Tax credit and Capital Gain

edmelissa
edmelissa Posts: 5 Forumite
in Benefits & tax credits
I may be receiving a Capital Gain this year - it is over the allowance, so part of it is subject to Capital Gains Tax. My accountant has told me that this will not affect my tax credits - but I wanted to be sure, so I called them. After over 2 hours, I STILL do not have a definitive answer. There is NOTHING online relating to Capital Gains (except in regards to dividends, whereas this gain is from the sale of an asset). And the staff at the tax credits office spent forever looking through their manuals, yet could not give me an answer.

I can't believe I'm the only person on tax credits who has ever received a Capital Gain.

Does anyone else have experience with this?

Thank you
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Comments

  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
    A capital gain is subject to capital gains tax, not income tax so it's not income for tax credit purposes.

    You won't be the only person to have ever had a capital gain but it's not something they would come across often.
  • edmelissa
    edmelissa Posts: 5 Forumite
    Thank you - however, I've just Tweeted the tax office on their Twitter page and the person answering me is saying that it IS considerewd income! This seems wrong to me - I have Tweeted back, asking where in their documentation this is stated, but I'm still waiting for a satisfactory answer (they just keep saying that the part of it that is taxable is counted as income, and ALL taxable income has to be declared. They don't seem to be differentiating between income and capital gains tax).
    I will update when I (hopefully) clarify this!
  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
    Tax credit staff aren't trained in income or capital gains tax (unless they've previously worked in these areas).
  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
    I also think HMRCs reply about your accountant is pretty cheeky.
  • edmelissa
    edmelissa Posts: 5 Forumite
    Yes, their reply IS cheeky. And it's actually the main HMRC Customer Service person I am tweeting, rather than someone in tax credits.

    They're directed me to a paragraph that states:
    Income from dividends
    Include any UK company dividends you’ve received. Also add in the tax credit - shown on the dividend voucher supplied by the company. This could include:

    gross amount of dividend income from company shares, authorised unit trusts and open ended investment companies - the amount to include is the total before tax

    stock or scrip dividends where shareholders receive shares instead of a cash dividend - the amount to include is the total before tax

    Exclude any capital gains exempt from tax.

    But the heading is 'dividends'. As this is the sale of an asset, I can't see how it applies!
  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
    I know it's HMRC but no one at HMRC is trained in every tax/benefit there is. All staff are assigned to a particular section and trained in that section.

    It doesn't apply. Personally if you want HMRC to confirm id write to them or have your agent do it. I wouldn't use something like Twitter.
  • edmelissa
    edmelissa Posts: 5 Forumite
    Thank you - I know you're right about Twitter. The problem is that the sale is pending and I am desperate for clarification before it goes ahead. I'd exhausted every other avenue of contact and Twitter was my last resort!
  • calcotti
    calcotti Posts: 15,696 Forumite
    First Anniversary First Post Name Dropper
    See here https://www.gov.uk/guidance/tax-credits-working-out-income

    Under "Other Income" it says "Exclude any capital gains exempt from tax.". By inference there you do have to include that part of the capital gain that is liable to tax.
    Information I post is for England unless otherwise stated. Some rules may be different in other parts of UK.
  • Darksparkle
    Darksparkle Posts: 5,465 Forumite
    calcotti wrote: »
    See here https://www.gov.uk/guidance/tax-credits-working-out-income

    Under "Other Income" it says "Exclude any capital gains exempt from tax.". By inference there you do have to include that part of the capital gain that is liable to tax.

    As OP has said, it's not a dividend. The section you have quoted is under income from dividends.

    HMRC have now correctly confirmed on twitter that it is not included for tax credit purposes
  • edmelissa
    edmelissa Posts: 5 Forumite
    HMRC have now correctly confirmed on twitter that it is not included for tax credit purposes
    Was just coming back to update :)

    It took a while to get the confirmation but at least they gave the correct info in the end (although I noted that it was from a different advisor than the one who was rude about my accountant!)
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