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have I misunderstood / duty to correct HMRC error?

HMRC amended SA100 adding in Marriage Allowance transfer but transferor's Taxable Income is > PA?

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In prior years, wife surrendered 10% of PA to husband as her only income was a small salary at the PT to accrue state pension year.  This year is different; wife's salary and dividends take her over her PA (>£20k), so no Marriage Allowance transfer to husband was made on her tax return. 

On his part, husband did not claim Marriage Allowance from wife.   ie both returns were filed with no election to transfer part of PA. 

HMRC have amended both returns allowing wife to surrender part of her PA to husband, even though wifes taxable income is > PA (inlcuding Dividend Allowance). 

a) Have I misread the legislation? 

b) In the hope I am not just having a Friday afternoon moment, and I have not misread the legislation, do I (and the taxpayers) have a duty to advise HMRC their error?

Has anyone else had this, thanks

Replies (11)

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RLI
By lionofludesch
06th Dec 2019 15:53

Yes, you have.

Provided neither spouse is into higher rates, the MA transfer will still apply. If you wish to withdraw the claim, it needs to be done before the start of the tax year (which is somewhat onerous). It won't be nullified just because there is neither overall gain nor loss.

Worth pointing out that, owing to the weird way the relief is given, there can still be an advantage. I had a case a couple of years back where the husband got the benefit of £230 knocked off his tax, whilst his wife paid dividend tax on £1150 at 7½% (£86.25).

Could've been even better if the wife's dividend had fallen into Dividend Allowance.

Thanks (1)
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By Not Anonymous
06th Dec 2019 15:56

Having a low income isn't what makes you eligible for Marriage Allowance, it's not being liable at higher rate (and not being liable at higher rate if the Dividend nil rate band didn't exist).

Sounds like the wife had made an application "in year" at some point in which case it continues until one party cancels it.

Thanks (1)
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By Wanderer
06th Dec 2019 16:01

Agree with lion.
Understand anyone reaching that conclusion based on
https://www.gov.uk/marriage-allowance
Most readers won't understand the significance of the word "normally" in:-

HMRC wrote:
To benefit as a couple, you (as the lower earner) must normally have an income below your Personal Allowance - this is usually £12,500.
Thanks (1)
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By Sharyn80
06th Dec 2019 16:00

Ahh yes of course, different tax rates on different types of income - thanks.

(who knows what till be the situation after 12 Dec)

Thanks (0)
Replying to Sharyn80:
By Tim Vane
06th Dec 2019 22:22

Sharyn80 wrote:

(who knows what till be the situation after 12 Dec)

I do. It will be exactly the same. You’re welcome.

Thanks (0)
Replying to Tim Vane:
RLI
By lionofludesch
07th Dec 2019 10:20

Depends how long after.

Thanks (0)
Replying to lionofludesch:
By Tim Vane
08th Dec 2019 01:10

lionofludesch wrote:

Depends how long after.

You think a Labour government will retrospectively change the tax rates for this year? I think that’s a little but far fetched!

Thanks (0)
Replying to Tim Vane:
RLI
By lionofludesch
08th Dec 2019 10:15

Tim Vane wrote:

You think a Labour government will retrospectively change the tax rates for this year? I think that’s a little but far fetched!

Property's not sold yet, Tim.

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By SXGuy
06th Dec 2019 19:19

I do love how hmrc apply the MA to people's SA yet failed every year to add my wife's to mine and had to subsequently submit an SA for her to claim it. Then they would remove her obligation to file until the following year when I'd have to repeat the process.

Thanks (0)
Replying to SXGuy:
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By Not Anonymous
06th Dec 2019 20:24

Surely it would be simpler for her to just to make an in year application and then it would continue for that year and each subsequent ad infinitum (or until Jeremy abolishes it).

Thanks (0)
By SteveHa
07th Dec 2019 11:09

Whilst everyone is correct, you can simply object to HMRC amendments to Returns to have them reverted to submitted. There is no legal basis for an enduring amendment without enquiry.

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