Britannia challenges HM Revenue & Customs over tax exemption status

| September 7, 2007 | 0 Comments

Britannia Building Society has successfully challenged HM Revenue & Customs (HMRC) over the taxable status of the bonuses on ISAs and child trust funds paid to some of its members.

Earlier this year, Britannia paid out £51 million in windfalls to members with these types of accounts but HMRC deemed these payments to be taxable, in spite of them being related to accounts which are meant to be tax-free.

However, Britannia members receiving bonuses on tax-free ISAs or child trust funds will no longer have to pay tax on such bonuses following a ruling by HMRC. Members will also be entitled to reimbursements totalling over £2 million, regardless of the windfalls having been received before the ruling by HMRC.

Britannia also plans to set up a tax-free account into which members can pay their Britannia Membership Reward. The aim is to allow members to invest the reward without affecting their subscription limits. For instance, if a member has deposited a maximum £3,000 into a cash mini ISA, they are still able to pay a windfall cheque into the account.

The ruling by HMRC could well have implications for other building societies, e.g. where takeover windfalls are paid to members with tax-free accounts.

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