Product overview

Changes to Top Slicing Relief legislation

Until 2020 HMRC used a simplified and outdated method to calculate top slicing relief. In many cases they under calculated TSR by tens of thousands of pounds.

Tim Good first explained how HMRC’s top slicing relief (TSR) calculator was incorrect in his ‘Calculating top slicing relief’ article which was published in Taxation magazine in September 2017. Since that time, the issue was taken further by Marina Silver who has successfully argued her case at a HMRC First-tier Tribunal. The judgment from that Tribunal can be read here. In March 2020 HMRC withdrew their appeal against the Silver judgment.
 

Update on the Silver case

The outcome of the Silver case prompted the Government to clarify how allowances and reliefs can be set against life insurance policies in the Finance Act 2020.

Tim Good wrote a follow up article in Taxation Magazine (April 2020) about the TSR changes announced in the 2020 Budget and why it matters.

The Silver case highlighted the importance for accountants and relevant professional services firms of double checking their tax calculations for any client (including deceased estates) that have a CEG, to see if they have a possible claim. CEGs arise on investment bonds or single premium non-qualifying life policies, which have been widely sold by the investment industry over recent decades.
 

The Judges case

The Judges case was heard on 19 January 2022 and the decision was published on 18 February 2022. The case involved a difference in the calculation of TSR in the year of death (2017-18) of over £44,000.

These two cases could have major implications for your clients, who could now reclaim hundreds if not thousands of pounds in overpaid or over-calculated tax. In the Silver case the taxpayer recovered over £19,000 and in the Judges case over £44,000.

To watch the TaxTV Topslicer interview between Tim Good and Giles Mooney click HERE

March 2024 Update from Tim Good

I continue to see multiple copies of correspondence from HMRC officers dealing with outstanding top slicing relief issues.

There are three main areas of interest and in each of these I would say that HMRC are on the back foot:

• Process issues – where typically HMRC are out of time to correct or open enquiries;

• Application of the Silver and Judges judgments to cases before 2018-19;

• Overpayment relief claims.

June 2024 Update from Tim Good

The long running top slicing relief (TSR) saga continues!

Following the FTT cases (Silver and Judges) and the changes made in Finance Act 2020 HMRC have attempted to correct their top slicing relief calculator.  Unfortunately the version released and used in most commercial tax software (v2.1.2) seems to have introduced errors which I have been unable to trace. HMRC v2.1.1 was better (although not perfect).

The upshot of all this is that HMRC and commercial software may well undercalculate TSR for 2022-23 cases and will sometimes be too generous. It is highly likely that HMRC will in due course publish yet another Exclusion for top slicing cases and taxpayers might end up having to pay more tax where it turns out that HMRC have been too generous.

For the tax years 2019-20, 2020-21 and 2021-23 HMRC officers will presumably use the version of the HMRC calculator that was in force for the relevant tax year and this will often give results that overcharge the taxpayer.

ALL TSR cases for these three years should be checked using my Topslicer App.

Overpayment relief claims must be made within four years of the end of the tax year (so we have until 5 April 2025 for the 2020-21 claims).

In the meantime I am still waiting for judgment to be delivered for the two Tribunal cases heard on 8 December 2023 that I took (pro bono) on the basis that HMRC are wrong to deny overpayment relief claims for earlier years on the basis of “practice generally prevailing”. These cases have no impact on overpayment relief claims for 2019-20 and later years.

June 2025 update from Tim Good

Judgment in the overpayment relief claim case (Roger Joye) heard on 8 December 2023 was eventually delivered (like the proverbial elephant) on 5 Jun 2025. The Tribunal agreed that HMRC could not resist the taxpayers' overpayment relief claims on the grounds of "practice generally prevailing" and that HMRC's incorrect calculations ceased to be PGP from 28 September 2017 (the date of my article in Taxation magazine).

It would not surprise me at all if HMRC were to lodge an appeal. They would have to argue that there has been an error of law. However the judgment in our favour is clearly a finding of fact. I think the chances of a successful appeal are low and if they do appeal they might well withdraw before any hearing.

Although the appeal deadline is 31 July 2025 it could be many months (years even?) before a hearing date is listed and HMRC might simply use this as a delaying tactic before (as they did with Silver) finally capitulating.

The normal deadline for making overpayment relief claims is four years after the end of the relevant tax year. The last year for which the incorrect calculations identified in Silver, Judges and Joye could give rise to significant overpayments was 2019-20 and so the normal time limit of 5 April 2024 has long since passed.

