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Where Taxpayers and Advisers Meet

Marriage allowance - HMRC confused

Dave12335
Posts: 23
Joined: Sat Feb 09, 2019 10:09 am

Marriage allowance - HMRC confused

Postby Dave12335 » Sat Feb 09, 2019 10:21 am

Hi all

Thanks very much for any help that can kindly be given.

I believe all the conditions for marriage allowance are met in my case, see the letter that I wrote to hmrc below.

Hmrc wrote back to me with a broad brush letter to say “the allowance cannot be transferred to a spouse whose earnings before any adjustments are liable to tax at the higher rate”. It seems, they do not believe adjustments are made for gift aid and pension contributions.

I am not sure what to do. Would writing a letter pushing back help ?

Letter written to hmrc :

“Following difficulty on the telephone with HMRC, I am writing to ask the tax reduction for marriage allowance be applied to my account for 2017/18.

I can confirm that I meet the conditions set out at s55B Income Tax Act (ITA) 2007 and that my spouse meets the conditions set out as s55C ITA 2007.

In particular, the main income condition which applies to me as the transferee is that I am not, for 2017/18, liable to tax at a rate other than the basic rate. Kindly note, that I have an extended basic rate band of £45,647 as a result of gift aid payments of £5,718 (net) and pension contributions of £4,000 (net). It is this extended basic rate band of £45,647 that is used to determine whether I am a basic rate taxpayer and thus whether marriage allowance may be claimed. My taxable net income was £45,550 (comprising employment income of £56,559 + taxable benefits of £491 - personal allowance of £11,500). As such, I am a basic rate taxpayer and therefore entitled to marriage allowance.

On the telephone, I received inaccurate guidance from HMRC that I was not entitled to the marriage allowance.

I look forward to receiving confirmation as soon as possible that the tax reduction has been applied to my account for 2017/18.“

Lambs
Posts: 1418
Joined: Wed Aug 06, 2008 3:15 pm

Re: Marriage allowance - HMRC confused

Postby Lambs » Tue Feb 12, 2019 8:17 pm

D,

I believe your position is essentially correct - see this article

https://www.taxationweb.co.uk/tax-articles/income-tax/hmrc-falling-short-with-the-new-transferable-tax-allowance.html

which goes into some detail on HMRC's past failings in relation to the Transferable Tax Allowance. HMRC's appreciation of the workings of the TTA is abysmal.

As I think you have realised, strictly, the Allowance is not yours to claim but you are confirming that you are an eligible beneficiary; your spouse should also confirm the correct position as the electing party.

While I have not checked your maths (and I cannot check the maths in relation to your spouse's eligibility to make a valid election), I should be tempted to try the following:

"I am in receipt of your letter of XXXX date. Unfortunately, your letter appears not to address the specific circumstances as already advised to you. Please ensure that I am availed of the Tax Reduction as per ITA 2007 s 55B without further delay."

If you do not get a satisfactory response then please get back to us as there is an educational element to this. I trust you (as a couple) have considered the potential for claims in relation to earlier tax years (assuming you each satisfy the respective criteria). If you don't get a reply from me to any update, then please persist / PM me. I deal with a lot of TW threads so it is difficult to filter them out sometimes.

Kind regards and good luck,

Lambs

robbob
Posts: 2818
Joined: Wed Aug 06, 2008 4:01 pm

Re: Marriage allowance - HMRC confused

Postby robbob » Wed Feb 13, 2019 9:52 am

I am presuming your spouse is not higher rate taxpayer either.

Presuming this is the case I am with lambs on this i cannot see any reason based on the numbers you have given why the transfer request would fail, the case should not be an online exclusion case as there is only one 1 think for 17/18 and that relates to a scenario where there is property income.

Note you are close to the h rate limits though and any other income that falls within the "untaxed tax free" savings or dividend allowance could put you over the top even though that income would probably not specifically generate a tax charge itself.

Other notes
You are only eligible if as Lambs mentions you spouse has "actioned" the transfer in the first place - if your spouse hasn't requested the transfer and had it approved by hmrc then your request will fail - based on what you have posted this seems not to be the case.

Have hmrc processed the numbers that confirm you are not higher rate taxpayer before transfer request was made? - eg if at the time the transfer was requested they were only aware of employment income but not the full level of deductions for that specific tax year the computer at that time would likely say no.

