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The Self Employed and the Marriage Allowance

The Self Employed and the Marriage allowance

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My self employed client received a letter some months ago to say that his wife had applied to transfer part of her allowance to him (under the new Marriage Allowance provisions) and that the resulting tax saving would be applied when he filed his SA Tax return.  The 2015/2016 Tax Return is now filed (online).  There is no trace of the extra personal allowance in the 2015/2016 HMRC tax calculation nor has any adjustment been made to the client's SA account.  Does anyone know how /when credit will be given and whether or not the 2016/2017 payments on account will be consequentially adjusted?

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By Marion Hayes
09th May 2016 15:41

What did you put in his tax return?

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By petersaxton
09th May 2016 16:06

I don't understand the concept. You have to apply for the transfer but then you have to enter it on the tax return. Is there anything you have to do this dual way? If you don't put it on the tax return will HMRC correct it?

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By Tim Vane
09th May 2016 16:16

Perhaps either he or is wife fails to meet the criteria for the transfer to be effected. Just because a transfer election is in place it does not mean that it is valid.

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Replying to Tim Vane:
By Tim Vane
09th May 2016 16:18

by "is wife" I mean "his wife" but life is too short to edit a post nowadays.

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By emanresu
09th May 2016 19:17

petersaxton wrote:

I don't understand the concept. ....

To quote HMRC's own programming notes on this topic:

"The Marriage Allowance Transfer for the receipient is not claimed on the SA Return but is included in the SA302 tax calculation.

OTRSA and 3rd party submissions will get this data from the Data cache during the return completion process."

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Replying to emanresu:
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By Andrew Lee
11th May 2016 10:21

For claims made within SA, I understand there is a technical problem at HMRC at present whereby the allowance does not appear in the tax calculation at their end even when it has been validly made. They are trying to fix this but cannot confirm how long it will take. Everything appears correctly at our end (IRIS software), but not at theirs at the moment. Once again, the government has introduced complex and relatively minor adjustments to the system that HMRC software has not been properly updated for despite the year they have had to do so.

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By claudialowe
09th May 2016 17:06

What software? I have had one client where his wife has transferred her unused allowance, and BTC let me tick a box to that effect, and then reduced his tax liability accordingly.

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Replying to claudialowe:
By Tim Vane
10th May 2016 01:17

claudialowe wrote:

What software? I have had one client where his wife has transferred her unused allowance, and BTC let me tick a box to that effect, and then reduced his tax liability accordingly.

Yes, all software will do that. The trouble is that the reduced liability you see in the software is NOT the liability that the software will send to HMRC. Indeed, HMRC's computers will reject a computation that has a liability that has been reduced by the Marriage Allowance. The software will send the liability as it is calculated before the reduction and HMRC will apply the additional allowance and make an adjustment where appropriate.

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Replying to Tim Vane:
RLI
By lionofludesch
10th May 2016 09:26

Tim Vane wrote:

Yes, all software will do that. The trouble is that the reduced liability you see in the software is NOT the liability that the software will send to HMRC. Indeed, HMRC's computers will reject a computation that has a liability that has been reduced by the Marriage Allowance. The software will send the liability as it is calculated before the reduction and HMRC will apply the additional allowance and make an adjustment where appropriate.

sigh

What a complete nonsense. And all for £4 a week ....

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By emanresu
10th May 2016 09:47

lionofludesch wrote:

What a complete nonsense. And all for £4 a week ....

It is certainly one of the most convoluted implementations of a tax policy that I've seen.

And I've followed a few!

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By Laurence52
10th May 2016 09:36

It's worth reading this thread on the MoneySavingExpert site:
http://forums.moneysavingexpert.com/showthread.php?t=5443240

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By Paul Soper
10th May 2016 19:00

The revenue envisage (I think) two situations. One a claim during the year where they give effect to the claim by adjusting code numbers, of course if you are self employed you haven't got one, and a claim made after the end of the year in the tax return for the previous year where a new section has been added on page 5 of this year's SA100 - but your client's spouse is (I'd also guess) not filing a return. Probably they didn't think this would happen...

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By emanresu
10th May 2016 20:31

As I understand it, Paul, there are two ways of invoking an MAT. One is via the donor's SA100, the other is via:

https://www.gov.uk/marriage-allowance

and this will be the way those who don't normally file get on the band-waggon.

I would guess that this will be one of the most unrewarding things tax-payers may ever do. I would suggest that many will not get a penny out of MAT through fundamental misunderstandings as to how MAT works. Some may even lose. What is more, once signed up the MAT has a life of its own and many may - even if there is an initial benefit - end up losing.

HMRC's own version of those "30-day free trial in exchange for a CPA" offers folk forget to cancel!

