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Marriage allowance transfer and mortgage interest

Can my clients claim the marriage tax allowance?

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Husband and wife clients have been eligible for the marriage allowance tax relief for the last few years.

I'm doing their 20/21 returns and her income is showing as £13542 with the mortgage int tax relief of £3260 and so takes her below her PA and so the transfer can be made to her husband.

However, his income is showing as £50490 so into higher rate, this is before the mortgage int tax relief. So if this is taken into account, he would be able to receive the marriage allowance transfer from her. However my software (BTC) is coming up with an error message saying that as his income is so high he cannot receive the transfer.

I've spoken to HMRC and the person seemed to be very clued up on this, she said submit his return and it should correct itself within 30 days and claim the relief. However I wondered whether anyone had done this in practice, the return I will be submitting for him will not have the claim on (in prev years it has shown).

Thanks in advance, I want to make sure I know whether I am getting this right before speaking to the client. Without the transfer he owes £130, with the transfer he gets a refund of £218.

Replies (11)

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By mikeyban
13th May 2021 09:43

The mortgage interest relief is a tax reducer not a deduction so I think your software is correct.

Thanks (2)
RLI
By lionofludesch
13th May 2021 10:17

I agree. I'm afraid you're working on pre 2017 legislation.

The wife's income is £13542.

The up-side is that you can carry forward any mortgage interest that she doesn't need, which sounds like it might well be a better deal than the marriage allowance option.

Also, even if there was a valid claim, the benefit to the husband would have been £250 exactly, not £348.

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By Duggimon
13th May 2021 10:26

Agreed, the husband's income is too high for the transfer, the interest rate relief has no bearing on the relevant figure.

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RLI
By lionofludesch
13th May 2021 10:50

"I've spoken to HMRC and the person seemed to be very clued up on this, she said submit his return and it should correct itself within 30 days and claim the relief."

This is disappointing. Firstly, she wasn't clued up at all. Secondly, you assume she's clued up because she takes your side.

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Replying to lionofludesch:
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By frankfx
13th May 2021 11:08

lionofludesch wrote:

"I've spoken to HMRC and the person seemed to be very clued up on this, she said submit his return and it should correct itself within 30 days and claim the relief."

This is disappointing. Firstly, she wasn't clued up at all. Secondly, you assume she's clued up because she takes your side.

OP

Why not revert to HMRC to point out that the clued up officer was in fact Clueless.

Was that due to poor training, no training, complacency and so on.

You could go on to say that the client no longer trusts you, yet you trusted the HMRC badged officer.

Bear in mind the all HMRC officers may be wrong on the point raised ( interest is a tax reducer, not a taxable income reducer.). fundamental misunderstanding.

OP let us know the outcome, please.

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By David Ex
13th May 2021 11:09

chicka wrote:

I've spoken to HMRC and the person seemed to be very clued up on this, she said submit his return and it should correct itself within 30 days and claim the relief.

Oh dear! Not very clued up then!

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By Paul Crowley
13th May 2021 11:32

As agreed all so far
Marriage allowance not allowed as donor income too high

BUT as client has not stopped the claim, I think there is a good chance that HMRC will 'correct' the returns ( the returns which are accurate) and show the incorrect position.

That will probably give rise to a tax liability on lower earner

We had a couple last year
It is also what HMRC do on self-employment. 'Correct' the accurate return to make it inaccurate, if HMRC has cancelled the Class 2 NIC

We did a catch up May last year on a new client
ye 2016,2017,2018,2019,2020 on a subcontractor
HMRC 'corrected' 2019 and 2020, but not the earlier years for Class 2 NIC
How could that be?
At no point did client cease trading, or claim that he ceased trading and had tax deductions under CIS for every month.

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Replying to Paul Crowley:
RLI
By lionofludesch
13th May 2021 12:10

Paul Crowley wrote:

As agreed all so far
Marriage allowance not allowed as donor income too high

BUT as client has not stopped the claim, I think there is a good chance that HMRC will 'correct' the returns ( the returns which are accurate) and show the incorrect position.

That will probably give rise to a tax liability on lower earner

Can't agree with you there, Paul.

I find them pretty hot on denying a MA transfer where the taxpayer creeps over the HR threshold.

There'd be no payment due from the wife anyway. She has loads of mortgage interest relief available to cover any error.

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Replying to lionofludesch:
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By Paul Crowley
13th May 2021 12:44

The return as submitted would use the personal allowance, c/f unused tax reducer

If HMRC 'correct' then personal allowance reduced

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Replying to Paul Crowley:
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By lionofludesch
13th May 2021 13:02

Paul Crowley wrote:

The return as submitted would use the personal allowance, c/f unused tax reducer

If HMRC 'correct' then personal allowance reduced

And less interest carried forward but still no tax this year.

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By SXGuy
13th May 2021 11:54

"I'm doing their 20/21 returns and her income is showing as £13542 with the mortgage int tax relief of £3260 and so takes her below her PA and so the transfer can be made to her husband."

You sure about that? Might want to re check your figures and account for the fact that interest is a tax reducer not an expense.

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