Fixed Rate Bonds - confused by HMRC advice

fiddlesticks0

https://forums.moneysavingexpert.com/discussion/comment/81965578#Comment_81965578

I have no idea what you are talking about - either way would have been fine - I could have happily planned for either as long as I knew which was the case. The situation is that it has now caused problems as it has not in fact been implemented as described on this site, and elsewhere.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81965582#Comment_81965582

Everyone agrees the system is flawed but that doesn't mean you can't get the treatment you think you should get. With a bit of effort.

fiddlesticks0

https://forums.moneysavingexpert.com/discussion/comment/81965591#Comment_81965591

Ok, I'm done with you - if you can't understand that my replies don't bear any resemblance to your accusations then I have no more to add.

intalex

https://forums.moneysavingexpert.com/discussion/comment/81965561#Comment_81965561

How about sign up for self-assessment and submit figures as you had planned - compliant with the rules you believed to be correct? There may be no argument to be had with HMRC, but if there is, equip yourself with evidence that interest is accessible at maturity.

fiddlesticks0

https://forums.moneysavingexpert.com/discussion/comment/81965606#Comment_81965606

Hi - thanks for the suggestion. As explained though, I've no intention of arguing anything with HMRC - I'm just seeking clarity on what the rule is, so that I can plan ahead, as the information printed on this site appears at odds with how HMRC actually usually implement things. The only thing that seems certain is that there is no clarity/consistency with explaining and implementing the rules, across MSE/the financial institutions/HMRC etc.

intalex

https://forums.moneysavingexpert.com/discussion/comment/81965625#Comment_81965625

The HMRC rule is that interest is arisen for tax purposes (i.e. taxable) when it is accessible - if your product T&Cs allow change of interest destination (out vs in), access funds (e.g. with penalties), and possibly other quirks which impact this rule, then you have to assess it accordingly and retain evidence to defend your position, otherwise doing a self-assessment means you enter the figure you believe (and can defend) is correct for each tax year and it may not be queried by HMRC, but if it is, at least you will have evidence to defend your position (especially that one bank that gave you that letter - out of interest which bank was it?).

Everyone is in the same boat, the only way to be compliant with the rule and the bank-HMRC reporting process is to choose one of the product types listed by masonic in an earlier post.

masonic

https://forums.moneysavingexpert.com/discussion/comment/81965625#Comment_81965625

The rule is clear as outlined by @intalex and the implementation is clear in that the rule is not followed by HMRC when going on banks' BBSI returns. That creates a situation where the tax treatment can be incorrect unless you intervene, which of course it is every taxpayer's obligation to do if they do not pay enough tax as a result.

fiddlesticks0

https://forums.moneysavingexpert.com/discussion/comment/81965680#Comment_81965680

Thanks for the information. With regards to the particular provider mentioned, which I'd rather not name (and I'm concerned here with the rules for bonds generally, not just with this particular provider), the letter they provided is mainly just outlying the details of the product, and they say it's provided to 'formally confirm the structure of the account'.

The relevant detail would appear to be that the interest is 'paid' into the account each year, but there is no option to 'receive' interest payments annually, nor is there any way to access accrued interest before maturity, even by paying a penalty.

They say the letter is intended for HMRC to assess the situation given the product detail. So they seem to me, through the various emails to be suggesting that only tax at maturity should apply, but of course they won't/can't give me an actual answer either way. EDIT: they mention 'if HMRC have assessed interest in a particular tax year and this does not reflect the structure of the account, the covering letter can be used to support a discussion or review with them.'

On the other hand, they say they report everything annually to HMRC and are seemingly used to having to dish out these letters 'confirming the structure', so from everything I've read, I should expect HMRC will most likely tax annually. I'd really have no confidence that this will or won't be the case however.

intalex

With regards to the particular provider mentioned, which I'd rather not name

It's a sign of superior competence, not the opposite, I'm sure you'll be doing them a favour by naming them…

If I were you, I'd send that letter to the other providers you hold multi-year bonds with and ask them to replicate that letter (provided the T&Cs are the same).

DRS1

HMRC get details of the interest paid on an account in the tax year. They don't get told if that interest is accessible. So they will tax the interest for that year. It is down to the taxpayer to say to HMRC that this slug of interest is not accessible this year so should not be taxed this year (and then to declare the interest for the year in which it is taxable).