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Top Slicing Relief

HMRC letters

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Morning everyone.

Anyone else getting letters that HMRC have sent to their clients saying they are due refunds (large refunds in some cases) as 'the previous calculation we sent you was not correct' re: 2016-17. These are legitimate letters.

HMRC are adding Top slicing relief in these cases even though the taxpayers income before the gains was in the higher rate and the gain does not push them into additional rates! One of the refunds is £6,000 plus.

Keen to find out if this is a case of HMRC changing the way that they calculate Top Slicing Relief or if they are just being incompetent.

Thanks in advance

 

Replies (11)

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RLI
By lionofludesch
05th Dec 2018 11:56

Give us some numbers.

What changed ?

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Replying to lionofludesch:
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By We're_all_mad_here
05th Dec 2018 12:08

The calculation is exactly the same bar the Top Slicing Relief that HMRC have added. To put some numbers to it (approximate):

50,000 gross pension in 16-17. Gross Chargeable Event Gain 60,000 with a term of 34 years.

IRIS, who we use, calculates the TSR as zero. HMRC have calculated this as £6,000 +.

I called HMRC and they said that they are in the process of issuing further letters in this regard but copies are only being sent to the taxpayer. Helpful!

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Replying to We're_all_mad_here:
RLI
By lionofludesch
05th Dec 2018 12:14

£50000 gross pension would push them into higher rate, would it not ?

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Replying to lionofludesch:
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By We're_all_mad_here
05th Dec 2018 13:37

Yes.

It is my understanding that TSR only applies when the gain pushes total income into a new tax bracket...

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By Red Leader
05th Dec 2018 12:19

Perhaps it is related to the personal allowance claw back for income over £100k.

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Replying to Red Leader:
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By We're_all_mad_here
05th Dec 2018 13:35

I wish it related to this. I have had two further clients whose incomes (with the CE gains) is 80,000. Their incomes before the gains were 60,000 i.e. higher rate anyway, but HMRC have 'corrected' their returns to include Top Slice Relief....

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Caroline
By accountantccole
05th Dec 2018 12:44

I think the computers are generating amendments for scenarios where HMRC couldn't deal with online calcs and software houses had to match. We have had a flurry of non resident dividend adjustments.
They've made incorrect assumptions on income disregard adjustments on one of mine that nearly gave my client a heart attack.
Just wish they'd send the amendments to us rather than just to clients

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Replying to accountantccole:
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By We're_all_mad_here
05th Dec 2018 13:37

Perhaps this is the case but I am unsure how a taxpayer who income before the gain was in the higher rate bracket is entitled to TSR even though their income doesn't straddle a tax rate bracket....

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Replying to We're_all_mad_here:
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By leeanthonyblackshaw
05th Dec 2018 14:07
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Replying to leeanthonyblackshaw:
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By We're_all_mad_here
05th Dec 2018 14:22

Thank you.

I remember reading Mr Good's article last year, however I cannot see anywhere on HMRC's guidance that they have changed their approach to calculate TSR.

Also Mr Good's article seems to reference discrepancies which range between £100 to a £1,000. As noted above HMRC are trying to refund £6,000+ to one of my clients.

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Replying to We're_all_mad_here:
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By leeanthonyblackshaw
05th Dec 2018 14:50

I understand they have accepted some of his arguments.

Also see the article example with a large tax difference and the reasons (eg personal allowance).

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