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Prudential wins against HMRC - With Profits holders take note!


CliveH

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This was covered in some of the weekend papers - If you have a With Profits plan take note that you should keep it if you were intending to surrender it.

 

The dear old Pru has won a long battle with HMRC and it means that With Profits policyholders could be in line for a windfall. Certainly wise to get some advice if you have With Profits Policies/investments.

 

Full details here:-

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Thousands of Prudential with-profits investors could be in line to receive a share of around £150 million after a High Court judge ruled that HM Revenue & Customs (HMRC) had unfairly taxed ‘several thousand dividends’ between 1990 and 2009.

 

The case, which has been running for 10 years, could have ramifications for other providers which have similar with-profits funds to the Pru, including Aviva, Royal Sun Alliance, Standard Life and Legal & General.

 

The case centred on the tax treatment of dividends from overseas companies where the UK holding in a particular company is less than 10%. The Pru, on behalf of its with-profits sub-fund investors, was claiming remedies in relation to corporation tax paid between 1990 and 2009.

 

Following a law change in 2009 most dividends received from overseas companies are now exempt from tax.

 

At the end of October Mr Justice Henderson ruled that HMRC had unfairly taxed the funds in question and should reimburse Prudential policyholders the tax paid with compound interest.

 

The judgement read: ‘The Revenue remains unjustly enriched until the date of actual repayment… the interest forms part of the restitutionary claim itself. I would reject the Revenue’s submission that the claimants’ only entitlement is to simple interest...compound interest forms part of the principal sum that needs to be awarded in order to achieve full restitution.’

 

The ruling is open to appeal by HMRC, which said it was considering the judgement ‘carefully’ before deciding whether to appeal.

 

The case may be referred to the Tax Tribunal in any case to quantify the amount of tax at risk. This process would take place after a possible appeal from HMRC, meaning it is unlikely that any payments will be made immediately following the High Court judgement, and are likely not to be paid for some years.

 

A spokesman for Prudential said: ‘We have taken the action involved, and at this stage it would not be appropriate to comment further as there may be an appeal by HMRC.’

 

The case was launched in 2003, and was last adjourned in 2010.

 

Prudential said it had seven million with-profits policy holders in the UK but could not yet highlight those affected by the judgement.

 

An HMRC spokesman said: 'HMRC is considering this long judgement carefully, before deciding whether to appeal. The uncertainty created by this litigation is largely historic. The key legislation which was the subject of this litigation was changed in 2009.'

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NOTE! -whilst we should all be grateful to the dear old Pru for fighting this battle - PLEASE NOTE that ALL With Profits plans from ALL Providers stand to gain from this judgement - so it is not just Prudential.

 

Therefore anyone with a With Profits plan should be very careful what they do with it and seek advice.

 

Good News Tho'!

 

And good on the Pru!!!

 

 

 

 

 

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Thanks for that little snippet Clive.

 

Do you know whether and refunds would be retrospective and would you anticipate that the the more reputable of all the assurance companies involved will contact their policyholders - even those who have moved home!!

 

I had several Pru endowments mature around 2000 and whilst the very generous maturity values proved them to be a very fine investment I would not be too proud to accept an HMRC sourced windfall!

 

No doubt there are others on here with a similar experience?

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At the moment Rich - we have no idea - a) the prospect of the HMRC appealing is high and b) the case has run for over a decade already so a final outcome could still be some years off.

 

We have been advised to flag it up with people and advise our clients to keep these plan intact where possible as surrendering them could cut of the policyholders ability to be compensated.

 

The reason for this is that the "windfall" will not be a normal "windfall" in the true sense of the word. It is a rebate of tax wrongly applied. Therefore there is uncertainty if this rebate will be paid to past members of the With Profits funds or just to those individuals who are members of the fund at the time the tax rebate is to be paid.

 

 

 

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