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By Mister E
11th May 2016 11:44

This, and the Class 2 NIC boxes, are a mess and HMRC are currently showing liabilities that are not due.
I get reports from my team that the helpline are not sure what is happening either.
We tried to get some NIC figures for Class 1 earnings as P45 case not P60; SA helpline do not deal with NIC so can't help. NIC helpline said they could give class 1 PAID but they don't have the LEL/PT, etc numbers... which makes me wonder who does....!
Ought to change to P45s to include NIC figures, but who to approach to suggest this?
Class 2 abolished and NIC put on a cumulative basis (as per OTS) can't come quick enough in my view.

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Morph
By kevinringer
11th May 2016 13:16

Marriage Allowance was announced in Budget 2014. 2 years on (and 12 months after it came into effect) HMRC's systems are still unable to cope. Making Tax Digital is also supposed to start in 2 years. The shambles of Marriage Allowance proves HMRC won't cope with MTD: but we may be forced into it anyway.

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By North East Accountant
12th May 2016 09:45

Marriage Allowance is a joke.
For SA taxpayers transfer out is OK and can be done on TR.
For transfers in where we act for the husband but not the wife we can tick a box and it knocks the £212.00 off the tax liability but the wife has to transfer it to her husband online.
So the husband's tax liability is not actually fully determined in his Self Assessment.
I suppose its to do with HMRC wanting to get rid of SA and go back to HMRC assessing tax liabilities.

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By North East Accountant
12th May 2016 09:45

Marriage Allowance is a joke.
For SA taxpayers transfer out is OK and can be done on TR.
For transfers in where we act for the husband but not the wife we can tick a box and it knocks the £212.00 off the tax liability but the wife has to transfer it to her husband online.
So the husband's tax liability is not actually fully determined in his Self Assessment.
I suppose its to do with HMRC wanting to get rid of SA and go back to HMRC assessing tax liabilities.

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Replying to North East Accountant:
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By emanresu
12th May 2016 10:03

North East Accountant wrote:

Marriage Allowance is a joke.
So the husband's tax liability is not actually fully determined in his Self Assessment.

True - albeit it is, I guess that HMRC would say, in the SA302.

The era of tax simplification !!!

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By Paul Soper
12th May 2016 11:03

I suspect that one of the more common situations where we will see the MAT being made AFTER the end of the year will be clients with losses, where offset in the return or by adjustment to earlier years. In teh return there is a section to claim the MAT and in the case of any claim after the end of the tax year the transfer will only apply to the year for which the claim is made. Then there will be loss carry back to earlier years where the tax return will not provide a mechanism, nor will a coding adjustment, so we will need (not at the moment because 2015/16 is the first year anyway) a further mechanism in making extended loss relief claims leading to loss of personal allowances.

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RLI
By lionofludesch
12th May 2016 12:07

It's a shambles.

Roll on MTD when we just have to send in a photo of each other to claim the £212 (or whatever it is by that time).

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Replying to lionofludesch:
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By emanresu
12th May 2016 12:23

lionofludesch wrote:

It's a shambles.

Roll on MTD when we just have to send in a photo of each other to claim the £212 (or whatever it is by that time).

Huh, my own 2015/16 SA100 has only one field pre-populated by HMRC. It is out by a factor of 17.

Is this how MTD will work? - NOT!

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RLI
By lionofludesch
12th May 2016 15:14

I think RTI left us in no doubt in the Accuracy v Box Ticking debate.

Box Ticking is important. Accuracy is not.

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By Mister E
13th May 2016 09:15

I see the MTD consultation is now put back until after the EU referendum, another delay. Never be ready on time at this rate.

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Replying to Mister E:
Morph
By kevinringer
13th May 2016 10:05

Mister E wrote:

I see the MTD consultation is now put back until after the EU referendum, another delay. Never be ready on time at this rate.

Mister E, could you post the MTD announcement please. Thanks.
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Replying to kevinringer:
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By Mister E
13th May 2016 12:15

Not sure if you can see this http://www.accountancyage.com/2016/05/12/digital-tax-consultation-to-be-...

Read it but can not find an actual HMRC/treasury link.

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Morph
By kevinringer
13th May 2016 13:17

If the MTD consultation has had to be put off until after the referendum, why is it the OTS launched a consultation yesterday that requires responses after the referendum. Is the OTS not also part of the Government?

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RLI
By lionofludesch
13th May 2016 16:57

I like the comment " ... beta tests are slated to start in July ...."

Never a truer word typoed.

If typoed is a word, obviously.

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Replying to lionofludesch:
Morph
By kevinringer
16th May 2016 10:02

lionofludesch wrote:

I like the comment " ... beta tests are slated to start in July ...."

Never a truer word typoed.

If typoed is a word, obviously.

It's at https://en.wiktionary.org/wiki/typoed. Google has 70,500 hits for typed whereas typo'd has 97,300 hits.
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