Underpaid PPI offer and HRMC Tax Problems.
sponnygit
Forumite 2 Posts
Hi, I made a PPI refund claim last year against The Bank of Ireland Credit Card from the Post Office. The Bank agreed I was due redress and I was offered £3976 in late August last year (2021). However I was only paid £3345 in ealy September after returning the signed paperwork. I've misplaced the copy for that offer now, but I had assumed at the time that the shortfall was to cover the tax on the refund.
This year, I looked to claim any tax I may have been due back from HMRC for that refund and filled in the R40 form (after watching a couple of youtube videos explaining the process) .... only now I've received a letter from HMRC saying I owe them £597 :-( for "Savings Income" on £2976 (£3976 less the £1000 PSA) x 20%
What do I do now ? I thought PPI was tax free (apart from the 8% interest).... I've tried calling BOI credit card people but that goes straight though to JaJa who took over the Credit Cards and they have no notes of any refunds. I've emailed BOI ppicomplaints and still no answer.
As for HMRC I have no idea how to deal with that. Any advice would be much appreciated .
Thanks in advance, Pete.
This year, I looked to claim any tax I may have been due back from HMRC for that refund and filled in the R40 form (after watching a couple of youtube videos explaining the process) .... only now I've received a letter from HMRC saying I owe them £597 :-( for "Savings Income" on £2976 (£3976 less the £1000 PSA) x 20%
What do I do now ? I thought PPI was tax free (apart from the 8% interest).... I've tried calling BOI credit card people but that goes straight though to JaJa who took over the Credit Cards and they have no notes of any refunds. I've emailed BOI ppicomplaints and still no answer.
As for HMRC I have no idea how to deal with that. Any advice would be much appreciated .
Thanks in advance, Pete.
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Maybeoffer was in Euros and you were then paid in GBP ?
PPI refunds aren't taxable and do not have tax deducted.
The statutory interest paid alongside PPI refunds is taxable and does have tax deducted.
What exactly did you include in the interest sections of the R40?
I called the tax office and they assumed I had earned £3976 in savings interest... Not a PPI reclaim. I guess the R40 form is not as clear as I thought. I have to send another R40 to show the limited savings I actually had and they will reset that... Then I have to send a new R40 with the full breakdown of the refund then pay tax on the interest part (if it's over £1000).
A bit of a mess.... And all because I thought BOI had paid the tax due straight to HMRC (as I understood was pretty standard on PPI refunds). Instead it looks like they have short paid me and sent 0 to HMRC so now I have to pay tax AND I have to chase them to ask why the shortfall from the offer ‽
HMRC haven't assumed anything, they have undoubtedly accepted what you have entered on the R40. The R40 guidance notes do specifically state include "PPI interest payments".
Under no circumstances do you need to send TWO further R40's!!!!
What you need to do is send ONE correctly completed R40 with all of your taxable income information for the tax year in question on. Along with a letter explaining it is a correction to the original.
You don't include PPI refunds on an R40 as they aren't taxable income.
You do include the statutory interest on the R40, along with details of the tax deducted, as this is taxable income.
You also include details of any normal bank and building society interest as that is also taxable income. Do not include interest from ISA's as that is tax exempt.
There are different sections for taxed interest (the PPI related bit) and untaxed interest (normal bank/building society interest).
You also include any other taxable income you have received for the tax year in question such as taxable earnings, pension income etc.
You include all taxable income, you do not make any adjustments, HMRC will recalculate the tax position once you submit the revised R40. You may be liable to tax on all the interest but in certain situations upto £6,000 can be taxed at 0%. Or £1,000 might be taxed at 0%.
What makes you think the tax hasn't been paid?? Anyway that is pretty much irrelevant, if it was deducted from the statutory interest you were paid that's what counts.
Why do you think there is a shortfall of some sort??
Haven't the PPI company paid you the PPI refund and statutory interest less 20% tax deducted from the interest element???