Pension ex gratia payment

lunny_2

Good evening
Could anyone be so kind as to give me some advice?
My father recently passed away, leaving nothing of any real value, except a small pension.
Upon reviewing the paperwork I discovered he was mis sold the pension and the company has agreed to make an ex gratia payment for the error that was made.
Now my question is, they want to deduct tax at the basic rate.
Is this correct, as the value of the estate is very small and this payment would be less than his personal allowance.
If this is correct, can we subsequently reclaim this tax?
Thankyou

Debt_Free_Chick

I think you need to take this up with them.

If the ex-gratia payment is "damages" i.e. compensation, then no tax should be payable at all.

Ask them to confirm the reasons why tax needs to be deducted and ask them to confirm that no tax is due on any part deemed to be "damages".

Note that if the payment includes any interest, then they must deduct tax - but only on the interest part. The executor may be able to claim this back, but I'm pretty sure that the provider has no option but to withhold it, in the first place.