Are we all on the fiddle now: SA101: "Additional Information"

harryhound

This years paper returns have been sent out with a sort of centre fold supplement:
4 Sides of A4 with obscure questions.

It looks to me as though these 50+ extra boxes are meant to highlight actions that save tax or that used to save tax and force people to answer questions that most of us normal tax payers just don't understand.

If I don't understand I will reply NO; however my better half has pointed out that some of the obscure questions sound familiar; so perhaps someone can explain what it is the tax man is trying to get at:

Interest from gilt-edged and other securities?. Yes I do have some of those but they are in a unit trust. (Are they trying to find ones that pay gross?)

Life Insurance gains: Tax treated as paid? Gains where no tax was paid? Voided ISA's ? Deficiency relief ?..................
Well I've got an endowment policy that has matured (for less than the salesman told me it would) ??????
(Are they trying to get at people who trade in second hand policies?)

Stock Dividends? I think I had one of these, when HBOS desperate not to admit it was running out of cash bunged, all its share holders a few extra shares? The bumph that came with it suggested the shares were worth 19 quid (I doubt they still are)
(presumably the tax man is worried that he is not getting the normal 10% advanced corporation tax and will want me to chip in instead?)

Those questions are on the front page it gets worse on the next three.

Would anyone like to explain what is going on?

Harry

Personally I think a government that forces its civil service to question immense numbers of its citizens about subjects that they don't understand, is heading for bringing the system into disrepute.

System

The majority of these questions appeared in Tax returns up to the change in style in 2007/2008. See here - http://www.hmrc.gov.uk/forms/2007/sa100.pdf and

http://www.hmrc.gov.uk/forms/2007/sa101.pdf

The reason HMRC decided to list them on a separate "Additional Information" page is because it did not apply to a large number of taxpayers and so now they have the option of chucking that page out in the bin for recycling.

harryhound

Still don't know what half of them mean though!
Perhaps I should tick both boxes to mean "I don't know".
Bring back Nigel Lawson, at least he tried to get rid of a tax per year, not double the complexity, like the present government.
All a symptom of living in a country where we all appear on CCTV several times per day?

http://www.thisislondon.co.uk/news/article-23391081-george-orwell-big-brother-is-watching-your-house.do

Thanks,

Harry.

PS

I've received a cheque, when a policy matured. and I've banked it, with no idea that there was a huge heap of expensive legislation underlying it.

Does anyone want to explain this drivel:

