Tax on interest not received because of early closure penalty

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  • eskbanker
    eskbanker Posts: 31,451 Forumite
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    talexuser said:
    I don't think its irrelevant to the point in the thread to declare an interest amount to HMRC without the penalty under discussion and the infinitesimally small chance of being challenged on a tiny, tiny discrepancy of a large 5 figure tax bill compared to what else goes on (let alone Covid loans etc) but there again, that's a personal opinion.
    I suppose it could be argued that 'two wrongs make a right' is an opinion, but it's a fact that knowingly under-declaring taxable income is fraudulent....
  • talexuser
    talexuser Posts: 3,499 Forumite
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    It is, but the principle of tax is supposedly on income, and I didn't get the total income, however the internal legal semantics work, and if challenged I will happily pay up for such a heinous crime of tax on a few quid ... if and when.... eventually  :)
  • masonic
    masonic Posts: 23,473 Forumite
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    edited 16 November 2023 at 7:11PM
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    talexuser said:
    It is, but the principle of tax is supposedly on income, and I didn't get the total income, however the internal legal semantics work, and if challenged I will happily pay up for such a heinous crime of tax on a few quid ... if and when.... eventually  :)

    Perhaps we should all be able to deduct our expenses from our income and only pay tax on our profits, but that's not currently how the tax system is set up for individuals. Given the cost of essentials like housng and energy costs which get debited from people's current accounts around payday, this would make a huge difference, but anyone who tried it on without a change in the tax system would be committing a dishonesty offence.
  • eskbanker
    eskbanker Posts: 31,451 Forumite
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    talexuser said:
    It is, but the principle of tax is supposedly on income, and I didn't get the total income, however the internal legal semantics work...
    I don't suppose there's much mileage in going over it yet again but you did get the total stated income, i.e. the interest - the fact that a separate penalty charge was deducted from the capital doesn't change that....
  • Middle_of_the_Road
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    Is there any benefit with this continual back and forth????
    LOCK this thread...... please......
  • ColdIron
    ColdIron Posts: 9,150 Forumite
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    talexuser said:
    It is, but the principle of tax is supposedly on income, and I didn't get the total income
    But you did get the total income or full interest as detailed in your own posts
    Why else are you considering misrepresenting it?
  • talexuser
    talexuser Posts: 3,499 Forumite
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    edited 16 November 2023 at 8:52PM
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    All explained in my original post, the rest is just endless repetition. 
  • eskbanker
    eskbanker Posts: 31,451 Forumite
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    talexuser said:
    All explained in my original post, the rest is just endless repetition. 
    You don't have to keep repeating the same theory after it's been so comprehensively debunked!
  • intalex
    intalex Posts: 836 Forumite
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    edited 16 November 2023 at 9:02PM
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    Funny thought...

    With reference to the other discussion about multi-year fixes and when its corresponding interest portions are taxable, there is a specific definition of when interest "arises".

    For interest offset by penalties at the time of early closure, where does the interest stand with respect to that definition of "arises"?

    The only interest that would be accessible is the amount after deduction of the penalties (if interest > penalty), so does that mean the amount offset by the penalties never "arose" and therefore never taxable?
  • masonic
    masonic Posts: 23,473 Forumite
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    intalex said:
    Funny thought...

    With reference to the other discussion about multi-year fixes and when its corresponding interest portions are taxable, there is a specific definition of when interest "arises".

    For interest offset by penalties at the time of early closure, where does the interest stand with respect to that definition of "arises"?

    The only interest that would be accessible is the amount after deduction of the penalties (if interest > penalty), so does that mean the amount offset by the penalties never "arose" and therefore never taxable?
    We have been discussing Dunmore v McGowan (1978) in that thread in detail, so you'll recall that this case centred on interest being used in this manner. It was ruled in the Court of Appeal that the interest "arose" immediately, because the appellant benefited though reduction of a liability he had. This is now settled in law.
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