Apportionment of Interest on Fixed Rate Bond

Apportionment of Interest on Fixed Rate Bond

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My client is a higher rate taxpayer; his wife is not. In July 2007, they invested £100,000 into a fixed rate bond with a Building Society, but in the wife’s name only for obvious reasons.  Annual interest was first credited to the bond  on 1 July 2008.

Shortly after that, when the credit crunch took hold, and the public made more aware that only the first £50,000 savings were “protected”, my client and his wife decided to go to the Building Society in person and add my client’s name to the account, or bond, thereby protecting the whole amount of the initial capital investment.

HMRC’s view is that the interest credited on 1 July 2008 be shared equally between husband and wife.  Whilst it is true that both husband and wife’s names appear on the account in 2008/09 (though not until after the interest had been “earned”), could it be argued nevertheless that the assessment to interest in 2008/09 should fall solely on the shoulders of the wife?

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