HM Revenue & Customs has announced it will appeal against a tribunal ruling that should hand £15m back to investors in taxes on loyalty bonuses.
The 'discount tax' ruling refers to rebates of annual management charges to clients when discounting investments - known as loyalty bonuses – that were deemed taxable by HMRC from April 2013.
Hargreaves Lansdown described the decision as "an unwarranted tax on investors" and launched a challenge.
Hargreaves won the first tier tax tribunal in March this year, but HMRC is now appealing the decision.
Chris Hill, chief executive of Hargreaves Lansdown, has said the group "see no reason why we would not be successful at appeal".
He said: "The process is likely to complete in the first half of 2019 and a successful outcome will see millions returns to clients, as well as a simplification of their tax affairs.
For now, Hargreaves Lansdown continues to pay loyalty bonuses to clients.
However, since 6 April 2013, these bonuses have been paid after deducting a 20 per cent provision for the 'discount tax' being equivalent to the basic rate of income tax.
This money is in part being held by HMRC and part by Hargreaves Lansdown, and will be returned to investors if the tax office loses the appeal.
Mr Hill said: "The reason we did this was to avoid creating large and unexpected tax bills for clients in the future if our legal challenge proved unsuccessful."
Investors are advised to include loyalty bonuses as income on their tax returns.
Basic rate taxpayers suffer no further tax charge, higher and additional rate taxpayers could be liable to either an extra 20 per cent or 25 per cent tax.
Funds held in Isas and Sipps do not have taxable loyalty bonuses, so there is nothing to do for those who only hold funds in these wrappers.
Mr Hill said: "The champagne is on ice until any appeal is concluded.
"Until that stage, the money withheld could still potentially be tax and owed to HMRC, so we will wait for a successful conclusion before arranging to return monies to clients."