Marriage Allowance

Hallucyn8

Thanks polymaff

Seems pretty clear cut then in most respects. Doesn't include anything about it being automatically withdrawn at the end of the tax year so will have to assume that this is not the case.

Probably the most confusing thing is, if I'm reading it correctly, that it says the withdrawal must be made by my ex-wife but if I log on to my online personal tax account I have the option to cancel it.

polymaff

Hallucyn8 wrote: »

Thanks polymaff

Seems pretty clear cut then in most respects. Doesn't include anything about it being automatically withdrawn at the end of the tax year so will have to assume that this is not the case.

Probably the most confusing thing is, if I'm reading it correctly, that it says the withdrawal must be made by my ex-wife but if I log on to my online personal tax account I have the option to cancel it.

Generally, when an election to stop MAT is made it will still be active in the current tax year. Section 7 (see my quote) states that, if divorce is the issue, then the MAT will not be applicable in the current tax year.

The issue facing all tax accountants is whether to obey the legislation or HMRC's implementation thereof. I can't off the top of my head think of an issue where HMRC's interpretation of the legislation has been so wrong - and where they have steadfastly maintained their foolish position for so long.

Typically their stance has been "You can't do X", modified a year later to "You can't do X - except in circumstances A, B, and C", and then onto "You can't do X - except in circumstances A, B and C - and it would be of no benefit to you do do so in any of those circumstances". Even the last of which is wrong, wrong, wrong.

EDIT: And you'll notice that the legislation says nothing about a claw-back. Well, it can't describe conflicting approaches when only one party can cancel the election.

Sheer Alice in Wonderland.

Hallucyn8

Thanks again polymaff.

Interesting stuff but by its very nature not very helpful (and that's not a criticism to your good self just in case it came across that way).

I'm thinking that the best course of action to me will be to actually either attempt to cancel it myself as the option is there or prompt my ex-wife to do it and face whatever consequences that entails. She wasn't very financially astute so I can't see her remembering or it occurring to her to cancel so if I do nothing it could potentially just keep running and at some point in the future it could catch up to me and I would be facing a much larger bill!

polymaff

You are asking for advice over something that should be straightforward of one who knows that it isn't. Your sole responsibilty is, after para (8) is true, to let HMRC know that you are now not a valid beneficiary of MAT. HMRC have no legal power to claw back any benefit you have received other than in the tax year in which para (8) became true.

EDIT: here's the reference:

http://www.legislation.gov.uk/ukpga/2014/26/section/11

Hallucyn8

Thanks polymaff, understood, thanks for your help on this.

Hallucyn8

Just thought I would drop a quick update here in case anyone else ends up in a similar situation.

My decree absolute was granted on Tuesday and today I logged on to my Personal Tax Account and clicked through the options to cancel the Marriage Allowance due to divorce. I had to enter the date that the marriage ended and the following message was displayed:

You have told us you divorced or ended your civil partnership on 29 October 2019.

As this date falls within the current tax year:

your Marriage Allowance will be cancelled from 5 April 2020, the end of the current tax year
your Personal Allowance will go back to the normal amount from 6 April 2020, the start of the new tax year

Once I had confirmed the details I received a message with a slightly different wording but with the same outcome:

You have asked us to cancel your Marriage Allowance. This means:

your Marriage Allowance will remain in place until 5 April 2020, the end of the current tax year
your Personal Allowance will go back to the normal amount from 6 April 2020, the start of the new tax year

And finally received a confirmation email that backs this up:

Marriage Allowance cancelled

Your Marriage Allowance will be cancelled on 5 April 2020, at the end of the tax year.

What happens next

If your former partner pays tax through PAYE, we’ll change their tax code and send them notification of their new tax code in the post. We’ll tell their employer to start using this new code from the start of the new tax year on 6 April 2020.

If they complete a Self Assessment tax return, we’ll return the allowance to them at the end of the current tax year on 5 April 2020. Their Personal Allowance will be adjusted on 6 April 2020.

There’s no need to contact us. You can check the status of your Marriage Allowance on your personal tax account by clicking the link below.

So while that appears to be all good news from my point of view, although I'm still half expecting to get a tax bill at some point, it does seem to contradict the legislation unless I've still managed to misunderstand despite polymaff's help.

polymaff

I've commented many times - on MSE (not the least in this thread) and on professional accounting web-sites - that HMRC regularly abuse legislation - leaving accountants with a problem. Do they follow the legislation - or HMRC's interpretation thereof. When I was in business I followed a pragmatic line - fit in with HMRC. Now, retired, I just quote the legislation...:)

MAT has been such a mess. I've seen worse in terms of consistency in the legislation, but I've never seen such a delinquent, incompetent implementation of legislation and, of course, that is 100% down to HMRC. I've had my fill of senior officers at HMRC whining on about lack of consultation as to the implementability of their legislation - but sorry, guys and gals at HMRC, that's what you are paid to do!

So they've cancelled MAT on a date completely in conflict with the legislation. Have they talked about claw-back which, again, would be completely in conflict with the legislation?

Hallucyn8

polymaff wrote: »

So they've cancelled MAT on a date completely in conflict with the legislation. Have they talked about claw-back which, again, would be completely in conflict with the legislation?

Not as yet! The details I put in my last post are the full and complete information I've had from them so far so I guess I just wait until next year and see what happens.

Sea_Shell

Quick Question, and apologies if it's been answered up thread.

Is the amount of tax free limit you can transfer, a fixed amount of £1250*, rather than 10% of your Personal Allowance. (* based on current PA figures)

I ask, because I want to get this all tee'd up for when DH is due to start drawdown on his pension, so he can draw more, tax free. I don't work, but currently have a tax code of 1158L, due to having earned £911 interest during 2018-19.

So can I transfer the whole £1250 to him, or can I only transfer 10%, being £1158?

Gov.uk reads to me like it will still be £1250, but just wanted to check with you knowledgeable lot! Cheers

polymaff

It is fixed - though not always exactly 10%. If the 10% figure isn't a multiple of 10, it is rounded up to a multiple of 10.


E.g. £11,850 -> £1,190.