BN66 - Time to fight back!!!

[BrilloPad]

I've been doing some sums over the weekend and I reckon in my case it may work out better to keep the cash in the bank than get a CTD. Here is an illustration.

My total tax liability for 2001/2/3 is £105,000. I have estimated that the interest due would be approx £35,000, giving a total liability of £140,000 to date.

HMRC currently charge 7.5% p.a. but this is on the tax (105k) not on the compound figure (140k). Per year this works out at £7875.

Now if I stick the 140k in a top savings account paying 6.5%, then I can earn £9100 before tax. As I am a basic rate tax payer, I would get net £7280. In other words, I'm only £600 quid a year worse off and if we win then I get to keep the interest. The CTD only pays a miserly rate of interest so I would be basically looking at just getting the £140k back.

If you are a 40% tax payer, then it's not so good with a net return of £5460, which is almost £2500 shortfall every year. One way to avoid paying tax on the interest is to use an offset mortgage. I haven't done the calculations for this but I reckon this could stack up just as well as buying a CTD.

Therefore before you buy a CTD I think it's worth sitting down and doing the sums if:

1) you were in the scheme a few years ago
2) you are a basic rate tax payer
OR
3) you have got an offset mortgage

Will Hector read this and decide on compunded interest? retrospectively?

[ASB]

My total tax liability for 2001/2/3 is £105,000. I have estimated that the interest due would be approx £35,000, giving a total liability of £140,000 to date.

But what about penalties ?

Penalties normally start at 100% and get reduced based on level of disclosure and cooperation (and it's you who pay the penalty if HMRC think the scheme provider is not cooperating).

I think the lowest penalties generally applied are 20%.
http://www.hmrc.gov.uk/pdfs/ir160.htm#5

[smalldog]

But what about penalties ?

Penalties normally start at 100% and get reduced based on level of disclosure and cooperation (and it's you who pay the penalty if HMRC think the scheme provider is not cooperating).

I think the lowest penalties generally applied are 20%.
http://www.hmrc.gov.uk/pdfs/ir160.htm#5

no penalties apply on this as its fully disclosed and not tax has been due and still isnt.

[helen7]

no penalties apply on this as its fully disclosed and not tax has been due and still isnt.

Where did you get this information from?

[ASB]

no penalties apply on this as its fully disclosed and not tax has been due and still isnt.

That seems optimistic. Whilst I am sure it was disclosed on your return and duly annotated HMRC view is that this wasn't enough.

Certainly this should help in reducing the penalties from the initial 100% but I doubt it would get them to nil.

[Maddog]

Have you spoken to Montpelier about this? I am told there are good reasons - and they are quite complex.

Yes I have spoken to MTM and they cannot explain why their figures show I have received over £12K more than what went into my bank account. They have said they will investigate it.

Complex !! I know how the calculations work, hardy rocket science ? If they say they paid me £12K more than they did then I'd like to see their calculations and find out who trousered the dosh.

Luckily I recorded every penny they ever sent me including the payment dates, so will be ensuring they set the records straight.

[smalldog]

Where did you get this information from?

Its been discussed on this forum before, trawl back thru....generally speaking HMRC only charge penalties on concealment. If you are a good boy/girl and put all the monies down on your tax return (which we have, the debate here is in which column they fall on your SA) then its only interest due...

If you missed a huge chunk of cash off your SA that an inquiry revealed, or your filed late then thats when you generally incurr penalties. It is of course down to how hardball HMRC want to be and Im not going to argue either way. We need to see what the assessments look like when they land.

[smalldog]

Yes I have spoken to MTM and they cannot explain why their figures show I have received over £12K more than what went into my bank account. They have said they will investigate it.

Complex !! I know how the calculations work, hardy rocket science ? If they say they paid me £12K more than they did then I'd like to see their calculations and find out who trousered the dosh.

Luckily I recorded every penny they ever sent me including the payment dates, so will be ensuring they set the records straight.

have they included their fees, would that explain the difference?

[DonkeyRhubarb]

That seems optimistic. Whilst I am sure it was disclosed on your return and duly annotated HMRC view is that this wasn't enough.

Certainly this should help in reducing the penalties from the initial 100% but I doubt it would get them to nil.

I have got a tax assessment from HMRC and it only shows tax/nic + interest. None of the letters I have received from them have ever made any mention of penalties.

[smalldog]

Will Hector read this and decide on compunded interest? retrospectively?

Brillo, in a way Im hoping it does take 5 years to sort. That will give the property market time to recover and their 8.5% int charge will be nothing compared to the percentage rise in my property portfolio...

Statistically speaking property doubles in value every 7 years, even after adjusting for market downturns such as the late 80's and this current one. Its actually what I have witnessed with my own portfoilo, and if any of you have the appetite for it you could do a lot worse than buy now and ride the upturn. Of course we dont yet know if we are at the bottom, thats the fun of speculating on any market, property, shares, gold etc etc....some areas are bucking the current trend too, one of my properties has risen 4.3% in the last quarter, some areas I have seen a single digit drop for the same quarter....