HMRC have issued Revenue and Customs Brief 04/13 Payments of trail commission.
It provides HMRC’s view on the tax treatment of payments of 'trail commission' passed on to investors in Collective Investment Schemes and other associated investment products including life insurance policies. HMRC states that it “considers that these payments are taxable” and explains how payments from trail commission should be taxed.
HMRC state that payments made to investors are 'annual payments' and therefore subject to Income Tax in accordance with S683 Income Tax (Trading and Other Income) Act 2005. The payer is under an obligation to deduct basic rate Income Tax and the investors should then account for any higher or additional higher rate tax due through their Self Assessment tax return.
Guidance is then provided on a number of areas but also includes the comment that HMRC will not apply this view to earlier years. They then state that from 6 April they expect the payers to commence putting in place arrangements to deduct basic rate tax and investors who are liable to tax at either higher or additional rates to include the payments on their Self Assessment tax returns for the tax year commencing 6 April 2013.