Problem with a fixed rate deposit savings account

colsten

KGriff wrote: »

Not much they can do about the previous years deducted tax perhaps, but I assume they will claim it back for the last year.

You can claim back tax for the last 4 years. See the link alanq posted.

KGriff

colsten wrote: »

You can claim back tax for the last 4 years. See the link alanq posted.

Oops .. ! I really must read things more carefully. Thank you for that too colsten.

I am having one of those days. (again!)

stormy-weathers

steelbru wrote: »

What was the AER figure given in the terms and conditions ?

Can you confirm that he filled in an R85 form to get the interest paid without tax ?

The AER was 4.25% and an R85 form was filled in.

stormy-weathers

xylophone wrote: »

£20,969.91?

Thanks for that xylophone

stormy-weathers

Archi_Bald wrote: »

Not sure what you mean by "compound interest rate". Assuming the AER was 4.25% (was it?):

£20,969.91 if it is an ISA or if he had given the bank an R85.

£20,477.61 if it's not an ISA or he hadn't. He can claim tax back from the HMRC by means of an R40.

Thanks he had given the bank an R85.
compound interest pays interest upon the interest previously earned during the term as opposed to simple interest which means that interest earned in the first year will not receive interest in the second and third years.

stormy-weathers

alanq wrote: »

Some possible (unlikely?) reasons for discrepancies to eliminate from the enquiries.

I don't know if they were around 3 years ago but Nat West used to accept deposits into low interest feeder accounts that only began to pay the higher fixed rate starting at a later date.

The account was not a simple fixed rate account but a stepped rate account.

The account didn't have "compounded interest" but in fact paid the interest to a linked account.

The "3 year" bond was in fact only for approximately 3 years.

Some accounts permit multiple deposits while a bond is still on offer to new customers and not all of the funds were there for the full term.

The time taken for deposit cheque to clear / begin earning interest.

The bank placed the funds in an account other than that applied for.

Nephew has his sums wrong.

We had thought that the bank had deducted interest but this doesn't appear to be the case according to them.They are not being very helpful .We have asked them nicely and politely if they an explain but they won't answer emails.We have called them and written as well but still no response.It's looking like to get any answers we will have to take it to the Financial Ombudsman.

stormy-weathers

KGriff wrote: »

Assuming the interest is added each year and the tax taken off at the usual 20% basic rate. I work it out as follows:

Day 1 - £18,508.38p
End of year 1 interest - £786.60 minus 20% tax (£157.32) = £629.28

So £19,137.66 carried forward to year 2.
End of year 2 interest - £813.35 minus 20% tax (£162.67) = £650.68

So £19,788.34 carried forward to year 3.
End of year 3 interest - £841.00 minus 20% tax (£168.20) = £672.80

Giving a final total of £20,461.14

This assumes that no R85 form was completed to begin with and therefore any tax deducted each year was to be reclaimed using a self assessment form or form R40.

Had their been an R85 form applied to the account then the total would have been £20,969.91 I believe, as stated by xylophone in this thread.

We had worked the amount out to be £20,969.91 as an R85 form was completed.It should be a simple matter but the bank won't tell us why they have a different amount.

stormy-weathers

KGriff wrote: »

True. I reckon someone didn't add the R85 form on the account and that has led to the dispute.

Can somone provide me with some info though too please. As my wife and I are both tax payers, we have never had occasion to use the R85 form on any of our savings. Nor have we ever tried to claim the tax back using form R40

But I assume, where there is a 3 year fixed savings, such as the one described by the OP that a person should be able to claim back not just the interest but the 'interest on the interest' ie the compounded interest or is it just a case you can only claim back each years annual interest without it being compounded?

Secondly, should a person claim back the interest each and every financial year (submitting three R40 forms in total) or can they wait the three years to claim it all back with one R40 form?

If anyone knows the correct position, it may be useful to know and clarify what people can (and cannot) claim back.

It appears to me in the scenario described by the OP here, that the R85 form being applied to the account from the onset, would have been the best thing to do to obtain the highest return for his nephew.

Well when my nephew spoke to them on the phone the bank claimed that they had did apply the R85 form to the account.
When he said could they then explain the difference they asked him to write in,he has done but hasn't received a response.

SeduLOUs

stormy-weathers wrote: »

We had worked the amount out to be £20,969.91 as an R85 form was completed.It should be a simple matter but the bank won't tell us why they have a different amount.

Did you submit an R85 form for each tax year?

stormy-weathers

SeduLOUs wrote: »

Did you submit an R85 form for each tax year?

We asked if we had to and was told that as it was a three year fixed rate deposit account and that we only needed to submit one when the account was opened and this would be applied for the three year period.