The First-tier Tribunal (FTT) has found for a taxpayer who sought to use a more beneficial method of calculation for top slicing relief.  Legislation introduced in the March 2020 Budget prevents this method from being used currently, but questions have remained around claims for earlier years.

When the taxpayer died in the 2017/18 tax year, chargeable event gains arose on his life insurance policies.  The return was submitted by his executor using the calculation method that HMRC deemed correct, but a note was included in it to appeal for a more beneficial method of calculation.  This was that he should be entitled to use his personal allowance in a way to give a lower tax liability, and to claim the personal savings allowance.

Historically this part of the legislation has been thought to be unclear.  In the March 2020 Budget, the Government introduced provisions that the less beneficial method of calculation was the only one that could be used from then on.  HMRC’s view was that this applied retrospectively.

The FTT rejected that argument, finding for the taxpayer that the more beneficial method of calculation was permissible. It considered the case that led to the change in the law, and ultimately agreed with its findings.

The decision can be found at: The Finance & Tax Tribunal (tribunals.gov.uk)

Please contact us if you have any questions regarding the use of reliefs and allowances to enable reduction of tax liabilities.