But all is not lost! Under extra-statutory concession B41 "repayments of tax will be made in respect of claims made outside the statutory time limit where an over-payment of tax has arisen because of an error by the Inland Revenue or another Government Department, and where there is no dispute or doubt as to the facts."

Product overview

The Taxpert Topslicer Tool gives a quick, easy and accurate way of checking the HMRC calculation of TSR on CEGs.

The Topslicer Tool performs the calculations set out in s535 ITTOIA 2005 to calculate the correct amount of TSR and then compares the result to the HMRC calculation. The Taxpert Topslicer Tool shows full workings which can be used to support a submission to HMRC.

This means you can:
 

1. make historical checks on your client’s tax liabilities to see if there is a difference between what they paid and what they should have paid. The software highlights, where appropriate, how much they may have overpaid; and

2. use the Topslicer Tool as a tax planning aid to reduce future CEG tax liabilities.
    

In a nutshell, the Topslicer Tool is the only calculator currently on the market which follows the methodology approved by the Tribunal in the Silver case. It allows you to:

• work out the top slicing relief on chargeable event gains;
• input income and reliefs figures for the relevant tax year and instantly see the tax result;
• select any tax year from 2013-14 to 2025-26;
• show the HMRC figures and highlight any differences.

The Topslicer Tool also includes the full workings that can be submitted to HMRC as part of a claim.

Taxpert Topslicer Tool in action
 

• Marina cashed in an investment bond triggering a chargeable event gain in 2024-25 of £100,000 after 25 years. She had pension and rental income of £35,000, gross interest of £4,000 and dividends of £15,000. HMRC will calculate her tax bill for 2024-25 as £32,954. The Taxpert Topslicer tool makes it just £27,954.

• Neville cashed in an investment bond triggering a chargeable event gain in 2021-22 of £20,000 after 20 years. He had pension and other non-savings income of £75,000. HMRC said his tax bill for 2021-22 was £51,185 after topslicing relief of £2,750. The Taxpert Topslicer tool makes the tax liability £47,185 after topslicing relief of £6,750. Neville should make an overpayment relief claim by 5 April 2026.

• Roger cashed in an investment bond triggering a chargeable event gain in 2017-18 of £100,000 after 25 years. He had pension and rental income of £35,000, gross interest of £4,000 and dividends of £15,000. HMRC calculated his tax bill for 2017-18 as £32,150. The Taxpert Topslicer tool makes it just £12,150. Roger should now make a late overpayment relief claim for 2017-18 citing ESC B41.

Why use the Taxpert Topslicer Tool

This Excel based groundbreaking tool has redefined how we calculate top slicing relief on chargeable event gains in the UK. Its application could help some of your clients save thousands of pounds in tax and help you to advise on the optimum encashment strategy for 2025-26. The Topslicer Tool should also be used to identify your clients who could be affected by the outcome of the Silver and Judges cases.

As well as showing you the difference between the HMRC calculation and what it should be, the Topslicer Tool provides the full workings of the calculation which will be invaluable when submitting a claim to HMRC. Plus, as it’s developed by Tim Good who first spotted the error in HMRC’s calculations, you can be confident that the tax figures you present to your clients will be correct.

Topslicer in action – feedback from users

“The Topslicer Tool is an invaluable resource.  As a Family Office providing investment, tax, financial planning and legal services, our clients have varied and often complex financial affairs.  We have been able to use the Topslicer Tool to assist not only with tax return preparation but also with future planning decisions for our clients across all the disciplines.

Its supporting computations are particularly useful for checking how the topslicing figure is arrived at – an impossibility with the commercial tax software.”

Sam Litchfield CTA ATT ACSI, LCM Family Limited

Saving your clients AND your practice money

To accommodate the current and historical TSR calculations, Tim has produced two versions of our Taxpert Topslicer Tool:

1. The “Current version” deals with the tax years 2020-21 (from 11 March 2020) to 2025-26.

2. The “Legacy version” deals with the tax years 2016-17 to 2020-21 (up to 11 March 2020).

Each version costs £299+VAT. However, you can purchase both versions for the discounted price of £449+VAT.

Buy now

Call the sales team on 03300 579651 or email sales@absolutetax.co.uk.

The Taxpert Topslicer Tool could make a huge difference to your clients. Start exploring the opportunities today.

Do you want to save your clients even more money?

Buy our Taxpert Tax Planning Apps Bundle, featuring seven different tax planning Apps, for just £249+VAT and buy any version of the Taxpert Topslicer Tool for just £150+VAT. This discount also applies to current Apps Bundle users who want to include the Taxpert Topslicer Tool.