Statutory Interest received From PPI and Income Tax??????

marshallka

:mad: :mad: I have recieved a redress offer from my bank for some PPI which I complained through the FOS about. I agreed to the amounts offered as Goodwill to me but upon receiving their letter stating these amounts will be credited to my bank account they have noted at the side of each payment of the statutory interest that I will have to pay 20% Tax over to the HMRC for them???


I have seen lots of people on here receiving these offers and not once has anyone been made aware that they have to pay tax on these amounts. I am so annoyed, they deprive you of the money and then expect you to be taxed on this too.:mad:

Would I be able to set this off (the loans are joint and my hubby works full time but I am not a tax payer at the moment) against JUST my tax code.

petermb_2

Yet another nail in the FOS route coffin. Litigation or the threat of it is all these bods understand.

marshallka

petermb wrote: »

Yet another nail in the FOS route coffin. Litigation or the threat of it is all these bods understand.

What is litigation... .

I have since found that Statutory interest made in a goodwill payment is non taxable????. Also I have never heard anyone else mention this on site before. I know of people that have had lots back in statutory interest but not paid any over to the tax man. This is ridiculous. They deprive you of the money, pay you 8% on top and then of that 8% they expect you to hand over 20% to the tax man..:mad: :mad:

petermb_2

No they are just trying to deduct 20% of your claim to reduce the amount they pay you. A compensation claim is not taxable.

Litigation is threatening the lender with court action instead of using their in-house service called FOS

sdooley

petermb wrote: »

A compensation claim is not taxable.

Not sure you can say that categorically given cases such as Zim Properties v Proctor (admittedly in a different field). Payments by way of settlement/compensation can be taxable either as a capital gain or an actual interest element can be taxable as income. Statutory interest arises from a court judgment not a settlement.

If not banks would simply say to rich customers that rather than paying them interest on their deposits they would pay them 'compensation' free of tax.

marshallka

sdooley wrote: »

Not sure you can say that categorically given cases such as Zim Properties v Proctor (admittedly in a different field). Payments by way of settlement/compensation can be taxable either as a capital gain or an actual interest element can be taxable as income. Statutory interest arises from a court judgment not a settlement.

If not banks would simply say to rich customers that rather than paying them interest on their deposits they would pay them 'compensation' free of tax.

Hi, I have just found this on the CAG forum and it looks like GOODWILL payments are non taxable.

Re: Important Information Regarding Tax On Interest
An important good news update to the above.

We are continuing to research this issue and we have identified a further important point.

Where a payment is received in settlement of a claim that is specifically stated to be a "goodwill gesture" (ex gratia) as opposed to an out of court settlement we have been advised that none of this payment is taxable nor need it be declared to the Inland Revenue.

http://www.consumeractiongroup.co.uk...tml#post399724

marshallka

A better document here to clear this up

http://www.hmrc.gov.uk/bulletins/tb72.pdf


Ex-gratia or voluntary payment: It is sometimes suggested
that an interest addition is not taxable because it, or the
compensation on which it is calculated, is paid “ex-gratia” or
voluntarily. We accept that a truly voluntary payment cannot
be interest, even if described as such, because the essential
feature of an entitlement to it is absent. In practice, however,
we consider it will be extremely rare for any payment arising
from claims that a financial product has been mis-sold to be
truly voluntary, since the redress is given in consideration of
the complainant giving up a right of action.

sportage1kia

marshallka wrote: »

:mad: :mad: I have recieved a redress offer from my bank for some PPI which I complained through the FOS about. I agreed to the amounts offered as Goodwill to me but upon receiving their letter stating these amounts will be credited to my bank account they have noted at the side of each payment of the statutory interest that I will have to pay 20% Tax over to the HMRC for them???


I have seen lots of people on here receiving these offers and not once has anyone been made aware that they have to pay tax on these amounts. I am so annoyed, they deprive you of the money and then expect you to be taxed on this too.:mad:

Would I be able to set this off (the loans are joint and my hubby works full time but I am not a tax payer at the moment) against JUST my tax code.

Hi there Marshallka
When I received redress letter from Hbos it does also state that if an interest payment has been made, this may constitute " taxable income" and any tax due on this should be dealt with between myself and the tax office.

But if the banks refunding is a goodwill gesture then it may not be taxable as you have stated Thank you for highlighting this.
Regards