PPI offer from RBS- Tax deducted?

bob_dob

Hi,
My friend has received an offer of refunded PPI plus 8% interest from RBS but in the letter it says 'Interest will be paid Gross or net of the lower rate of income tax depending on your tax position' and in the details of reimbursement it states that the offer has 20% tax deducted.

I thought that the banks were paying back the PPI owed without taking the tax off and then it was up to the individual to tell HMRC?

Please can someone confirm that this deduction of 20% tax is correct and not an option?

dilus

bob_dob wrote: »

Hi,
My friend has received an offer of refunded PPI plus 8% interest from RBS but in the letter it says 'Interest will be paid Gross or net of the lower rate of income tax depending on your tax position' and in the details of reimbursement it states that the offer has 20% tax deducted.

I thought that the banks were paying back the PPI owed without taking the tax off and then it was up to the individual to tell HMRC?

Please can someone confirm that this deduction of 20% tax is correct and not an option?

There are a couple of banks that do deduct tax at payout, I think RBS are one of them maybe someone else can confirm this. If it states on the redress letter that tax has been deducted then no need to worry about informing HMRC, just make sure your friend keeps this correspondence as proof, in case he gets chased by the tax man

tifo

bob_dob wrote: »

Please can someone confirm that this deduction of 20% tax is correct and not an option?

They deduct 20% as tax from the INTEREST received, not the actual refund of PPI. This is the same as deducting tax from interest received in a bank account as it's classed as income.

But if you don't pay tax or are not due to pay any for other reasons you can reclaim this from HMRC.