Sage self assessment summit: Part 3 – Marriage allowance

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The third part of this series looks at the thorny issue of marriage allowance: whether to claim, when to claim and how to claim.  

Serialised in eight parts, the Sage self assessment summit webinar features tax experts Rebecca Benneyworth and Paula Tallon outlining the main tax traps of the upcoming self assessment season, why they’re important and how to tackle them.

To watch the full webinar, including additional audience questions, click on this link and register absolutely free.

Topic 3 of 8: Marriage allowance

Marriage allowance remains a thorn in the side for many practitioners when it comes to self assessment season, and continues to generate questions and debate on AccountingWEB.

During the webinar Rebecca Benneyworth described marriage allowance as a ‘hiding to nothing’ for accountants, as it is likely they won’t be able to bill clients for time spent on this tricky area.

In terms of what to watch out when dealing with marriage allowance during the upcoming self assessment season, Benneyworth raised a number of points.

Firstly, both the claimant of the extra relief and surrenderer of personal allowances must not pay tax at a rate higher than the basic rate before and after the surrender has been made.

If the claim has been made in-year in a previous year, then this stands for all subsequent years unless it no longer applies – for example if the couple have divorced or separated.

The couple must be married throughout the tax year, and they must still be married when the claim is made. If the claim is being made now but the couple have divorced since the end of the 15/16 tax year, then no claim is possible.

One example cited by Benneyworth concerned a case where the spouse had actually died by the date of the claim, and therefore no claim was available as the couple must be married by the date of the claim.

marriage allowance

When to claim

If the accountant wishes the in-year claim to continue then it does not need to be revisited, which is one way of working.

The other way which, according to Benneyworth, is much more effective for accountants is that the claim is made retrospectively, and practitioners should consider that claim when completing tax returns for the couple.

Benneyworth urged accountants to consider claiming the marriage allowance when preparing the tax return as it is the most practical way of doing it – all the facts are known such as income and the position of the spouse.

IT issues

HMRC has had problems with its IT around marriage allowance – in some cases what has happened is that instead of subtracting the amount foregone by the surrenderer, it’s actually been added on by HMRC’s software, so it is worth examining carefully.

However, according to HMRC these issues have now apparently been resolved and accountants should now be able to make claims on behalf of clients.

Crib sheet

Another issue for accountants is that they may act for just one of the couple, and so may be required to give additional guidance. Rebecca Benneyworth’s final piece of advice around marriage allowance is to have a postcard or crib sheet for the other spouse so that you don’t bring non-paying work into the office.

You can view other topics covered in this series by visiting the content series page, or watch the full Sage Self Assessment Summit by registering here.

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03rd Jan 2017 21:35

With respect of course, the paragraph above commencing "Firstly" is incorrect.

There is NO such requirement for both transferor and transferee [respectively referred to above as "surrenderer" and "claimant"] to be basic rate taxpayers both "before and after the surrender has been made".

Basil.

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to fawltybasil2575
05th Jan 2017 11:23

Hi Basil,

Thanks for your comment. I believe the point Rebecca was making was that they mustn't be higher rate taxpayers - i.e. mustn't pay tax at a rate greater than 20%. Apologies if the article was misleading - I'll edit it to provide a bit more clarity.

According to our tax editor Rebecca Cave there is some controversy around this issue, as the advice on gov.uk is incorrect and has been for some time.

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avatar
05th Jan 2017 18:21

@ Tom,

[1] Thank you for editing out, from your article above, the incorrect paragraph to which I referred in my last post. Unfortunately, however, the video itself still contains the identical incorrect information - clearly your editorial team, when writing the above article, took Rebecca's oral comments at face value. Rebecca's comments were, with hindsight, clearly "a slip of the tongue", but nonetheless misleading.

[2] You are correct that the "gov.uk" website advice is incorrect [in essence there are many more eligible taxpayers than the website states]: that aspect is however a general one and entirely unrelated to the matter to which I referred in my last post.

Basil.

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