investment bond - top slicing - tax due

[Deleted User]

Is the underpayment £1343.60?

JeffMason

According to my P60, tax deducted from PAYE was £2989.40 - and no benefits on top of salary.

JeffMason

purdyoaten2 said:

Is the underpayment £1343.60?

They are saying I owe £1356.80

[Deleted User]

JeffMason said:

purdyoaten2 said:

Is the underpayment £1343.60?

They are saying I owe £1356.80

Yes - fair enough. The bottom line is that the calculation is saying that you did not pay enough tax at PAYE because your received your full personal allowance. It maintains that this should have been restricted to 5782 as your other income took you well over the £100000. I think that you will have to go to the additional information box and outline that, as it was the gain on the life policy that caused this, and top slicing relief was available, this  should not have happened. Reference should be made to the Finance Act (2020).

However, I must go back to this from my earlier link which is mystifying:

‘Affected customers are required to complete paper returns to get the correct calculation and should note the front of the tax return or covering letter with ‘Chargeable event exclusion case’.’

You May need to contact HMRC.

JeffMason

[Deleted User] said:

JeffMason said:

[Deleted User] said:

Is the underpayment £1343.60?

They are saying I owe £1356.80

Yes - fair enough. The bottom line is that the calculation is saying that you did not pay enough tax at PAYE because your received your full personal allowance. It maintains that this should have been restricted to 5782 as your other income took you well over the £100000. I think that you will have to go to the additional information box and outline that, as it was the gain on the life policy that caused this, and top slicing relief was available, this  should not have happened. Reference should be made to the Finance Act (2020).

Where do I add this? And any advice on the exact wording I should use to make this point very clear, would be much appreciated. This is all very new to me and I want to make sure they understand the issue. 

[Deleted User]

JeffMason said:

[Deleted User] said:

JeffMason said:

[Deleted User] said:

Is the underpayment £1343.60?

They are saying I owe £1356.80

Yes - fair enough. The bottom line is that the calculation is saying that you did not pay enough tax at PAYE because your received your full personal allowance. It maintains that this should have been restricted to 5782 as your other income took you well over the £100000. I think that you will have to go to the additional information box and outline that, as it was the gain on the life policy that caused this, and top slicing relief was available, this  should not have happened. Reference should be made to the Finance Act (2020).

Where do I add this? And any advice on the exact wording I should use to make this point very clear, would be much appreciated. This is all very new to me and I want to make sure they understand the issue. 

Just before submission under ‘Fill in your return’ (This appears automatically) there is a large box headed ‘Any other information’

Detail that your personal allowance has been restricted incorrectly. You encashed an investment bond giving rise to a chargeable event and claimed TCR. The claim for TCR should have restored your personal allowance as outlined in the FA 2020. 

I would hold off a day or so just in case anyone still practising comes up with any further suggestions on here.

JeffMason

Thank you! This is incredibly helpful and much appreciated! I'm also glad to know that it wasn't just me being an idiot and not understanding how to fill in the form correctly!

I shall hold off and see if anyone else can offer advice. But thank you again.

[Deleted User]

JeffMason said:

Thank you! This is incredibly helpful and much appreciated! I'm also glad to know that it wasn't just me being an idiot and not understanding how to fill in the form correctly!

I shall hold off and see if anyone else can offer advice. But thank you again.

No problem - I just hope that my interpretation is correct on this. As I say there are a few on here who still practise - we will see!

Jeremy535897

This article gives chapter and verse in the final example, and explains that the personal allowance should be restored. The article is dated March 2021 (latest update), and so it seems that HMRC have failed to keep their promise of updating 2020/21 software to deal with this:
https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/top-slicing-relief-facts/
Agent Update 79 (referred to above) is here (see pages 4 and 5):
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/908453/Agent_Update_-_issue_79.pdf
See also: https://www.gov.uk/hmrc-internal-manuals/insurance-policyholder-taxation-manual/iptm3820
https://www.gov.uk/government/publications/changes-to-top-slicing-relief-on-life-insurance-policy-gains-from-11-march-2020/changes-to-top-slicing-relief-on-life-insurance-policy-gains-from-11-march-2020

I have not come across it personally. Trying to telephone HMRC on an issue of this complexity is unrealistic. A paper return is out of time unfortunately. The best thing I can suggest you do is as purdeyoaten2 suggests, but also refer in the "any other information" box to all the documents above (except the pruadviser one). Another option would be to use HMRC approved commercial software, but I cannot say which software would correctly deal with the issue.

[Deleted User]

Great advice as always from Jeremy. Personally it is my view that, if you have to use the additional information box, provide as much information as possible. 

The final link provided by Jeremy is excellent as it is the HMRC’s own internal manual on this.

To the op - what is the tax code on your P60. The tax is out by a small amount - £13.80. Did you claim any expenses?