OK I think I may be getting there. In my personal case I was the beneficiary of the trust in whose name the investment was held. So when the investment was conveyed to me personally by the trustees there was no change in beneficial ownership. I suspect that this was the reason why no CEG arose on that event. But that would not apply in the OP case. Is that it?
To be honest it never occurred to me that there might be a legal impediment to transferring beneficial ownership (irrespective of the tax consequences).
Indeed I personally own an insurance bond that was originally invested by my Dad. It came my way by way of a trust rather than direct by him, but I would be surprised if that makes a difference to the mechanics.
You put "assigned" in quotes. If I have used some term with technical implications that reach beyond the common English language useage then my apologies. Assigned, gifted, conveyed, whatever. One day it is his, next day it is hers, and no consideration passes for the exchange.
It's to do with the oddities of Top Slicing Relief isn't it?
Yes that is involved in it.
Of the CEG, we get
Personal savings allowance nil rate £500 @ 0% = £0.00
Basic rate £500 @ 20% = £100.00
Higher rate £19000 @ 40% = £7600.00
TOTAL (excl employment) £7700.00
Less
Top slicing relief £3800.00
Notional tax on gain £4000.00
TOTAL deduction £7800.00
Net tax benefit from CEG = £7700.00 - £7800.00 = £100.00
Still thinking about this. Perhaps a worked example.
Simplify it by excluding savings income.
Salary £36338, dividends £41236, nothing else. 2016-17.
If you allocate all £11K PA to salary, then you have spare BR band £6662 before considering divis. So, £5K divis at 0%, £1662 at 7.5%, 34572 @ 32.5%. Total tax bill £16428.80 as base line "Case 1").
If you allocate £1662 PA to divis then the overall tax bill goes up to £16636.55 (Case 2), ie 12.5% of £1662, the 12.5% being BR rate on salary 20% less BR rate on divis 7.5%
So at first sight that seems to be a bad move.
BUT if you allocate £6662 PA to divis, then the total bill goes down to £16011.55 (case 3) being the best case. The difference between case 2 and case 3 is 12.5% of the excess of £6662 over £1662. Not the same 12.5% as the comparison above, as it happens, this time 32.5% HR tax on divis less 20% BR tax on salary.
So in *this case* whether to allocate PA to divis at all seems to depend on whether £1662 is less than or greater than half of the £11K PA available to be transferred ("half" being relevant only by the coincidence that 20% - 7.5% happens to be the same as 32.5% - 20%). In this case it is less, so transfer is beneficial provided that it exceeds double £1662.
Now, how to put that into a general case formula ...
Don't the articles specify they rank Pari passu except in respect of dividends?
'Er indoors reckons I need to get a life. Having dismissed Indian, Chinese and Thai, she asked me to choose between pizza and kebab from Just Eat, and I replied that they ranked pari passu.
My answers
OK I think I may be getting there. In my personal case I was the beneficiary of the trust in whose name the investment was held. So when the investment was conveyed to me personally by the trustees there was no change in beneficial ownership. I suspect that this was the reason why no CEG arose on that event. But that would not apply in the OP case. Is that it?
To be honest it never occurred to me that there might be a legal impediment to transferring beneficial ownership (irrespective of the tax consequences).
Indeed I personally own an insurance bond that was originally invested by my Dad. It came my way by way of a trust rather than direct by him, but I would be surprised if that makes a difference to the mechanics.
You put "assigned" in quotes. If I have used some term with technical implications that reach beyond the common English language useage then my apologies. Assigned, gifted, conveyed, whatever. One day it is his, next day it is hers, and no consideration passes for the exchange.
With kind regards
Clint Westwood
I reckon they would do well to have a dedicated box on the tax return for you to enter the "exclusion case number" when filing by paper :)
Yes that is involved in it.
Of the CEG, we get
Personal savings allowance nil rate £500 @ 0% = £0.00
Basic rate £500 @ 20% = £100.00
Higher rate £19000 @ 40% = £7600.00
TOTAL (excl employment) £7700.00
Less
Top slicing relief £3800.00
Notional tax on gain £4000.00
TOTAL deduction £7800.00
Net tax benefit from CEG = £7700.00 - £7800.00 = £100.00
Bizarre.
Not sure if this option has ever been available online for an SA401. Could be wrong.
My closest attempt so far ...
To arrive at a figure for the ADDITIONAL personal allowance to be allocated to dividends over and above any already allocated by the default stack:
=MAX(0,MIN(A2,A1+A2-A3,MAX(0,A6-5000)-MIN(MAX(0,A6-5000),MAX(0,A1+A2-A3-MAX(0,A4-A5)+MAX(5000,A6)+MAX(A4,A5)))))*((A2-A3-MAX(0,A4-A5))<0)
Not an elegant solution.
Pretty sure that there will be fringe cases where this fails. In particular I am expecting the presence of savings income to throw up an anomaly.
Still thinking about this. Perhaps a worked example.
Simplify it by excluding savings income.
Salary £36338, dividends £41236, nothing else. 2016-17.
If you allocate all £11K PA to salary, then you have spare BR band £6662 before considering divis. So, £5K divis at 0%, £1662 at 7.5%, 34572 @ 32.5%. Total tax bill £16428.80 as base line "Case 1").
If you allocate £1662 PA to divis then the overall tax bill goes up to £16636.55 (Case 2), ie 12.5% of £1662, the 12.5% being BR rate on salary 20% less BR rate on divis 7.5%
So at first sight that seems to be a bad move.
BUT if you allocate £6662 PA to divis, then the total bill goes down to £16011.55 (case 3) being the best case. The difference between case 2 and case 3 is 12.5% of the excess of £6662 over £1662. Not the same 12.5% as the comparison above, as it happens, this time 32.5% HR tax on divis less 20% BR tax on salary.
So in *this case* whether to allocate PA to divis at all seems to depend on whether £1662 is less than or greater than half of the £11K PA available to be transferred ("half" being relevant only by the coincidence that 20% - 7.5% happens to be the same as 32.5% - 20%). In this case it is less, so transfer is beneficial provided that it exceeds double £1662.
Now, how to put that into a general case formula ...
This has been an issue for a week or so. See thread:
https://www.accountingweb.co.uk/any-answers/sa1-down-permanently
For the time being you can use the alternative "fill in, print and post" option in the second link on the SA1 web page.
'Er indoors reckons I need to get a life. Having dismissed Indian, Chinese and Thai, she asked me to choose between pizza and kebab from Just Eat, and I replied that they ranked pari passu.
With kind regards
Clint Westwood
Might there be a problem if the contract is between the school and the parents?