UK insurers are required by law to issue a certificate if they know a
gain has been made on a life insurance policy, life annuity or capital
redemption policy. In most cases, therefore, if you have made a
gain you will have received a certificate reporting the gain, either
directly from the insurer or indirectly via trustees or a lender. These
notes tell you how to fill in boxes 12.1 to 12.9 of your Tax Return if
you have received such a certificate. They also tell you what to do
in those cases where you have not received a certificate but may
still have made a gain.
In these notes 'gains' are chargeable event gains which are taxable
as income. They are included in income for all purposes, including
entitlement to age-related personal allowances and tax credits.
Insurers sometimes refer to them as 'chargeable gains' but they
are not capital gains so reliefs allowable in calculating capital gains
(such as taper relief), capital losses and the annual exempt amount
cannot be set against them.Only include in boxes 12.1 to 12.9 gains from life insurance
policies, life annuities and capital redemption policies taken out
with a UK life insurance company or a UK friendly society. Gains
from foreign policies go on the Foreign Pages in boxes 6.6 to 6.8:
see guidance on page 18 in the section headed 'Is the policy a
'foreign policy'?'.
Do not include in boxes 12.1 to 12.9 details of retirement
annuities: they go in Question 11.
Not all payments from life insurance policies, life annuities and
capital redemption policies give rise to gains. If you have not
received a certificate, go to the sections headed 'No chargeable
event certificate received – but gain made' and 'No chargeable
event certificate received – definitely no gain made' on page 17.
These sections will help you decide whether you have made a gain
which you need to enter on your Tax Return.
If your insurer has sent you a certificate in
connection with a policy you own or used to own, or sent such a
certificate to the trustees of a trust you created or contributed to,
you will have made a gain which you should include on your
Tax Return. The certificate will tell you:
• the policy details
• the type of event giving rise to the gain and the date when
it occurred
• the amount of the gain
• whether lower rate tax is treated as paid on the gain and, if so,
how much
• the number of years either since you took out the policy or since
the last event, whichever is the less.
In many cases the insurer will also have sent us a copy of the
information on the certificate.
First make sure the gain is taxable in 2006–07. The certificate may
show one date relating to the event giving rise to the gain or it
may include two dates.
If the certificate only shows one date then this is the date of the
event. If this falls in the year ended 5 April 2007 then the gain must
be entered in this year's Tax Return for 2006–07.
If the certificate shows two dates relating to the event then only
enter the gain on this year's Tax Return for 2006–07 if the later of
these dates falls in the year ended 5 April 2007. This later date is
the final day of the 'insurance year' in which the event occurred. An
'insurance year' (which may also be referred to as a 'policy year') is
usually a 12-month period beginning on the anniversary of the date
on which you took out the policy.
For instance, a policy you took out on 1 July 1996 would have an
insurance year ending on 30 June 2006. If, using the same policy
example, you made a part surrender on 31 January 2007, the
certificate might show both the date of the part surrender,
31 January 2007, and the end of the insurance year, 30 June 2007.
The gain would go on next year's Tax Return for 2007–08, not the
2006–07 Tax Return, because 30 June 2007 falls in the 2007–08
tax year.
• If the certificate reports that there is no tax to be treated as paid
on the gain, enter the number of years in box 12.1 and the
amount of the gain in box 12.2.
• If the certificate reports a figure of tax treated as paid, complete
boxes 12.3 to 12.5 (unless the policy was held in a voided ISA –
see guidance on completing boxes 12.6 to 12.8 on page 18).
Include the number of years in box 12.3, the amount of tax
treated as paid in box 12.4 and the amount of the gain in
box 12.5.
In a few cases the gain shown on the certificate is not the amount
you have to include on your Tax Return, for example, where:
boxes 12.1 to 12.5
Chargeable event certificate received – events other than sales
or assignments
• you are not the only person taxable on the gain – see 'Gain
made by more than one person' aside, or
• the assignment took place as part of a settlement on divorce or
separation under a Court Order, see Help Sheet IR320: Gains on
UK life insurance policies for more information.
If the gain arose because of a sale or assignment of the policy,
the certificate will show the same information as for other events
apart from:
• the amount of the gain, and
• how much tax is treated as paid on the gain.
However, the certificate will tell you:
• whether (but not how much) tax is treated as paid on the gain
• the total previous gains, if any
• the premiums or consideration paid
• the amount of previous capital payments (or relevant capital
payments), if any, and
• the value of parts previously assigned, if any.
Using this information and the value you received for disposing of
the policy, you can calculate the gain and tax treated as paid
yourself. Help Sheet IR320: Gains on UK life insurance policies gives
you help in Example 3 on page 11.
If the certificate reports that there is no tax to be treated as paid
on the gain, complete boxes 12.1 and 12.2. If the certificate
reports that there is tax to be treated as paid on the gain, complete
boxes 12.3 to 12.5. When you have calculated the gain, enter the
amount in box 12.2 or 12.5 as appropriate. The certificate will
show the number of complete years that you need to include in
box 12.1 or 12.3, as appropriate. If your gain is treated as if tax has
been paid on it, enter the amount of tax you calculate in box 12.4.
An assignment which is not for money or money's worth will not
give rise to a gain. If you have received a certificate reporting a
sale or assignment but you do not think that there was any money
or money's worth, ask us for a post-transaction ruling before
entering details on your Tax Return. The transfer of a policy as part
of arrangements made on divorce or separation is not treated as
taking place for money or money's worth provided the transfer of
the policy took place under a court order or was part of an
arrangement ratified by the court. See Help Sheet IR320: Gains on
UK life insurance policies for more guidance.
If you have not received a certificate, in most cases this will be
because you did not make a gain. This could be because your
type of policy, or what you did, or the type or amount of benefit
you received, does not give rise to a gain (there is more about
this below).
But if any of the following four circumstances apply to you, you
may have made a gain even though you have not received a
certificate from the insurer.
• The insurer has sent the certificate to someone else but you are
liable for any tax that is due, for example, where the policy is
held by:
