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HMRC internal manual

International Manual

From
HM Revenue & Customs
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Examples: Increased one-off payment

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 < C8 therefore Cr = C8 = 10,000,000

C9’ = Cr x 103% = 10,300,000

C10’ = Cr x 106% = 10,600,000

Calculate the formula result

T = 34% x {[2/3(10m - 8/8x25k)] + [1/3(8/10x10m+ 2/10(C9’+C10’/2))]}
         
T= 34% x {[2/3(9,975,000)] + [1/3(8,000,000 + 2/10(20,900,000/2))]}
T= 34% x {[6,650,000] + [1/3(8,000,000 + 2,090,000)]}
       
  T = 34% x {6,650,000 + 3,363,333}
           
  T = 34% x 10,013,333    
  T = 3,404,533      
       

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 < Cr then tc’ = 0.41
 
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 are ineligible for clearance.

The relevant person therefore needs 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.