As part of the regular monitoring of our systems and processes, we have become aware of an error that resulted in tax reclaims not being paid or not paid in full to some customers investing in funds that receive interest (e.g. corporate bond funds and gilt funds) through certain tax wrappers.
For certain funds that customers invest in through tax wrappers, tax is deducted from the distributions paid by the fund. This money is paid to customers' accounts in the form of tax reclaims and represents a very small proportion of any customer's total investment with us.
We are in the process of correcting records for everyone affected by the error to put them back in at least the same position they would have been in, had the error not occurred.
The impact on individual customers will depend on the value of their investments in those funds impacted. Importantly, over 50% of those affected will require an adjustment of less than £50, with almost 40% requiring an adjustment of less than £25.
We would like to apologise to affected customers and reassure them that we are taking action to ensure that customers' accounts are corrected as quickly as possible. We have also put measures in place to minimise the likelihood of this happening again.
Customers invested in funds that receive interest through the following tax wrappers and products will receive extra payments.
We will also make payments to any affected customer who has closed their account or switched their investment out of the relevant funds or tax wrappers.
During the next few months affected customers will see additional payments being made to their accounts in respect of these tax reclaims. These payments will include simple interest at a rate of 8% p. a. for the period between the dates on which tax reclaims would normally have been paid to a customer's account and the date of correction.
We plan to complete the process of making payments during March 2010, at which point all customer records will be up to date. At this time we will write to customers who will receive additional payments of £25 or more at the date of correction, as well as customers who have closed their account or switched their investment out of the affected funds or tax wrappers.
For all products impacted, both the tax reclaim and the interest payment will be paid into the product's Cash Account and will not give rise to any additional tax liability.
Notes:
(1) HMRC has confirmed that interest payments will not count towards a customer's ISA contribution limits in either the original subscription year or the current year.
(2) Although the Wrap SIPP interest payment is being paid directly, as detailed above this does not give rise to any additional tax liability.
Customers can contact us on our dedicated numbers. (Calls may be recorded / monitored to help improve customer service. Call charges may vary.)
Wrap - 0845 279 1001
FundZone - 0845 279 2002
References to legislation and taxation are based on our current understanding of law, HM Revenue & Customs' practice and discussions with HM Revenue & Customs. Legislation and taxation are liable to change in the future.
