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

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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

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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

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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.