Yes I agree.
It was this point exactly. I don't want to over do the 'as I am sure you can appreciate mistakes happen' lines as I don't want to antagonize the inspector.
Yes this is going to be my approach.
It was more a question of how should I approach the HMRC error. I obviously need to make HMRC aware that their letter & calculation are incorrect and I wondered if anyone had any thoughts on whether I should use this point to argue against penalties. Perhaps I should inform them of the error and argue on the basis as you noted (leaving the error as a stick to hit them with if needed).
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.
It is my understanding that TSR only applies when the gain pushes total income into a new tax bracket...
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....
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....
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!
Yes I agree and I think that in this case it would be beneficial to restrict the AIA to the requisite amount to eradicate the balancing charge.
My colleague is unfortunately very much accounts based and was asked to adjust a computation. This is like asking me to read Japanese. I hoped giving her an example or guidance (As supplied by Ste99) would assist her in future as she struggles with this area in particular.
Thank you for your assistance.
Yes the director is also a shareholder. Apologies for omitting this point.
My understanding is that in this scenario the write off is treated as a dividend distribution (with the possibility of NI being charged on the amount depending on whether HMRC feel that the loan arose in the course of employment).