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Top Slicing Relief

Any news on changes re calculation of tax on pre budget insurance bond gains?

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My client had an insurance bond with Standard Life which she encashed in 2017-18. On HMRC's calculation the gain put her income well above £100k thus wiping out her personal allowance and greatly increasing her income tax liability. She has sent me a note from the insurance company referring to the "Silver" FTT case, setting out the current position and confirming that as yet there is no indication of a change in approach by HMRC to the tax liability calculation of pre 2020 budget gains. She has asked as to her options. Those are clear and so I do not propose to rehearse them here. My question is twofold, "Have I missed anything recently and if not does anyone have any inclination or knowledge of anything in the pipeline as to a change in approach by HMRC to those pre 2020 budget gains?"

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By lionofludesch
13th May 2020 17:38

I haven't got anyone affected - but did the taxpayer not win and HMRC declined to pursue it further, largely on the grounds of being wrong ?

Whilst this is big bucks for any taxpayer in that position, I would imagine it's small beer in HMRC terms.

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Replying to lionofludesch:
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By GamekeeperTurnedPoacher
13th May 2020 17:58

Thanks lionofludesch,
Yes Mrs Silver did win but HMRC indicated that they would appeal but a few days after the budget announced that they had withdrawn the appeal. Presumably that means that the lady may apply to have her liability re-calculated generating an income tax repayment if she had paid up or the cancellation of the "additional tax " if she hadn't.
The problem is that she won at the First Tier Tribunal which is not binding on any other case and so does not constitute a precedent.
The proposal in the budget only relieves gains arising on or after budget day and so as matters stand pre budget gains are still caught unless the taxpayer appeals and wins but technically HMRC could appeal that FTT decision and though it might seem unlikely win at the Upper Tribunal potentially closing off all other appeals by those with pre budget gains.

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Replying to Wanderer:
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By GamekeeperTurnedPoacher
14th May 2020 10:12

Thanks Wanderer but I was aware of the article. It doesn't change my client's situation. Please see my response timed at 17:58 on Wednesday 13 May 2020 to lionofludesch

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By [email protected]
13th May 2020 17:48

I put in a protective claim where the difference to my client between losing the personal allowance and the new approach was £38k in tax, back in August(?) last year when the original tribunal decision was reached. I sent in a further claim in February after HMRC announced the change in legislation. I have still heard nothing from HMRC, but did chase them again last week.

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Replying to [email protected]:
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By GamekeeperTurnedPoacher
14th May 2020 10:13

Thanks [email protected][***]

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By JFtax
14th Jul 2020 12:42

My client had a CEG in the 2018/19 tax year and we made a manual amendment to the return (before the budget announcement). HMRC have now made the amendment resulting in a £52,750 refund to our client.

There was no covering letter but the narrative on the amended calculation states: "We have calculated your Top Slicing Relief (TSR) in line with changes brought about by the published March 2020 budget. The revision provides for personal allowances to be recalculated for the purposes of the TSR calculation and clarifies that the highest part assumption rules will apply within the TSR calculation."

I haven't seen any general HMRC guidance on a change of stance for pre-budget 2020 gains but this appears to give a green light for other to pursue claims already or yet to be made.

Will be interested to hear if others have had any similar or different response from HMRC.

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By GamekeeperTurnedPoacher
22nd Oct 2020 15:05

Hi JFtax
Really interesting especially since I have just watched HMRC's webinar on this subject (today 22/10/20 12:45 to 13:45) and your post was brought to my attention just after I had emailed my client's financial adviser, who handles so much for her, of this latest news.
HMRC's position is that the "new" method of calculation applies to:
2020-21 and subsequent years
2019-20 (presumably because the announcement in the budget fell during that year)
2018-19 because of timings concerning the "Silver" case
No earlier years.
Unlike your client, mine had her gain in 2017-18 and so does not benefit from the changes.
A few complaints, including from me, during the webinar about the cut off for "earlier years" on the grounds that HMRC have been aware of this for some time. In my view a poor show from The Treasury.

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