tax treatment of bank complaint compensation

Imvrasos

I was recently awarded compensation following a complain to Virgin Money over current account opening issues. Can the forum gurus please advise if such compensation sums are treated/reported as income by/to HMRC? I am currently sitting right below the higher income tax rate threshold and could be pushed above by the sum in question.

[Deleted User]

Imvrasos said:

I was recently awarded compensation following a complain to Virgin Money over current account opening issues. Can the forum gurus please advise if such compensation sums are treated/reported as income by/to HMRC? I am currently sitting right below the higher income tax rate threshold and could be pushed above by the sum in question.

As with most things - it depends:

https://www.financial-ombudsman.org.uk/consumers/expect/tax

Jeremy535897

If the current account was for a business, any compensation will be subject to income tax as a receipt of the business. If it was not, because there is no underlying asset, capital gains tax is not relevant as the compensation is less than £500,000 (paragraph 11 ESC D33).

Imvrasos

[Deleted User] said:

Imvrasos said:

I was recently awarded compensation following a complain to Virgin Money over current account opening issues. Can the forum gurus please advise if such compensation sums are treated/reported as income by/to HMRC? I am currently sitting right below the higher income tax rate threshold and could be pushed above by the sum in question.

As with most things - it depends:

https://www.financial-ombudsman.org.uk/consumers/expect/tax

Apologies, this does not answer my question. I was looking at your link right before posting and did not find relevant information.

Jeremy535897 said:

If the current account was for a business, any compensation will be subject to income tax as a receipt of the business. If it was not, because there is no underlying asset, capital gains tax is not relevant as the compensation is less than £500,000 (paragraph 11 ESC D33).

Thank you, the account is personal. My worry is if it could be classed as income?

Jeremy535897

It could only be taxed as income if the account was a business account. As it was not, in my opinion no tax is due and no reporting is required.

akh43

I have the same issue, £200 compensation from VM already put into my VM personal current account yesterday and the reference to the payment is named "redress", without me even accepting it.  

Their letter states "As we do not know your tax status you may wish to seek independent financial advice about this payment"

I am retired and a basic rate tax payer as I receive a bit more than the the allowance.  Do I get taxed on this, does it get lumped in with my interest payments for the past tax year or do I need to declare it anywhere?

Thanks

Jeremy535897

It is not subject to tax and does not need declaring.