Life’s decision to pay tax on behalf of clients.
HMRC said: "Where a fund manager pays a financial intermediary amounts such as a percentage of their AMC or annual commission payable for the retention of an investment in a fund the payment will be trading income of the financial intermediary and as set out above will not be taxable as an annual payment."
HMRC said that payments made by fund managers to life companies would not be taxed as income because they are not ‘pure income profit’ when held by the life company.
The HMRC note also confirms that where the policyholder has an agreement with an intermediary platform to receive trail commission the obligation to deduct tax falls on the platform.
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By GlobalDataThe note states that when an adviser passes a rebate to an investor the amount will be treated as an annual payment and therefore incur income tax.
Earlier in June, HMRC changed its rules to remove capital gains tax charges while selling down bundled assets, to move into a clean share class.
In May, the HMRC also said it plans to extend its tax on rebates to some discount brokers.
