Hargreaves Lansdown has launched a legal challenge against HM Revenue and Customs’ tax on cash and unit rebates.
According to a statement from HL, the company pays a rebate net of a provision for the tax, and will add the provision back into clients’ accounts if the challenge is successful.
Ian Gorham, chief executive of Hargreaves Lansdown labelled the tax “an attack on the small investor”.
He said: “The ‘Discount Tax’ is anti-competitive. Loyalty bonuses have been hugely popular with investors and helped them save money on investing in their favourite funds.
“We have saved investors over £1 billion in the form discounts and loyalty bonuses, helping clients benefit from lower costs. Money that has gone straight to the investor without any need for it to be declared on a tax return or shared with HMRC.”
The government announced in March that rebates would be subject to tax. The policy came into effect on 6 April, with providers given a year to sort out their systems to automate the process.
Shortly thereafter the Tax Incentivised Savings Association tried and failed to convince HMRC to defer the implementation of its rebate tax until 2014.
In response to an initial consultation on the possibility of taxing rebates, Novia chief executive Bill Vasillief told FTAdviser such a tax could bring an end to the practice of rebates altogether.
In May, Standard Life announced it would pay the rebate tax for mutual fund customers until the end of December 2013.
Companies adopted a variety of approaches following the implementation of the new tax, including clean and controversially-named super-clean share classes.