Tax advice please

Steve_xx

Mikeyorks wrote: »

Likewise. I normally avoid CGT like the plague ... it's a specialist area, and I'm not one.

But this (initially at least) simply revolves around the admissibility, or otherwise, of the loss being offsettable against income? HMRC say this is a negligible value situation and it can be set against gains. So it's worth pursuing being able to set it against income (I'm assuming he hasn't any CGT gains tucked up his sleeve?).



Definitely linked ... if admissible. Although you can off set against the year of loss + earlier year ...... you can't preserve his PA for the year you determine is the priority and where the loss exceeds total income (read Example 2 on the helpsheet link you posted) ...... which it appears to? (loss £20k .... income circa £5k pension + £12.5k gross Interest = £17.5k in 08-09. Therefore income wholly neutralised and therefore no tax due ... but you lose his PA + the 10% rate band in the process. However ... leaves £2.5k loss to carry to 07-08 where it will displace tax at 20% on interest and leave the (old) 10% band utiliseable? Makes the loss worth the best part of £3k [ 12.5k + 2.5k interest negated at mainly 20%]?).

But this all pivots on HMRC admitting the loss can be set against income. Personally I would write initially ..... simply pointing to the article on B&B and asking for ratification of your (uncle's) understanding that the loss is settable against income?

Thanks again Mike. I'll be talking to my Uncle again later today. I'm considering what Jimmo above stated and think maybe that wont be a goer. My uncle is getting a bit agitated - like most people do where tax is concerned. I sense that he feels happy enough to recover on his savings income via the PA + 10% route because he's got the two forms, one for each of the past two tax years, and they look relatively easy to fill in.

When he requested the forms from the tax office the lady he spoke to indicated that he may have to start doing a return in view of the amount of savings income he has. Then she went on to say " for now, just complete the two forms and they may just process it as is". Even if he does have to complete returns in future his income affairs are relatively simple so there ought not to be a problem there. He simply has his occupational pension and the interest from his savings. He has no other income and hasn't any shares at all now since the collapse of Bradford & Bingley.

Mikeyorks

jimmo wrote: »

I think the “and” bit will block any claims.

If all the content of hs286.pdf below the para 'Claim to set loss against income' ...... relates purely to losses against income - then it falls on several counts, gross assets being one?

But I find it totally unclear just what below that para does relate to offset against income .... and what may relate to offset against chargeable gains, as the latter is interspersed sporadically.

As I've said earlier ..... the fact that brief1609.htm studiously ignores 'income' suggests it's not applicable. But as all of that was put together in haste .... the omission might be inadvertent rather than by design.

I still think it's worth the OP asking the question? As you'll be aware, with your background, interpretation within HMRC can sometimes be mixed ... and occasionally beneficial.

Mikeyorks

Steve_xx wrote: »

I sense that he feels happy enough to recover on his savings income via the PA + 10% route because he's got the two forms, one for each of the past two tax years, and they look relatively easy to fill in.

Then you should caution him against being precipitate! The 10% factor generates a max of £232 last year and £223 the previous. The £20k loss (if ..... as I've kept saying .... 'it is admissible') offers considerably more (and one of the 10% reductions would still be available).

It is worth asking the question of his tax office? Nothing lost by that .... nor will it be a free ticket into SA just by doing that!

Mikeyorks

Mikeyorks wrote: »

It is worth asking the question of his tax office?

Apologies ..... I think I need to take that back.

I was just idly looking around the background to hs286.pdf and came across this :

http://www.hmrc.gov.uk/manuals/vcmmanual/VCM45010.htm

...... which immediately qualifies that virtually the whole of hs286.pdf simply relates to an offset against income. So any potential claim - for income - falls, under a number of headings. Whereas, perversely, he could happily claim the loss against chargeable gains ..... but not against income. I've found the potential of that a bit odd .... it's suitably explained (from link above) here :-

The relief is intended to provide investors in unlisted trading companies with some degree of financial insurance against failure, and is part of the Government's assistance to small businesses

I'll let you get on with the 10% claims!

Steve_xx

Mikeyorks wrote: »

Apologies ..... I think I need to take that back.

