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HMRC says commission passed on to investors is taxable.

HMRC in their Review and Customs Brief 04/13 stated that they ‘would not be justified’ in seeking to collect tax for earlier years Trail commission paid to, or for, the benefit of an investor in a collective investment scheme, insurance policy or other investment product. It is taxable as an annual payment within ITTOIA 200 s 683, but ‘a practice of non-taxation’ of the payments has developed.

Payers are obliged to deduct basic rate income tax and account for the tax to HMRC, while investors should account for any higher or additional rate tax due through their self-assessment tax return, it said, noting that this was contrary to the view generally taken by the industry.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“HMRC have not identified and challenged the general approach in the past and may possibly have given unclear advice to some payers. HMRC had never considered the tax position of payments made by intermediaries to investors.”

HMRC said that taking into account the small amounts of typical individual payments, they (HMRC) has reached the conclusion that they would not be justified in seeking to collect tax for earlier years from either the payers, who should have deducted tax at source from the payments, or investors, who should have declared any higher or additional rate liability in past year’s tax returns, where they have not already done so.

If you are unsure and need any help and advice on Self Assessment, Corporation tax, VAT, PAYE, RTI, or you need to keep abreast of changes in legislation and how it could impinge upon your business, contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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