Share this content

Chargeable Event Certificate

Has tax treated as paid actually been paid?

Didn't find your answer?

Client has a chargeable event certificate for withdrawal from a bond. No tax will be payable due to number of years it has been held & untouched.  WHen it says Tax Treated As Paid - has this actually been paid as when it's entered on the self assessment it's coming back as a repayment???

Replies (5)

Please login or register to join the discussion.

avatar
By richard thomas
23rd Apr 2021 16:40

The tax is "treated as paid" because, so the theory goes, the payout on the bond is less than it otherwise would be on account of the fact that life insurers should have paid CT at 20% on the income and gains accruing for the policyholder. But it cannot be repaid to the policyholder because it has not actually been paid by them - see s 530(2) ITTOIA.

I don't know what you mean precisely by "when it's entered on the self assessment it's coming back as a repayment". The deemed tax is not entered on the return - see AI pages, box 4, so where is it "coming back". In the tax calculation?

Your mention of no tax being due because of the number of years held is a reference to top-slicing relief. That gives relief for tax at the "excess" rate, ie of higher rate liability over basic rate and cannot give rise to a repayment of the tax treated as paid at the basic rate.

Thanks (1)
avatar
By victoriarchalmers
23rd Apr 2021 17:07

If I enter it as Other income on SA Return and enter the tax 'treated as paid' it comes out with a repayment. So should it not be entered at all?

Thanks (0)
Replying to victoriarchalmers:
avatar
By Jane Wanless
23rd Apr 2021 17:32

Are you entering it on page TR3 of the main return? It needs to go on the Additional information pages - Ai1. Hopefully if you enter it there, the tax result should work out correctly.

Thanks (0)
Replying to victoriarchalmers:
avatar
By richard thomas
23rd Apr 2021 17:35

The gain should be entered, but on the Additional Income pages in box 4, and the number of years in box 5 so that the computer can calculate the TSR. Why are you putting it in "other income"? See box 9 on page TR2 & item 9 on page TRG4 (SA150 Tax Return Guide)

Thanks (0)
Replying to victoriarchalmers:
RLI
By lionofludesch
23rd Apr 2021 17:44

victoriarchalmers wrote:

If I enter it as Other income on SA Return and enter the tax 'treated as paid' it comes out with a repayment. So should it not be entered at all?

Yes, it sounds like you're entering it in the wrong place.

The tax is only a credit, you can't reclaim it. Bit like the building society interest composite rate, for those old enough to remember it.

Thanks (0)
Share this content