UK FCA to permit unit rebates for platforms
The UK’s Financial Conduct Authority (FCA) is to permit rebates from fund managers to platforms in cash, provided it is passed on to consumers in full in the form of additional units.
The Financial Conduct Authority (FCA) – successor to the UK Financial Services Authority (FSA) – confirmed today that, as expected, cash rebates on both advised and non-advised platforms will be officially prohibited.
But it said its rule banning cash rebates to consumers would not prevent a platform from receiving a rebate from a fund manager in cash, provided this is passed on in full to the consumer in additional units.
The changes are due to come into effect from 6 April 2014, though platforms will have to ensure it sets out a clear platform charge on both new and legacy business from 6 April 2016.
The ban on payments from fund groups to platforms has caused a major shake-up in the industry, with leading platforms reviewing their business models.
The ban on all rebates comes after Her Majesty’s Revenue & Customs (HMRC) – responsible for collecting tax revenue in the UK – introduced a tax on rebates to consumers.
In a ruling which suggested a level of collusion between HMRC and the regulator, the Revenue said the payments made to investors are annual payments and therefore subject to income tax.
This article was first published on Investment Week