Britannia establishes tax exemption status

by Gill Montia

Story link: Britannia establishes tax exemption status

Britannia Building Society has successfully challenged HM Revenue & Customs (HMRC) over the taxable status of the windfalls paid to some of its members.

The case centred around the building society’s 300,000 members with Isas and child trust funds.

In February of this year, Britannia paid out £51 million in loyalty bonuses to members with such accounts.

HMRC considered these payments to be taxable, despite their being related to accounts which are tax-free.

Following a ruling by HMRC, Britannia members receiving bonuses on tax-free Isas or child trust funds will no longer be required to pay tax on their windfalls.

They will also be eligible for reimbursements totalling over £2 million, despite the bonuses having been received before the case was settled.

Britannia also has plans to set up a tax-free account into which members can pay their Britannia Membership Reward.

The aim of this is to allow members to invest the reward without affecting their subscription limits.

If, for example, a member has deposited a maximum £3,000 into a cash mini Isa, they will still be able to pay a windfall cheque into the account.

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