Many people have been successful in obtaining compensation for mis-sold Payment Protection Insurance (PPI) and those who have received it may need to complete a Self-Assessment Tax Return.
The compensation is not liable to tax, but an element of the payment contains interest, which is taxable. The amount of interest received has to be entered on a Self-Assessment Tax Return.
Some banks will have deducted basic rate tax before payment but some may not have.
A person liable at the 40% rate of tax will have additional tax to pay on the interest received, as will those who have received interest without any tax deduction before payment.
Either way, the amount of interest received has to be reported to HM Revenue & Customs (HMRC) and if you received such a payment during the year ended 5th April 2013 then it must be entered on your 2013 Self Assessment Tax Return. Deadlines for submission of these completed Forms are looming.
HMRC will have details of the payments made, supplied by High Street banks, and no doubt will compare these with entries on Tax Returns. Enquiries may open where interest has not been returned. A bill for tax, interest, plus penalties, could result, and HMRC could extend their enquiries into all areas of your trading/financial affairs.
If you need assistance to:-
(a) decide whether you are affected by this;
(b) need help completing a Tax Return, or
(c) think you may need to complete one for the first time;
then please contact one of our experienced team for an initial appraisal on:
Telephone: 0151 285 3100
Fax: 0151 285 3131
E-mail: [email protected]
Address: 116 Duke Street, Liverpool, L1 5JW
