Hidden in the Budget’s small print were changes that are likely to result in the removal of requirements for mutual funds to pay interest distributions net of tax.
Assuming this is eventually enacted, from April 2017 there will no longer be any reason for a platform to offer separate net and gross nominee accounts according to Zurich UK Life’s head of retail platform strategy Alistair Wilson.
Mr Wilson said: “It might sound like a minor change, but it could be a big deal for platforms and fund managers.”
At present, platforms can choose to run two different nominee accounts: a gross nominee account for Isa and self-invested personal pension investors, and a net nominee account for general investment account investors.
In the instance of there being a single net nominee account, the platform reclaims the tax suffered on interest distributions for Isa and Sipp investors from HM Revenue & Customs, and pays that tax into the investor’s Isa or Sipp account.
Under the proposals announced in the Budget, from next April all interest distributions will be paid gross, with platform operators no longer needing to run separate net and gross nominee accounts.
Adviser view
Mark Polson, principal at the Lang Cat, said this is not something an adviser should have to spend too much time on, pointing out only a couple of platforms have gone down the gross nominee route, adding it has usually been for trusts and charities.
Mr Polson added: “Platforms will have to make some changes, but this is better than having to put in a load of new stuff.” He said fund managers would be the most affected, with some offering gross and net probably looking to amalgamate these.
ruth.gillbe@ft.com
