IHTM29121 - Calculating yield – adjustments to yield and adjustments that are not to yield
Example 2 -Adjustments to yield, adjustments that are not to yield
The following example shows how to calculate the yield on a case
where there are some adjustments that are adjustments to yield and
some that are not.
The deceased died on 1/3/2008. The case is being worked in
PC&S. We establish that the deceased’s share of a joint
bank account is 100% when it was originally included at 50%. The DV
agrees an increase in the value of the house of £100,000. The
customer also voluntarily tells us about the sale of some household
and personal goods at an increase and claims loss on sale relief.
As initially assessed:
| Entry A(NIOP) | Entry A (IOP) | Total | |||
| House | + | £500,000 | |||
| Household & personal goods |
+ |
£12,000 |
|
|
|
| Quoted stocks and shares | + | £185,000 | |||
| Joint bank account | + | £27,000 | |||
| Tax | = | £52,473 | £117,127 | £169,600 |
As finally assessed
| Entry A(NIOP) | Entry A (IOP) | Total | |||
| House | + | £600,000 | |||
| Household & personal goods |
+ |
£15,000 |
|
|
|
| Quoted stocks & shares | £185,000 | ||||
| - Loss on sale relief | £9,250 | ||||
| Joint bank account | £54,000 | ||||
| Tax | £63,132 | £154,768 | £217,900 |
Difference in overall tax = £48,300
The yield adjustments are :
Increase/ Decrease
| Entry A/IOP | House | + £100,000 |
| Entry A/NIOP | Bank account | + £27,000 |
Yield is calculated as 40% x (£100,000 + £27,000) =
£50,800
We only record the amendments that give rise to yield. The
yield is greater than the overall increase in tax. If we had not
done intervention work the tax to pay on the estate would have
actually reduced because of the volunteered amendments. In this
case the work we did both counteracted the reduction and provided
further tax to pay.
