Lambeth merger bonus

steady__eddie

This could be an hypothetical question but hopefully it's not and the proposed merger will take place.
My qualifying status to the above is in the form of an I.S.A. which I hold with them, I received info. from them today outlining the possible bonus which in my cicumstances is £400 subject to deduction of lower rate tax. In the Q & A section It goes on to say :-

Q. I am a qualifying shareholding member with money currently invested in a Lambeth I.S.A., will my bonus be paid gross ?
A. Your bonus can be paid gross but this will be subject to you completing the appropriate H.M. Revenue and Customs form.

I am a taxpayer but I would contend that the interest or bonus in this instance is not subject to tax due to the very nature of the account. I adopted the same stance some time ago when the Portman comandeered my I.S.A. with The Staffordshire but on that occasion I was informed by the Staffordshire that "Tax will be deducted".

Does anyone have any views please ? I presume that the appropriate H.M. Revenue and Customs form is an IR 85 ? Reference is made to H.M. R. & C. booklet IR 111 - Bank and Building Society interest, are you paying too much tax when you don't need to ? I have searched the H.M. R. & C. site but I am unable to find any reference to the aforementioned booklet. Once again, any ideas please ?

Careful_ly

I would take the view that the bonus is taxable, it is being paid to you as a member of the building society, I think the type of account you have that makes you a member is
irrelevant.
The R85 form to allow it to be paid gross can only be completed by a non tax payer.
If in fact you were a higher rate tax payer this bonus would need to be declared on a SA form and subject to a further 20% tax.
IMHO
Careful_ly

ReportInvestor

The bonus is taxable at your top rate of income tax. There is no doubt about this.

There can't be one rule for some ISAs and another for others. If someone had paid in £3K in one tax year, they can't legally add to it - so that would be a problem.

You are a bit of "collector", aren't you s_e? Don't forget to remind MSEers where you are placing that "lucky" ISA next .

steady__eddie

I would have liked to thank both of you for your replies (to boost your count) but somebody has nicked my thanks button.
I am going to see the taxman next Tuesday when they hold a surgery in the local jobcentre. I want the situation clarifying.
Given that the voting members are swayed in a favourable direction and I am unfortunate enough to lose my membership in yet another mutual organisation, then I will be only to glad to enlighten others as to where my lucky I.S.A. is relocating to.
Should I post it on the gambling forum ?