Confused calculation

23 November 2010

Issue: 4282 / Categories: Forum & Feedback

A taxpayer has relatively low income for 2009/10 and this includes a chargeable event on a life assurance policy of almost £2,000. The agent’s tax software indicates that a repayment of tax arises, but does this relate to the notional tax on the event?

Our client was born in 1947 and her income for 2009/10 comprises employment and pension income of £7 498 interest of £5 dividends £514 and a life insurance gain (a chargeable event) of £1 930. Total: £9 947.

The tax paid on employment and pensions amounts to £204 and £1 was paid on bank interest. Total: £205. The notional tax on life insurance gain is £386.

Our tax software attributes £903 of the chargeable event to the 10% starting rate for savings and accordingly shows a refund due of the ‘other’ 10% of the notional tax as being repayable. We understand that the notional tax credit on a chargeable event is not in any circumstances repayable. In which case the software is wrong.

Is this the correct conclusion?

Query 17 706 – Heavyweight

Reply from Long-serving Practitioner

Heavyweight is confused about the allocation of tax bands to...

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