I was just idly looking around the background to hs286.pdf and came across this :

http://www.hmrc.gov.uk/manuals/vcmmanual/VCM45010.htm

...... which immediately qualifies that virtually the whole of hs286.pdf simply relates to an offset against income. So any potential claim - for income - falls, under a number of headings. Whereas, perversely, he could happily claim the loss against chargeable gains ..... but not against income. I've found the potential of that a bit odd .... it's suitably explained (from link above) here :-



I'll let you get on with the 10% claims!

Ah, ok then Mike. Thanks for your efforts with this, it's much appreciated.

I will tell my uncle that he ought to continue with the 10% claims. But didn't we conclude on that issue that he could claim 20% back of the portion of his savings interest that bridges the gap between his occupational pension income (£5300) and his PA? Then he would be due a 10% refund on £2320 of savings interest.

I'm reckoning on it heading to near £1k since in 2007/8 his pension earnings were only £3,545, so the gap between his pension earnings and the PA is greater than in 2008/9 and therefore I guess he gets to claim back a bigger chunk at 20%.

Mikeyorks

Steve_xx wrote: »

But didn't we conclude on that issue that he could claim 20% back of the portion of his savings interest that bridges the gap between his occupational pension income (£5300) and his PA?

Indeed. I'd taken it as read that would 'accompany' the 10% claim? If it's an R40 ...... it requires pension etc details - therefore you're providing all that's needed. They should make a formal computation based on that .... which will automatically mop up the unused portion of the PA.
Enclose a brief note asking for that to be done ..... if you want to cover all bases?

Steve_xx

Mikeyorks wrote: »

Indeed. I'd taken it as read that would 'accompany' the 10% claim? If it's an R40 ...... it requires pension etc details - therefore you're providing all that's needed. They should make a formal computation based on that .... which will automatically mop up the unused portion of the PA.
Enclose a brief note asking for that to be done ..... if you want to cover all bases?

Yes it's two copies of the R40 form that's been sent, one for each of the respective tax years. It looks to me fairly straightforward to complete and in actual fact there are only a couple of sections that he needs to complete at first glance. So I guess they plan to automate the process, feeding it through a reader and then it must compute the result.

One has to wonder why it is that when HMRC receive interest from your bank accounts that it isn't allocated by NI number to an individual. Thereby triggering an automatic refund if overpayment of tax occurs. I actually thought that HMRC did receive such detailed information from banks, but apparently not so.

Mikeyorks

Steve_xx wrote: »

I actually thought that HMRC did receive such detailed information from banks, but apparently not so.

They do get detailed Section 17/18 reports from deposit takers regarding interest paid. But the NI number is an optional field ..... and I certainly can't recollect ever being asked for it when opening accounts other than ISAs (which, of course, aren't reported in this way).

I think the data is only collated, by HMRC, for an individual where they deem it necessary / desirable for checking / investigation purposes. Not sure you'll ever see it fully automated for refund purposes .... too many 'what ifs' such as people on variable income but below the tax threshold and generally unknown to HMRC.

Steve_xx

Mikeyorks wrote: »

I think the data is only collated, by HMRC, for an individual where they deem it necessary / desirable for checking / investigation purposes. Not sure you'll ever see it fully automated for refund purposes .... too many 'what ifs' such as people on variable income but below the tax threshold and generally unknown to HMRC.

Yes I thought that might be the case and I see what you mean regarding the complexities involved regarding variable income etc. But I kinda still feel that where there is a fairly simple situation, as in my uncles' case, I would really think that some automation could be possible. The real problem is the complexity of the whole regime and the ambiguity that seems rife in their examples.

suso

Steve_xx wrote: »

One has to wonder why it is that when HMRC receive interest from your bank accounts that it isn't allocated by NI number to an individual. Thereby triggering an automatic refund if overpayment of tax occurs. I actually thought that HMRC did receive such detailed information from banks, but apparently not so.

they used to, but they no longer use the information(I'm not sure whether its no longer received or no longer utilised)

So in some cases when tax has been overpaid they can't refund as the information is not collated, but likewise when tax has been underpaid (taxpayer is now in the higher rate band due to interest on savings taking them over the threshold) then unless the taxpayer tells them about it, then they just pay tax at 20% rather than 40%.