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If you have potential claims on the basis of Marina Silver, for 2017/2018, would you submit amended returns now?
Tim, your view and the Silver case have to make perfect sense and as the legislation is written. I cannot understand HMRC's argument!
HMRC seem to be sitting on one of my 2017/18 returns which needs to show lower tax due - is this likely to be why?
Interestingly today I have received two amended calculations from HMRC for clients for whom our original calculations show that no top slicing relief was due (as the slice already fell into the HR band) but now the HMRC calculations are giving them relief but no explanation as to how they arrived at that figure!!
HMRC have just sent out aboout 15,ooo corrected SA302s for 2017-18. Some of these
will reflect a change they made last year to their top slicing relief calculation. The change related to the use of the savings rate band and personal savings allowance and can result in additional TSR of up to £1,100.
We are an example of HMRC doing their recalculation (and writing literally within the last couple of days that I think they were allowed to amend their own website's calculation). The recalc cost us 1100, ie 20% of 5500.
I can also confirm that in January 2019 the 17-18 calculator worked on the old basis (not taxing the initial 5500), while by Nov the 18-19 HMRC calculator now effectively taxes the 5500. However, it is optically confusing as it still shows 5000+500 of allowance taxed at 0% leaving £29k to be taxed at 20%. The adjustment appears to be inserted lower down, and in a invisible fashion, so that top slice relief is no longer half of the 40% tax. In some way, therefore, the apparent 5500 of 0% is retrospectively amended to 20%, if that makes sense!
And I can confirm that none of the savings allowance is used to reduce the tax paid on UK interest to 0% either. This seems wrong. At the very least one should get £500 tax free savings allowance. And given that the Gain divided by life of the bond in years plus all other income (in our case) is below the higher rate threshold, one should get £1000 savings tax free. And in fact given that gain/life plus non-savings income is below the personal allowance, actually one should surely also get the £5000 savings allowance?
Furthermore, if the purpose of the legislation was to tax the gain as though it would be spread across the relevant number of years, then surely if gain/life plus non-savings income is within personal allowance then there should be no tax to pay at all, ie top slice relief should be 100%?!
[For the record I am a punter rather than an accountant. The gain in our case is offshore but that seems to make no difference to the HMRC calculator].
Leaving aside the topslicing issue, I wonder if HMRC have any authority to collect the extra £1,100. If a 2017-18 tax return was filed on say 6 January 2019 then HMRC had until 5 October 2019 (nine months from the filing date) to issue a corrected assessment. If the corrected assessment was issued on 28 October 2019 it was not valid and the extra tax is not payable. HMRC would have to open an enquiry within 12 months of the filing date (deadline 5 January 2020) or make a discovery assessment.
The more substantive topslicing issue is due to be heard by the Upper Tribunal on 31 March 2020.