Loyalty bonuses

Payments made to investors

Hargreaves Lansdown offers a platform for the distribution to investors of various products offered by different fund providers. It also provides administration services to investors.

In 2013 HMRC announced from that April financial intermediaries making specified payments to investors should deduct basic rate tax at source. Hargreaves Lansdown considered that this did not apply to the loyalty bonuses it paid to investors. In essence these were a discount against management charges.

Given the large number of investors receiving such payments and the relatively small amounts paid HMRC and Hargreaves Lansdown made an agreement intended to avoid the necessity of multiple appeals. Hargreaves Lansdown retained an amount equal to the basic rate of income tax on the bonuses and HMRC assessed it under ITA 2007 s 957. Hargreaves Lansdown appealed against the assessment.

The First-tier Tribunal said case law had established that...