INTM820513 - Example: Effect of matched in-flows
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 £1m cb
Deposits from undisclosed trade £6m
Interest and gains £2m
Withdrawals (£3m)
31/12/10 £6m C8
Interest and gains
(these reflect ‘value increases’) £1m
Further deposits from undisclosed
trade- non-UK source (£3m can be
treated as £5m‘compensating inflows’ £5m
against earlier £3m
withdrawals)
31/12/12 £12m C10
Find the relevant values for the formula
n = 8.
C10 > C8 x 1.2 (£7.2m), so Cr = C8 + “Value increases” + “compensating inflows”
So Cr = £6m + £1m + £3m = £10m.
This result is more than C8 x 1.2m, so we take this as Cr.
Therefore, C9 = Cr + Cr x 3% = £10.3m;
C10 = Cr + Cr x (2x3%) = £10.6m.
Calculate the formula result
T = 34% {{2/3(10m - 8/8x1m)} + {1/3(8/10x10m + 2/10(10.3+10.6/2))]}
T = 34% {[2/3(9m)]+ [1/3(8m+ 2/10 (20.9m/2))]}
T = 34% {6m+[1/3(8m+2.09m)]}
T = 34% {6m+3.363m}
T = 34% 9.363m
T = £3.183m
Is there an increased charge?
Tc = T/Cr
Tc = 3.183m/10m=0.31
Tc
Tc> 0.21 so no minimum charge
Which assets are eligible for clearance?
Maximum value of cleared assets = Cr
The maximum value of assets in the account at any time in the period between 31/12/10 and 31/12/12 inclusive = £12,000,000.
This includes post 31/12/10 inflows of £2,000,000 which do not compensate for earlier withdrawals. These cannot be cleared.
The assets eligible for clearance therefore = £6,000,000 balance at 31/12/10
+ £1,000, 000 interest and gains + £3,000,000 compensating inflows = £10,000,000.
As this value = Cr all of these assets can be cleared.
Assets of £5,000,000 (£3,000,000 withdrawals made pre 31/12/10 and not reintroduced + £2,000,000 post 31/12/10 inflows which do not compensate for earlier withdrawals) remain uncleared and any liability to UK tax will remain due on this amount.