Amex PPI and tax on stat interest

tifo

I've just been offered a PPI refund by Amex but they're paying interest net of tax. They want me to reclaim this from HMRC if i need to.

This is the first time i've come across this and i don't see any guidelines for this from the FOS.

I should be able to deal with my own tax affairs.

They're also not offering the interest they charged on PPI premiums.

Any advice?

di3004

Hi tifo

Post about this on the above reclaiming - discussion thread where you will receice this advice in detail.

I find this matter confusing to be honest, but sure one of the folks in the stated thread will post up on this for you, good luck x;)

DrSqueeze

Some banks are paying PPI interest gross, some net. There's no consistency between the banks.

Whichever option they choose will not please all customers, since it either means that some people will have to contact HMRC to pay tax - or else some will have to contact HMRC to ask for a refund. It's really no different to how interest is paid on a typical bank account, where the bank pays the customer net interest and automatically pays the tax.

I don't suppose the FOS really has an opinion on this (since the tax is payable regardless in the majority of cases) provided the bank informs the customer which way it's being done. I suspect a lot of people would prefer the bank to deduct tax automatically, it's less effort. For basic rate taxpayers there's nothing else to do.

As for the interest on the PPI premiums, I'd suggest you go back and ask them to reconsider this. It's something you shouldn't have paid.

tifo

i'd prefer to handle my own tax. I declare all interest i receive anyway.

this is the first time a bank has done this on any of the interest i've received.

the same bank did not do this last time it paid me interest on a refund.

DrSqueeze

tifo wrote: »

i'd prefer to handle my own tax. I declare all interest i receive anyway.

this is the first time a bank has done this on any of the interest i've received.

the same bank did not do this last time it paid me interest on a refund.

Have they already paid? If not, you could go back and ask them to pay you gross.

I've seen examples of banks paying both ways, so always recommend people check the letter / payment amounts in detail. I read somewhere that HMRC are concerned about the number of people not disclosing untaxed interest - so perhaps they're putting pressure on the banks?

tifo

DrSqueeze wrote: »

Have they already paid? If not, you could go back and ask them to pay you gross.

No, it's in the offer letter which I received today.

They're offering to refund net interest minus paid tax at the higher rate. I definitely don't pay higher rate tax (50%). They also remind me to inform the HMRC if i'm a higher rate tax payer.

This means I need to do extra work and ask for a refund from HMRC and the bank are telling me I'm a higher rate tax payer and only these need to tell HMRC. Why would I need to inform them if the bank is paying the tax for me anyway?

From my calculations, they've paid less interest than they should and i use simple 8% (not compounded).

They were very quick though ... offer received within a week!

I_luv_cats

Millions face unexpected tax bill over PPI



BBC Radio 4's Money Box
Saturday, 12th November 2011 at 1204 BST On Radio 4 and Online





Millions face an unexpected tax bill over PPI compensation. Customers who have waited weeks, sometimes months for their money will have to pay tax on the interest they receive. It was agreed with the regulator - the FSA - that victims of PPI mis-selling would receive interest at 8% - but that could come down significantly after the revenue have had their cut.
If you want to contact HMRC regarding tax on PPI contact the Income Tax enquiry line on 0845 300 0627 or write to PO Box 1970, Liverpool L75 1WX.

Lloyds loss after PPI
FOS



Money Box

DrSqueeze

tifo wrote: »

They're offering to refund net interest minus paid tax at the higher rate. I definitely don't pay higher rate tax (50%). They also remind me to inform the HMRC if i'm a higher rate tax payer.

This means I need to do extra work and ask for a refund from HMRC and the bank are telling me I'm a higher rate tax payer and only these need to tell HMRC. Why would I need to inform them if the bank is paying the tax for me anyway?

Sounds like they've mixed up or mistyped their message there.

Normally, a bank would deduct tax at basic rate.

They then tell people to contact HMRC if they're not a basic rate taxpayer. This is either to pay the difference (for higher rate payers) or to claim it back (for non taxpayers).

I've not come across a bank who automatically assumes a person is higher rate, as they'd need to know your current salary etc. Unless the interest is exceptionally high and would make you a higher rate payer all by itself.

Ask them to clarify, because what they've said doesn't make sense.

They were very quick though ... offer received within a week!

Impressive!

tifo

DrSqueeze wrote: »

Unless the interest is exceptionally high and would make you a higher rate payer all by itself.

I'd be lucky if it was that high!

They're offering £72 interest after tax.

I calculated interest at £205 gross at the 8% simple (not compound) rate. And my PPI schedule is £23 less than theirs so the interest should be more from them at around £220.

They're offering a PPI refund of £183.

I don't know how much tax they've taken off.

DrSqueeze

Definitely sounds like Amex have muddled themselves up. Ask them to explain because it doesn't make sense.

tifo

I_luv_cats wrote: »

It was agreed with the regulator - the FSA - that victims of PPI mis-selling would receive interest at 8% - but that could come down significantly after the revenue have had their cut.

Not significantly, only as part of an overall income. It will affect those with refunds form large loans than those of us from credit cards.

But the same has always been there for many years. Anyone receiving any interest has to include it as income, whether from default charges, PPI, loans or anything else.

The charges/PPI etc being refunded is not income because it was taken from disposable income net of tax. Compensation is also not seen as income.