INTM820512 - Examples: Increased one-off payment
Facts
Find the relevant values for the formula
Calculate the formula result
Is there an increased charge?
Which assets are eligible for clearance?
Facts
31/12/02 25,000 Cb
Deposits from undisclosed trade £9m
Interest and gains £975,000
31/12/10 10,000,000 C8
Interest and gains £1m
Withdrawals (£3m)
31/12/12 8,000,000 C10
Find the relevant values for the formula
n = 8
Establish Cr: C10
C9’ = Cr x 103% = 10,300,000
C10’ = Cr x 106% = 10,600,000
Calculate the formula result
T= 34% {[2/3(10m-8/8x25k)]+ [1/3(8/10x10m+ 2/10(C9’ + C10’2))]}
T= 34% {[2/3(9,975,000)] + [1/3(8,000,000 + 2/10(20,900,000/2))]}
T= 34% {[6,650,000]+ [1/3(8,000,000 + 2,090,000
T= 34% {6,650,000 + 3,363,333}
T= 34%x 10,013,333
T= 3,404,533
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Is there an increased charge?
Tc = T/Cr
Tc = 3,404,533/10,000,000 = 34.045%
as tc > 0.34 (34%) then the increased one off payment T’ applies
where 7m
In this case Cr = 10m therefore tc’ = 0.41
T’ = tc’ x Cr
T’ = 0.41 x 10,000,000
T’ = 4,100,000
Which assets are eligible for clearance?
Maximum value of cleared assets = Cr
Cr = £10,000,000
Maximum value of assets in account at any time between 31/12/10 and 31/12/12 inclusive = £11,000,000 (31/12/10 balance of £10,000.000 plus interest and gains of £1,000,000).
Subject to the maximum clearance value of £10,000,000, none of the assets were ineligible for clearance.
The relevant person therefore needed to decide which assets to include within the cleared value of £10,000,000.
The balance of assets with value £1,000,000 will remain uncleared and any liability to UK tax will remain due on this amount.