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This is what HMRC say (but they would, wouldn't they, because it reduces the relief?), and it is how they do their example. But is this what the law says? Many thanks.
Not that I needed to as I know how the system works, I've just done a calculation using a third party software (not the HMRC software) and it has included the chargeable event gain in the calculation of entitlement or otherwise to the personal allowance. I can assure you that what is says on the HMRC site is legally sound.This policy affects pensioners who would normally be entitled to an increased personal allwoance by reason of their age were it not for restrictions based on level of income and chargeable event gains being fully included in the calculation of age allowance entitlement.I will locate the legislation and give you a link to it.
Thank you for these links. I have read what I can of the legislation, in particular section 537 of the 2007 Act, and at step 2 the tax on the slices (one slice from each bond) is calculated on the basis that the total chargeable event gains are equal to the sum of these slices. And on this basis, my total income is just over £40,000, and therefore this calculation should give me my full personal allowance (no age allowance of course). The third example at IPTM3850 (HMRC's interpretation of the legislation) does not give the personal allowance on the calculation of the tax on the slice, and I cannot see that the legislation (section 537) gives any grounds for not giving the personal allowance in that part of the calculation. The legislation I am looking for (if it exists) is the bit that says that the tax on the slice (step 2) is calculated using the allowances which are available (or not) as per the tax calculation that includes the total gains from the chargeable events?
The chargeable events were in 2012/13, and the software has calculated the top slicing relief as you and HMRC say it should be done. I do appreciate what you say about banging my head against a very thick brick wall but there is a difference of nearly £10,000 (my head is already sore at that, so maybe a brick wall won't hurt it much more). And yes please, I would be interested in any third-party website views which actually mention the basis of the calculation of the tax on the 'slice' (if it is easier for you, then any websites other than HMRC that deal with top slicing on chargeable events, then I can trawl through them between now and the end of January and see what they have to say for themselves). Many thanks.
I am sorry but you seem you have missed the point of my question.
I am aware (not happy, but aware) that I get no personal allowance in what I would call the 'main' calculation (total other income plus total chargeable event gains less any available personal allowances [none in my case], then work out the 'full' tax at the relevant rates and then deduct tax taken at source and whatever top slicing relief I can calculate to arrive at my 'net tax due'), because my total income including all the chargeable event gains is well over £100,000.
I am not asking for any of the personal allowance in this calculation.
It is the 'slice' calculation that I think HMRC has got wrong, because step 2 (both section 536 on single events and section 537 on multiple events) appear to be clear in saying that the total income for this calculation includes only the slice (not the total chargeable gains). And on this basis my income is well under £100,000 and I think I should not lose my personal allowance in this 'slice' calculation.
The third-party references you give appear to refer only to the 'main' calculation (which I accept), not to the step 2 'slice' calculation. Am I right in thinking that this is how HMRC do step 2 and therefore everyone is supposed to accept what they say?