Transfer of marriage allowance 16/17

Client has income over £43k but not liable at the higher rate as dividends below £5k

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I have a client with income of £43,999 including dividends of £1,376. He is therefore not laible to tax higher than basic rate. My software provider tells me that he is not entitled to receive the marraige allowance transfer as his income exceeds £43k. Are they correct?

Replies (20)

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RLI
By lionofludesch
27th Jun 2017 09:58

He may not be paying higher rate tax but his income is over the higher rate threshold.

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Replying to lionofludesch:
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By Tax Dragon
27th Jun 2017 10:08

Where does that matter? Not in s55B(2)(b).

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By Portia Nina Levin
27th Jun 2017 11:05

And s 55B(2)(ba)?

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By Tax Dragon
27th Jun 2017 11:29

Neither test is a threshold test.

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By Ruddles
27th Jun 2017 12:01

I think you need to read 2(ba) again, TD

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By Tax Dragon
27th Jun 2017 12:12

Am I wrong? Is it not possible to have income of £43,999 (including dividends of £1,376) and (but for the dividend nil rate) to be liable to tax at neither the dividend upper rate nor the dividend additional rate?

Damn my imagination.

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Replying to Tax Dragon:
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By Portia Nina Levin
27th Jun 2017 12:17

It is possible, but the OP has not provided any facts that allude to that possibility. On the facts that the OP has provided, if it weren't for the dividend nil rate, £1,375 of the dividend income would be taxable at the dividend upper rate.

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Replying to Tax Dragon:
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By Portia Nina Levin
27th Jun 2017 12:04

In the circumstances described by the OP, the effect of s 55B(2)(ba) is that the individual referred to in s 55B(1) is not entitled to the tax reduction referred to in that section.

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By Tax Dragon
27th Jun 2017 12:16

Sorry, I replied to Ruddles before seeing your comment. Absent other information, I agree; I think it wrong though to assume that the absence of other relevant information from the OP means that there is no other relevant information.

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By Portia Nina Levin
27th Jun 2017 12:19

Given that the missing facts, that you think might be there, would be very relevant, it seems extremely remiss of the OP not to mention them, quite frankly.

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Replying to Portia Nina Levin:
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By Tax Dragon
27th Jun 2017 12:31

Of course. But since the OP appears not to have known what the tests were, she might not have known what was, or was not, relevant. It does not justify respondents making up rules.

The OP should now read s55B and apply the tests.

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Replying to Tax Dragon:
By Ruddles
27th Jun 2017 12:33

Of course - I overlooked the £13k pension contribution and Gift Aid payments of £2,767 both of which the OP forgot to mention.

I agree with your original response, though - the higher rate threshold referred to in Lion's response is not directly relevant.

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Replying to Ruddles:
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By Portia Nina Levin
27th Jun 2017 12:46

I think the tests being discussed can be condensed to exactly that proposition though.

On the assumption that the amounts you mention are gross (to save this bear of small brain having to gross them up), the "higher rate threshold" (technically the basic rate limit) is, of course, £47,767 (per s 10(6)). And all of the dividend income would, being within it, be taxable at the dividend ordinary rate if there were no dividend nil rate.

Lion's response, seems to me to be a direct response to the software provider's assertion that the income exceeds £43K (PA + basic rate limit, if no adjustments needed thereto).

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Replying to Portia Nina Levin:
By Ruddles
27th Jun 2017 12:52

My bad - I should have said that the pension contribution was net and the Gift Aid payments the grossed-up amount :)

I had assumed that Lion was referring to "the" higher rate threshold (aka basic rate limit) and not to an extended threshold, hence the reference to its direct relevance. But it is of course quite relevant in determining what the actual basic rate limit (aka higher rate threshold) is in the particular circumstances.

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Replying to Portia Nina Levin:
By Ruddles
27th Jun 2017 12:58

The problem is that we don't know the context of the question to the software provider. If their response is intended to be interpreted as it is written - without consideration of any other factors, then it is wrong. On the other hand, if their response was case-specific and took into account all relevant factors, such that the basic rate limit required no adjustment, then it is correct.

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By emanresu
27th Jun 2017 14:50

Let's see the wood for the trees. The real issue the OP raises is "Do you have to be liable to pay some tax at one of the higher rates to be classed as a higher rate taxpayer?"

This issue is not just relevant to MAT, but to PSA as well.

HMRC's attitude is no. S55 could have been written in a clearer manner.

??????

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By Portia Nina Levin
27th Jun 2017 14:49

When you say "let's see the wood for the trees", do you mean let's forget about what the legislation says and focus on the right answer, per HMRC?

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By emanresu
27th Jun 2017 14:51

No. I mean what do you folk think?

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By lionofludesch
27th Jun 2017 14:54

Portia Nina Levin wrote:

When you say "let's see the wood for the trees", do you mean let's forget about what the legislation says and focus on the right answer, per HMRC?

It's the old problem, Portia. Who's going to take this to Tribunal for £230 (or whatever)? If you're not, you're stuck with HMRC's view, whether it's correct or not.

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Replying to lionofludesch:
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By emanresu
27th Jun 2017 14:56

lionofludesch wrote:

Portia Nina Levin wrote:

When you say "let's see the wood for the trees", do you mean let's forget about what the legislation says and focus on the right answer, per HMRC?

It's the old problem, Portia. Who's going to take this to Tribunal for £230 (or whatever)? If you're not, you're stuck with HMRC's view, whether it's correct or not.

Quite.

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