150,000 Hargreaves Lansdown investors due £15 million rebate

20 March 2018

Around 150,000 investors who use Hargreaves Lansdown to invest could be in line for a rebate following the decision of a tax tribunal.

The ruling relates to a loyalty bonus on management charges that Hargreaves Lansdown has paid to customers for the last 15 years.

Hargreaves Lansdown says that HMRC was consulted on the bonus, which discounts management fees, at the time it was introduced. The platform adds that it was made clear that because the bonus was a refund of charges, it would not be subject to taxation.

However, this position changed in 2013 when HMRC announced that such rebates on funds held outside Isas or Sipps should be taxed as income and paid net of basic rate tax.

Hargreaves Lansdown launched a legal challenge against this decision in September 2013, with the tax tribunal today ruling that loyalty bonuses in this scenario are not taxable.

The ruling marks a significant victory for many investors, however HMRC could appeal today’s ruling.

An HMRC spokesperson comments: “We are disappointed by the judgement and are considering whether to appeal.

“The current rules will continue to apply until we are satisfied that the litigation process is complete.”

What does this mean for Hargreaves Lansdown investors?

Hargreaves Lansdown will continue to give the loyalty bonus to customers with the 20% reduction being removed if HMRC decides not to appeal the decision.  

However, customers who’ve paid 20% tax on this bonus since the rules took force in 2013 will receive a refund collectively worth “at least £15 million”.

The platform says investors don’t need to do anything for now, and adds that it will write to clients as soon as it knows more.

Chris Hill, chief executive of Hargreaves Lansdown comments: “This is a victory for ordinary investors who will see at least £15 million returned to them. Hargreaves Lansdown was one of the first investment services providers to offer loyalty bonuses to reduce the cost of investing, and our clients have enjoyed significant savings for over 15 years.

“We saw the ‘discount tax’ which HMRC introduced in 2013 as an unwarranted attack on private investors, so we launched a legal challenge, and I am delighted that the tax tribunal has supported our view. The ruling will not only see money returned to investors, but will also simplify their tax affairs, as there will be no need to declare the loyalty bonus on their tax returns.

“Furthermore, it is likely to benefit clients of all investment services providers which offer rebates on annual fund charges, not just clients of Hargreaves Lansdown. HMRC has the right to appeal, so the champagne is on ice for now.”

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