Taxation in Respect of the Interest Element of Refund

jennyyates2001

Hello,

I have successfully received an offer from Yorkshire Bank with regards to 3 bank loans and the mis-sold PPI.

I'm really pleased I applied for this and would not have done this without having gone onto this website and getting the information on how to do so, so thanks!

My query is about the paragraph on my offer letter of "Taxation in Respect of the Interest Element of Refund"

It states the following:
"Delay interest, as stated on the attached appendices has been included within these offers. We are required by law to report this element of the offer to her Majesty's Revenue and Customs (HMRC). The amount of delay interest is being paid gross to you, however, it may be subject to tax. Depending on your personal circumstances you will need to declare this to HMRC and you may wish to discuss this with your Tax Advisor, prior to acceptance of this offer."

Please can anyone help, as I don't have a tax advisor? I have the basic tax code on my wages at work, so have never needed one. The offer seems to be correct, so I am likely to accept it within the 14 day timescale stipulated, but wanted to check out the above paragraph first.

Any advice would be much appreciated.

Thanks Jenny

-taff

Phone the HMRC andlet them know when you get your redress back.

jennyyates2001

Thanks for the response Taff. But why should the government have my money though?

I have only saved in the last few years and only in an ISA (less than £2000 each year) and these loans were from 2001 and 2002. I know that if I had not paid the PPI, then the money would have been spent.

So why should the government get their hands on money that was already taxed through my wages at the time, when it would not have gone into a savings account.....seems harsh to me?

Any responses again much appreciated....thanks.

[Deleted User]

jennyyates2001 wrote: »

But why should the government have my money though?

Probably because it's the law and the alternative is going to gaol.

jennyyates2001

But as mentioned above, how does the government know what I was going to do with my already taxed money? I know for a fact that it would not have been saved, therefore, why should they tax it again?

[Deleted User]

jennyyates2001 wrote: »

why should they tax it again?

They are not taxing the refund you receive, only the interest awarded is taxable. So no income is being taxed "twice".

There is little point in debating this further, inform HMRC that you have received this money and you will be able to pay what you owe painlessly through PAYE.

If you decide not to tell the tax office, you will receive a demand for the whole amount to be paid immediately because the Bank will (eventually) inform them for you.

jennyyates2001

Thanks for the advice....I think I had misunderstood a little....sorry but taxation is not my strong point!! I do see what you are saying and will contact HMRC accordingly.

I just think any savings I would have had would have been in an ISA as the amount offered is less than £1500 and therefore not taxed if it had been in an ISA.

Anyhow, thanks again for responding :-)
Jenny

[Deleted User]

jennyyates2001 wrote: »

I just think any savings I would have had would have been in an ISA as the amount offered is less than £1500 and therefore not taxed if it had been in an ISA.

No ISA would have paid interest at 8% though!
Remember, the money being taxed is the interest only element of your redress. You would not have had this amount of interest other than through a successful PPI complaint.

jennyyates2001

Right, I think I've got it....thanks for being patient and explaining, as like I said this is not my forte.

Once I have my payment back, I will contact HMRC.

Cheers Jenny