The iron hand of HM Customs & Revenue needs no introduction. So advisers could be forgiven for wondering what happened in March, when HMRC suffered two successive court defeats on retail investment issues.
First was a ruling in favour of self-invested personal pension provider Sippchoice. It has successfully protested the taxman’s sudden 2016 decision to stop permitting tax relief on in-specie Sipp contributions. Notably, HMRC had also asked for reliefs to be refunded all the way back to the 2012-13 tax year.
Then came Hargreaves Lansdown’s victory on the issue of fund rebates. A judge found that HMRC was wrong to treat the firm’s “loyalty bonuses” as taxable, a decision that has paved the way for £15m to be returned to investors.
Incidentally, while Hargreaves Lansdown’s fight has less direct relevance for advisers, it may ultimately reach further. The Lang Cat notes that a return to fund rebates as a primary method of discounting would reduce the prevalence of preferentially priced ‘super clean’ share classes. Removing these would get rid of one of the biggest barriers to swift investment transfers between platforms.
For once, these decisions are a shot in the arm for retail investors, rather than another example of iron-fist enforcement – assuming any appeals don’t succeed in having them overturned.
On top of this, the pensions minister has given assurances over the new powers HMRC will gain in June. The department will not abuse its newfound ability to deregister small self-administered schemes (Ssas) it deems are not used for valid retirement purposes, we are told. That’s all right then.
But intermediaries shouldn’t mistake these events as a sign that the taxman is being defanged. They look more like the consequences of a continuing clampdown.
These are not quite pyrrhic victories – their rewards are material for those concerned – but they will do nothing to change the direction of travel.
Our recent past has been defined by two particular tax-related stances: the first was the (now abandoned) 2015 pledge by the Cameron government not to raise income tax, VAT or national insurance rates for five years. The second has been a series of cuts to corporate taxation rates.
Add these to the increasing scrutiny of HMRC’s ‘tax gap’, and it’s not surprising the department has taken an even tougher approach of late. In the words of Royal London’s Steve Webb, it’s a case of “tax first, ask questions later”.
Mr Webb was referring to the emergency taxation rates initially levied on those using the pension freedoms, but the approach isn’t confined to one area.
Two new initiatives underline HMRC’s intentions. The Spring Statement may have been short on excitement, but it did contain a promise to more closely police online VAT fraud among retailers.
Of more relevance to advisers is the 30 September crackdown on non-compliant offshore interests. Many intermediaries will want to review clients’ affairs accordingly.