– the trustees of a trust you set up or contributed property to, or
– the trustees of a bare trust of which you are a beneficiary, or
– anybody holding a policy in their own name as your nominee,
or
– a lender to whom your policy was previously assigned as
security for a debt of yours.
If this may have happened, you should check with the trustees,
nominee or lender whether the insurer has sent them a
certificate and if so, ask them for a copy.
• The insurer has sent the certificate to the wrong address
because, for example, you have moved home without telling
your insurer. If this may have happened, you should contact the
insurer to ask whether it issued a certificate to your old address
and, if so, to request a copy.
• The insurer does not know about the event giving rise to the
gain or fails to recognise that a chargeable event has taken
place. For example:
– you have sold or assigned all or part of a policy for
consideration, or taken out a loan in connection with the
policy, but have not told your insurer this, or
– the person whose life the policy insured has died but the
insurer has not yet been informed.
If this has happened, you should contact the insurer to inform
them of the event that has occurred and to ask them for a
chargeable event certificate.
• The policy is a foreign policy – see 'Is the policy a 'foreign
policy'?' on page 18.
After you have obtained a copy of the certificate and determined
that the gain is part of your income, complete boxes 12.1 to 12.5
following the instructions above. There is further guidance in
Help Sheet IR320, including guidance on Personal Portfolio Bonds.
Not all payments from, or assignments of, life insurance policies
or other insurance contracts give rise to gains. If you have made
withdrawals from a UK policy, or you have received cash or other
benefits on the occasion of a death, surrender or maturity from a
UK policy but:
• you have not received a certificate, and
• none of the circumstances set out in the paragraphs above
applies to you
then you do not have a gain to include on your Tax Return. This is
likely to be the case, in particular but not exclusively, where:
• you have received a payment under a mortgage endowment
policy or a Friendly Society tax-exempt policy which has run for
10 years or more, or
• you have received a payment under a policy for which you paid
a single premium and the payment received is less than 5% of
the premium (in these circumstances any tax due on the payment
is deferred until the policy comes to an end), or
• you have given all or part of your policy to someone else and
have not received anything in return.
Where you are one of multiple owners of the policy, you only enter
your share of the gain on the Tax Return. If you own the policy
jointly with your spouse or civil partner, you should each enter on
your own Tax Return half the amount of the gain reported on the
certificate and also half the tax treated as payable. If:
• the multiple owners are not you and your spouse or civil partner,
or
• the gain arose in connection with a policy held on a trust which
you and other persons created or contributed to, or
• the gain arose in connection with a policy assigned as security
for a debt owed by you and other persons
see the section headed 'Dividing a gain where there are joint
or multiple owners or interests' in Help Sheet IR320 for
further guidance.
Some insurance products consist of a cluster of identical policies of
life insurance taken out at the same time from the same insurer.
Most insurers will report all the gains arising at the same time on
the cluster policies on the same certificate. If the insurer has
reported each gain on a separate certificate, but they are all
identical, add them together and include, as appropriate, the total
gains and total tax treated as paid. Just follow the guidance above
when completing boxes 12.1 to 12.5 of your Tax Return.
If you have made gains from more than one policy and they were
not identical, you will need to give details in the 'Additional
information' box, box 23.9, on page 10 of your Tax Return.
Describe each policy or cluster and for each one enter the amount
of the gains, the number of complete years and the amount of any
tax treated as paid. All this information will be shown on the
certificates from the insurers if you have them, unless the gain is a
result of an assignment (in which case please see Help Sheet IR320
for further advice). In boxes 12.2 and 12.5 enter the totals of the
gains, and in box 12.4 enter the total tax treated as paid. Do not
make any entry for the number of years in boxes 12.1 or 12.3.
If you have purchased a qualifying policy from a third party, or
own a policy made and originally assigned before 26 June 1982,
there may be a Capital Gains Tax charge when you receive money
in connection with it, give it away or exchange it for another asset.
Do not enter details of capital gains in boxes 12.1 to 12.5. They go
in the Capital Gains Pages. For more details about Capital Gains Tax
on second-hand policies, sometimes known as traded endowment
policies (TEPs), see the section 'Policies purchased from a third
party' in Help Sheet IR320.
You may not have received a certificate because your policy is a
foreign policy taken out before 6 April 2000. A foreign policy is
usually one issued by an insurer from outside the UK and is treated
as including a policy taken out with the UK branch of an overseas
insurer. If you are in doubt as to whether your policy is of this type
you should ask the insurer. Gains on foreign policies go on the
Foreign Pages obtainable from the Orderline (see the notes on
boxes 6.6 to 6.8 of the Foreign Pages and Help Sheet IR321).
A UK insurer may also issue a foreign policy as part of its 'Overseas
Life Assurance Business'. This is a type of policy sold by a UK insurer
to a person who, at the time it was taken out, was residing outside
the UK. Gains from this type of policy go on the Foreign Pages if
the policy was taken out on or after 17 March 1998. However,
gains from Overseas Life Assurance Business policies which were
taken out before 17 March 1998 are not treated as arising from
foreign policies and you should enter details of such gains in
boxes 12.1 to 12.5 according to the guidance above. If you think
you might have made a gain on an Overseas Life Assurance
Business policy taken out before 17 March 1998 but have not
received a certificate, contact your insurer.

One final thought:

Please can someone split the now huge HMRC database of "guidance" into current stuff (say last 3 years) and historical stuff like how to fill in a last century tax return!

Primrose

I'd award an MBE to anybody who could write a tax document in words that the average person can understand. Bet half the people working in HMCR don't understand it either!
Actually we currently hold a With Profits policy we were thinking of surrendering. After reading the above, think we'll just leave it to rot and let our poor Executors sort it out instead !! If I'd known this would have been the end result of putting the money in a WP policy (which has performed badly anyway) I would just have stuck the money in an ordinary savings account. Why don't they just send you a letter saying "You've made a profit. Just write out a cheque for the whole amount and send it to us".