Tax on Halifax Reward

twhitehead

My wife does not have sufficient income to pay tax on her savings with building societies so she registers with them to get interest paid without deduction of tax (R85).

Late last year she opened a Reward account with Halifax where they pay £5 if £1000 goes in each month and we have put £1000 in each month and £5 has been paid into her account by the Halifax.

So far so good.

Then she tried to register with Halifax to get an extra £1.20 being the tax deducted from the £5 per month.

Despite emails, letters and visits to the local Halifax bank we have both failed.

The latest response from Halifax is that although the £5 is tax paid, they are unable to pay the extra into her account and cannot issue an R85. She has to wait to the end of the tax year, then obtain an R40 from Inland Revenue, contact Halifax for certificate of tax deducted, fill in the R40 and return to Inland Revenue who will process the claim.

The last time anything like this happened it took about six months to get a refund off the Inland Revenue and the R40 forms she filled in went to several different tax offices before we had success and got the money she was entitled to.

Is the Halifax being a jobsworth or are they genuinely unable to issue R85s?

Has anyone managed to get the extra from the Halifax to which they are entitled?
:mad:

zppp

I suggest you read this recent thread;

https://forums.moneysavingexpert.com/discussion/1598237

scottishblondie

Reclaim it from the tax man at the end of the tax year, Halifax will not accept R85s and pay the reward without tax.

twhitehead

What a mess. I do my tax by self assessment and get a tax refund within a day usually. As I said the last time she had to fill in a R40 it took six months. I did ask the tax office if she could go on to self assessment and they said no, it is not worth it.
:mad:

scottishblondie

Something must have gone wrong there then, because I have always received my reclaimed tax (via R40) within 6 weeks.

rb10

The bank is correct in what they have told you.

Gross interest can be registered on all other accounts (like many others, they don't use R85s any more, it's just a verbal declaration), just not on the Reward current account. The reason given for this is that it is not technically 'interest'.

As others have said, the R40 is the way forward. Last time I filled one in it took just short of three weeks to get the money back in my account, paid from HMRC.

pinkdalek

An R85 is for getting interest paid without tax, the £5 reward is as it states a "reward" and is not interest, hence why the Halifax cannot complete an R85.

You can claim the "gross" equivalent by requesting a tax certificate from the bank and then claiming direct via the Inland Revenue.

rb10

pinkdalek wrote: »

You can claim the "gross" equivalent by requesting a tax certificate from the bank and then claiming direct via the Inland Revenue.

You do not in fact even need the tax certificate that the bank will send you ... just fill in the R40 form from the HMRC website, send it to them, and they'll put the tax straight into your account.

Mikeyorks

pinkdalek wrote: »

An R85 is for getting interest paid without tax, the £5 reward is as it states a "reward" and is not interest, .

In which case the R40 wouldn't work either as it is a form for :

HMRC wrote:

Use form R40 to claim back tax if you think you've paid too much on your savings interest

......... reclaiming tax deducted on interest. As it does work .... then clearly HMRC consider it is interest.

It's astonishing that they continue to allow Halifax to get away with this as it needlessly increases HMRC workload.

rb10

Mikeyorks wrote: »

It's astonishing that they continue to allow Halifax to get away with this as it needlessly increases HMRC workload.

It's a bit of a grey area, but I would imagine that it's HMRC's decision not to allow Halifax to pay the Rewards gross.

Otherwise, why would this be an issue? I can't believe that it's a constraint of the system; it surely must be a regulatory thing.

Mikeyorks

The issue - that Halifax treat this not as a deduction under the Tax Deduction Scheme for Interest (TDSI) - seems to stem from the Halifax side. I know not why (other than their paranoia of selling everything under the Reward banner) - only that there have been issues between the two sides going back 20 years and into the MIRAS days.

There's no merit in HMRC blocking the acceptance of R85s as it puts people down the R40 route instead. Which benefits neither the customer nor HMRC. The former having to wait for a refund - the latter having an increased workload. There would be no adverse R85 impact to Halifax - as the mechanisms are in place.

It would be interesting to see what percentage Halifax would deduct from the gross £6.25pm if the basic rate of tax and the TDSI rate were not now converged at 20%. They were different (going back 3 years when the basic rate was 22%) ...... and I have to suspect the deduction could only be 20%, ie the TDSI rate? Which would firmly label it as 'interest'.