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Latest on top slicing relief recalculations

12 October 2020: HMRC is recalculating top slicing relief on life insurance policy chargeable event gains for 2018/19 but some taxpayers will need to submit an amendment. An HMRC webinar will provide further information.

In a previous Insights article, ICAEW’s Tax Faculty explained the background to changes to the calculation of top slicing relief (TSR) on chargeable event gains following a successful appeal by a taxpayer in the First-tier Tribunal (FTT) (Marina Silver TC7103) that gave rise to legislative changes in Finance Act 2020.

HMRC originally confirmed that it would apply the new legislative basis to all TSR calculations for 2019/20 and subsequently agreed that it would also revise calculations for 2018/19.

HMRC ran an automated recalculation process on 28 August 2020 and issued revised calculations for 2018/19 where additional TSR is due. This automatic process picked up cases where the return was received by HMRC on or after 28 November 2019, as HMRC has a nine-month window in which it can correct returns.

Where a return was received by HMRC before 28 November 2019, the taxpayer or agent will need to submit an amendment to correct the amount of TSR. The deadline to submit an amendment to a 2018/19 return is, in most cases, 31 January 2021.

HMRC does not intend to recalculate the relief given for 2016/17 or 2017/18.

An HMRC webinar on Thursday 22 October 12:45 to 13.45 will provide further detail and give agents an opportunity to ask questions.

HMRC’s self assessment tax calculator has not yet been updated and in relevant cases the 2019/20 tax return should be submitted on paper and be clearly marked (on the front page of the return) as an exclusion 116 case.