HMRC Attitude Towards Taxing of Fixed Term Savings Accounts

masonic

https://forums.moneysavingexpert.com/discussion/comment/81919721#Comment_81919721

"One example I have heard is you can often get access to the money in a fixed saver if you are involuntary made redundant. Other examples include extreme illness or death."

I think HMRC has a bad enough reputation already without implying such things as potential solutions to a tax liability. 😉

masonic

https://forums.moneysavingexpert.com/discussion/comment/81920750#Comment_81920750

It doesn't matter whether it is or not, if you have evidence from the horses mouth that this is how they want you to treat it, then you should be covered in the event of any disagreement. It would be unwise of anyone else to rely on this second hand though.

HMRC can take strange stances on matters all of a sudden. For example, fractional share ownership. So for me, the optimal solution is not to hold accounts that credit "inaccessible" interest. Sadly I had a fairly long tail of such accounts when I first came to understand the problem, but am free of all of those now.

fuzzzzy

I just included my experience for the OP's benefit to show that there were some grey areas, especially since in their opening post they did speak of "opting" to have the interest paid at maturity. If I were them I would still take it up with HMRC and supply the account T&Cs.

In my own case although it would not change my overall tax liability, it would actually be in my interest to declare the interest at maturity (I do self assess now) as it would delay when tax needed to be paid, but I decided to go with the advice I was given, to declare it annually, partly because that was also consistent with how I was taxed on these accounts before self assessment and it seemed easier to keep it consistent. I do recall however a case previously in these forums where someone got the opposite advice and were having to retrospectively query previous tax years to sort it all out which sounded like a bit of a nightmare.

GeoffTF

https://forums.moneysavingexpert.com/discussion/comment/81920912#Comment_81920912

A professional tax advisor told me (about two years ago) that HMRC accepts the tax being paid year by year. She also said that her clients paid the tax on maturity.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81920750#Comment_81920750

I do not think it is on the main website but for sure ML has commented on the issue, such as below.

Martin Lewis issues urgent HMRC warning to anyone with fixed rate savings account

fuzzzzy

https://forums.moneysavingexpert.com/discussion/comment/81921482#Comment_81921482

That is quite general advice that does not get into the nitty gritty of the T&Cs of some of these accounts. Judging by some of the questions and answers that used to appear on the now closed HRMC forum it is a grey area open to interpretation and what was needed was HMRC to provide some clarity by way of clear examples. It seems like HMRC had no interest in providing that though.

GeoffTF

https://forums.moneysavingexpert.com/discussion/comment/81921697#Comment_81921697

The current de facto situation is that we can pay the tax year by year or on maturity (provided that we are consistent). Clarification would not help us. Most people pay yearly, which is good for the exchequer. Clarification would not help the exchequer either. Retrospective change would be bad for everyone.

masonic

It is perhaps HMRC's insistence that there is a clear set of rules that is not open to interpretation, coupled with their inability to provide any clear guidance, that has led to this mess. I have seen a few reports of tax professionals effectively saying either approach can be justified, but one thing HMRC was consistent on was that the taxpayer does not have a choice in the matter.

Rather than clarification, what's needed is legislative change. But the challenge there is what to do for those part way through such a multi-year fix. Simpler would be to regulate such inaccesible accounts such that the only options are compound interest all credited at maturity, or simple interest paid away. Then newly opened accounts can be targeted without impacting existing ones.

intalex

Have MSE tried to use their access and influence with relevant stakeholders to have this looked at and fixed?

masonic

https://forums.moneysavingexpert.com/discussion/comment/81922398#Comment_81922398

It was only quite recently (within the last few months) that Martin Lewis started to mention it in his public appearances. I believe there was a statement on the main site suggesting it was something they were looking into and inviting people to get in touch about it.