This isn’t the first time I’ve got myself into a flap about an announcement concerning the financial services industry. It usually results in a forthright discussion with a colleague and then back to business as usual. However, since reading about HMRC’s intention to tax trail commission rebates, I’ve been unable to get it out of my system.
There’s something inherently wrong about taxing someone on the return of their own money, particularly when investors have been shoe-horned down this route with the banning of trail commission on new investments and changes to existing ones. Don’t get me wrong, the implementation of Customer Agreed Remuneration is an improvement on automatic commission payments and the move towards clean charging is a positive step. However, penalising clients because the fund management industry has not yet caught up with the new regulatory framework is surely against the principles of the Treating Customers Fairly initiative. It’s not their fault that many funds do not have clean share classes nor that those that do are often more expensive.
I understand that HMRC are legally obliged to collect any tax that is due but surely there could be some leeway. After all they have already stated that they will not seek to collect tax due for previous years. Could such a concession not be extended at least until the proposed rebate ban has been enforced towards the end of the year? This would give the industry both the time and motivation to sort out the move to clean charging once and for all.
Let’s hope common sense prevails.