NSANDI Reclaim tax on 65+ bond?

teddysmum

I've sent an email to the Treasury , but not holding out much expectation of a reply.


After all it was George who put the scheme into action.

teddysmum

xylophone wrote: »

And consider this - if the bond were a five year bond, would a non taxpayer have to forego the interest paid in the first year because tax overpaid can only be claimed for the past four years?

Probably, as George doesn't seem to think before he acts.


HMRC said the bond rule applies, as you cannot access the interest,but do agree that taking the tax on something you don't have is very odd.

xylophone

HMRC said the bond rule applies, as you cannot access the interest,

But you can! That is the whole point! having to pay a penalty so to do does not mean that you cannot access it!

xylophone

https://www.nsandi-adviser.com/wp-content/uploads/65-guaranteed-growth-bonds-brochure.pdf

The 2015 brochure above.

"To get the full return from your Bonds,
you will need to keep your money invested
for the whole of your chosen term.
You can cash in all or part of your
Bond early, but we will deduct a
penalty from your payment."


You can therefore access the interest or indeed the capital in full or in part and before the three years has expired.

"For a 3-year term
We add the interest earned to the Bond
on each anniversary of investment, so it
grows in value each year"

The interest has therefore been paid in the tax year in which that anniversary occurs.

"What about tax?

The interest earned on 65+ Guaranteed
Growth Bonds is taxable. We take off tax at
the basic rate (20% at the time of printing)
when we add the interest to your Bond.
Basic rate taxpayers
There is no more tax to pay on the interest.
But if HM Revenue & Customs (HMRC) asks
you to complete a tax return, you should still
declare the interest.
Higher and additional rate taxpayers
You’ll need to declare the interest to HMRC
and pay any further tax due.
Non-taxpayers
You can apply to HMRC for a refund if you’re
a non-taxpayer. You can also get a refund if
you’re entitled to have any of your interest
taxed at the new 0% rate for savings income
(which starts from April 2015).
Sorry, we’re not currently part of the R85
scheme so we can’t pay the interest gross
on these Bonds."

LXdaddy

This really shouldn't be hard to understand. The date on which interest is paid determines which tax year it falls into. If in that year you are a higher rate tax payer then the interest is subject to higher rate tax and you are liable to pay the difference between what has been deducted at source and 40%. If you are a zero rate tax payer (and have allowances left) then you are due a refund of what was deducted at source.


The question of whether or not it is accessible does not arise - the interest has been paid into your account so it then becomes yours.

teddysmum

HMRC argues that the interest has to be accessible by being paid to you or into a separate account, in order to have the tax refunded and there will be no change unless they are advised otherwise.:


Please note that claims can only be made on tax taken from bonds in the tax


year that the bond matures and the interest has actually been received (unless


the interest has been paid into a separate account after each year that the bond


is held).


It is cheeky,as they are pre-taxing us and so depriving us of income from investing that interest.

xylophone

The interest has actually been received!

If it has not been received, how can higher rate taxpayers be asked to pay additional interest on it?

The R40 notes say


Please include income received from:

• building societies, banks and other deposit takers (including internet accounts) from current and deposit accounts

• Government stocks – gilt-edged securities or gilts (but read the notes on
page 4 about accrued income)

• UK authorised unit trusts, open-ended investment companies
and investment trusts

• National Savings & Investments products where tax is taken off before you receive it (First Option Bonds – no longer available, Guaranteed Growth Bonds and Guaranteed Income Bonds)

• National Savings & Investments products where no tax is taken off,
such as Income Bonds, Investment Account and Direct Save"

The so call Pensioner Bond is actually the

65+ Guaranteed Growth Bond.

You will notice that you are asked to give the total amount of interest received and total of tax deducted without being required to give details of the particular accounts on which the interest arose.

As this is the case, and as the interest paid/deducted must be declared (see notes above), why would a tax refund not be made?

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/419506/R40_M__internet_v2.0.pdf

Alter_ego

Sent off the R40 yesterday, I'll come back with the result.

teddysmum

Alter_ego wrote: »

Sent off the R40 yesterday, I'll come back with the result.

That will be very interesting, but I think I read that processing takes about 8 weeks,so a long wait.

xylophone

The wording on this petition may be of interest.

https://petition.parliament.uk/archived/petitions/73922

"If you're a non-taxpayer, you'll have to reclaim the extra interest from the taxman at the end of EACH financial year and would usually require 4 claims, for a 3 year bond if it is started in the wrong months. It's not difficult to do, but the R40 form is a lot more complicated than the R85 which only requires completing once for each bond/ saving account.
For details on how to reclaim overpaid interest, see HMRC's website."