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Marriage Allowance and POA

Marriage Allowance and POA

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The question is, should the deduction for marriage allowance (£212 in 2015/16) also reduce the payments on account for next year?

As the marriage allowance is taken off after the tax liability is arrived at, indeed the liability shown on the tax return does not have the deduction applied at all, I had thought it would not, that the POA would remain at 50% of the original liability per the return.

IRIS also appears to agree with me as it does not reduce the POA even while correctly applying the marriage allowance to the liability on the computation.

HMRC however have sent us a revised computation for one of our clients on which they have amended the POA to account for marriage allowance. This is the sixth or seventh return I have put in to which marriage allowance is to be applied but the first time they have sent such a letter. Having searched about I can't find anything definitive to say who is in the right here though obviously I'd rather not call HMRC to complain since it's in our client's interest to go with their figures.

Do I call HMRC to tell them it's wrong? Call IRIS to tell them their software is wrong? Wait and see? Does anyone really know how this mysterious allowance works?

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06th Jul 2016 14:36

I assumed it would reduce the POAs. I see no reason why it shouldn't.

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to lionofludesch
06th Jul 2016 15:16

Because the POA has always been 50% of the total liability per the tax return but now, if this HMRC letter is correct, it is not.

I can't find anything to confirm things one way or another though so while I'm perfectly happy to accept I'm wrong, I'd just like to be definite.

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to fawltybasil2575
06th Jul 2016 19:14

fawltybasil2575 wrote:

Lion is correct. Here is the legislation:-

That's really kind, Basil but, actually, I did no research on this. It was just a gut feeling based on logic - which, as we know, may not necessarily be present.

It's another Class 2 NIC, isn't it ? Annoying if HMRC - or your software - gets it wrong but it's not going to break the bank.

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to fawltybasil2575
06th Jul 2016 15:56

fawltybasil2575 wrote:

... HMRC have been issuing duff guidance, stating [wrongly] that the £212 re the Marriage Allowance "received" should not be deducted on the Return.

Please clarify, Basil. What should be done - and by whom and in which document?

Basil.

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06th Jul 2016 15:55

Thanks for your replies Basil, while you've cleared up one issue you now have given me another!

For the avoidance of doubt then, are you saying that the figure in box 1 on SA110, the tax calculation page of the Self Assessment return should be net of the marriage allowance? There certainly isn't anywhere on the return where you can explicitly state that the allowance has been applied.

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By vince8
06th Jul 2016 16:54

I have seen one where the husbands SA was filed early in May. The marriage allowance transfer was then generated online by the wife. At that point there was the opportunity to claim the allowance for 2015/16 and 2016/17 or just for 2015/16. The option taken was to claim it for just 2015/16 since the wife had a new source for 2016/17 and needs all her allowances. Shortly after the husband received an SA 302 showing the £212 credit but his online statement continued to show the previous tax total. He then got a statement for the 31/7/16 tax, which again did not show the £212. After 2 calls to HMRC a revised statement was issued and 2015/16 is now correct but £106 has been knocked off each POA for 2016/17. The husband is happy but they only claimed the marriage allowance for one year and he will no doubt forget all about it when 2016/17 catches up with him.

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07th Jul 2016 09:27

Sorry, but I have to disagree with Basil.

The figure in box 1 of the SA110 must not and should not include the deduction for transfer. The Marriage Allowance Transfer is in the gift of the transferor and cannot be "claimed" by the recipient. The legislation specifically refers to an election by the transferor.

As the allowance cannot be claimed by the recipient it can therefore NOT form part of the recipient's Self Assessment return. Thus the return cannot and should not include any deduction.

The correct process is to include the full Self Assessment calculation of tax (without the transfer) in box 1. If and when the marriage transfer is authorised by the transferer, HMRC can make a tax reduction adjustment to the recipient's assessment, provided the other conditions regarding both parties' income per chapter 3A are met.

Another way of looking at it is that there is a figure "self-assessed" by the taxpayer, and a final figure that is "dual-assessed" by transfering the allowance between H&W. An individual cannot adjust for the dual-assessment via self-assessment, and so this must be done post-SA by HMRC.

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07th Jul 2016 09:27

Personally, I'm surprised that the Marriage Allowance is given as a £212 deduction. It's stated as a transfer of 10% of the spouse's allowance so I expected it to be a deduction of £1060 from income, appearing next to the taxpayer's own personal allowance.

If it had been, of course, there'd be no problem with the payment on account. These software blokes don't half make life hard for themselves.

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11th Jul 2016 19:37

Have to disagree, Basil. The MAT as received is a rebate, and like other rebates only appears in the SA302. It is interesting to take note of how HMRC wrestled with the implementation of the MAT - illustrated in the version change notes to their own in-house software. They settled on a rebate as, presumably, a simple "fix" that would limit any attempts to exploit MAT. As such the receiver makes no entry on any document. A valid rebate just turns up on the SA302. As such, the HMRC in-house software appears to be correctly implemented.

As regards HMRC staff's understanding - or what will become standard practice - well that is a different matter altogether. Unanticipated ramifications of HMRC's policy - such as the effect on subsequent Payments on Account - may also need to be - in fact, appear to be being - made up on the hoof!

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