20% Tax withheld by Churchill on compensatory interest

Dobbybing

Hi all
Randomly after 7 years Churchill have sent me a letting outlining that they under paid for a written off vehicle. As well as paying this amount a compensatory amount of just over just under £270.
In the letter they are deducting 20% basic rate income tax 'in accordance with HMRC' from the compensation.
In my head, surely i am responsible for the tax, not the insurance company.
They haven't referenced any source to HMRC. 

Does anyone know, if this is indeed an HMRC thing, and if its possible to stop Churchill deducting it?

Dazed_and_C0nfused

Tax deducted from that type of interest payment is quite normal, it's been happening with PPI related payments for many years.

You won't be able to stop it being deducted but if you aren't liable to pay some or all of the tax you can always claim a refund from HMRC.

The method of doing this will depend on whether you complete a Self Assessment return or not.