I would keep it mechanical and confirm in writing all sources of taxable income - relevant deductions for pension payments gross/tax/net detailing adjusted taxable total and confirm that is your income and no higher rate tax has been charged - it does really need the figures in black and white to give someone the ability to do proper check - i am guessing an incorrect flag somewhere on the hmrc computer may be the fault. Ask them to double check the calcs by senior officer.

Lambs
Posts: 1418
Joined: Wed Aug 06, 2008 3:15 pm

Re: Marriage allowance - HMRC confused

Postby Lambs » Wed Feb 13, 2019 10:45 pm

R,
Note you are close to the h rate limits though and any other income that falls within the "untaxed tax free" savings or dividend allowance could put you over the top even though that income would probably not specifically generate a tax charge itself.
A quick point about the interaction between the TTA and the so-called Savings and Dividend "Allowances": they are not treated in similar fashion. By which I mean that if one hopes not to be a Higher Rate taxpayer by hiding behind the Dividend "Allowance", then tough but not so with the Savings "Allowance": if one slides above what would otherwise be the Higher Rate Threshold by virtue of the Savings "Allowance" alone, then that does not preclude eligiblity either to elect or to benefit from the election.

(ITA 2007 s 55B (2)(ba) in relation to the Dividend "Allowance", no equivalent condition for the Savings "Allowance"; ITA 2007 s 55C(1)(ca); beneficiary/elector respectively).

This distinction derives from a time when the Dividend "Allowance" was £5k, and the Savings "Allowance" was no more than £1k.

Best wishes,

Lambs

Dave12335
Posts: 23
Joined: Sat Feb 09, 2019 10:09 am

Re: Marriage allowance - HMRC confused

Postby Dave12335 » Thu Feb 14, 2019 12:33 am

Thank you Lambs and robbob, all understood. It is greatly appreciated. I will reply to HMRC along those lines and hopefully it will work out.

My guess, the issue is that HMRC’s computer slavishly rolled forward a figure for a little bit of dividend income I received in the previous year that would bust me over the higher rate limit if I had received it this year. However i didn’t receive any in this year. I’ll ask explicitly them to check / amend my record for that.

An added point is that I did have a very little savings income, however it was less than £500. I believe the legislation says that small amount effectively does not bust the limit, at least for that year onwards. I don’t have the references to hand (was something added in the finance bill?). I will specify the amount in my reply for the sake of completeness.

Dave12335
Posts: 23
Joined: Sat Feb 09, 2019 10:09 am

Re: Marriage allowance - HMRC confused

Postby Dave12335 » Thu Feb 14, 2019 12:36 am

Lambs - our posts crossed. Many thanks for clarifying the savings allowance point.

etf
Posts: 596
Joined: Mon Nov 02, 2009 5:25 pm

Re: Marriage allowance - HMRC confused

Postby etf » Thu Feb 14, 2019 9:38 am

On the telephone, I received inaccurate guidance from HMRC that I was not entitled to the marriage allowance.


I think examples like the one above highlight:

i) our tax system is far too complex...whatever happened to tax simplification?

ii) the judge in the Tribunal case below either rarely picks up the phone to call HMRC's helpline, or is incredibly lucky.

In the judge's view, the legislation was not particularly complex, and the taxpayers (had they known about it) could have rung HMRC’s helpline,

bd6759
Posts: 3095
Joined: Sat Feb 01, 2014 3:26 pm

Re: Marriage allowance - HMRC confused

Postby bd6759 » Thu Feb 14, 2019 11:06 am

The first question you need to ask yourself is what statutory authority you have for extending the basic rate band. I don't think you will find one. Any person who earns more that the limits set out in s10 ITA will be liable to tax at the higher rate. The fact that there are reliefs that can reduce the amount of tax payable cannot change that.

(S55B does not talk about net income, which has its own definition and allows the deduction of pension an gift aid contributions).

Dave12335
Posts: 23
Joined: Sat Feb 09, 2019 10:09 am

Re: Marriage allowance - HMRC confused

Postby Dave12335 » Thu Feb 14, 2019 11:52 am

Thanks, is this our considered opinion ? As it seems out of kilter with the article posted above by Lambs.

Dave12335
Posts: 23
Joined: Sat Feb 09, 2019 10:09 am

Re: Marriage allowance - HMRC confused

Postby Dave12335 » Thu Feb 14, 2019 11:53 am

Thanks, is this our considered opinion ? As it seems out of kilter with the article posted above by Lambs.


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