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High Income CB Charge- when is a relief a reducer?

Relief for finance costs - a tax relief or a tax "reducer" ? Per HMRC tax calculation a relief.

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Hello All

I know this topic has been raised previously but please bear with me for raising it again. HMRC has said that relief for finance costs is not a relief but a tax reducer and thus is not eligible to claim as a reduction of total income (in this case would reduce total income below the £50,000 figure for High Income Child  Benefit charge).  if so, why is it described as a relief on the face of the detailed tax calculation ? Is the term "reducer" definitive.                                                                           Thanks and stay safe

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By Anonymous.
18th Sep 2020 11:39

I don't know the answer but have seen the point made many times that the way in which relief is now given results in some taxpayers being "pushed into" higher rate bands when their net profits under the old rules wouldn't have.

The term 'reducer' is used by HMRC here:

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4460

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By Paul D Utherone
18th Sep 2020 13:17

I believe that they are correct, and recall a seminar at the time this came up that set out that the change taken with things like the PA restriction could lead to marginal rates >100%

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By richard thomas
18th Sep 2020 15:32

HMRC in fact say (correctly) at PIM 4460 that what is given under s 272A ITTOIA 2005 is “relieved at the basic rate of tax”. They are right to call it a relief, both there and on the tax calculation, because that is what s 272A itself does.

Reliefs from tax may be given in several ways. They may be allowed in computing income at Step 1 of section 23 ITA 2007. A good example of this is the relief for expenses of employment. Such reliefs do not have to be claimed.

They may be allowed at Step 2 of s 23 to give ‘net income’ before the rates of tax are applied at Step 4.

Or they may be given as a tax reduction, ie a relief in terms of a specific amount of tax which may be the basic rate or some other rate or just a given amount, in which case they are given at Step 6. They cannot in that case reduce net income or adjusted net income for HICBC purposes.

Quite why the dumbing down Stasi in gov.uk required HMRC to call it a “reducer” rather than the statutory term “reduction” I do not know. And I do not know what you mean by “definitive”. The law is clear.

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