PPI interest payments - or did I dream this?

[DoTheyMeanMe]

Re: PPI interest payments - or did I dream this?

tricky one isn't it.

It is correct, that any interest you receive from PPI is taxable. However some creditors usually pay you out, less the 20% tax.

If a creditor pays you out in full, then technically, you would need to complete a self assessment and declare it, so you can pay the tax that's due.

Think of it, like a savings account which pays gross interest. You would need to declare it, to pay the tax due, if the bank pays you net, you don't need to do anything.

The fact here is, they have decided to keep it. Im not entirely sure whether they can or can not do this. But from a tax point of view, it was never received by you, therefore it didn't become "your" liability.

First, we need to establish whether the 8% interest was due to be repaid to you or not, and then go from there. But I have a sneaky feeling that even if they agree, they would repay you less the tax anyway, in which case, you would still have no worries about declarations.

It would be interesting to find out however, whether they reduced the balance after they added the 8% to pay the tax due on it. As I would think, this should be done as a matter of law. What I mean is, if you were as an example awarded £100 as 8% interest, they would only be allowed to allocate £80 of it, towards your balance.

Did they allocate the whole lot?

They deducted the 8% and then credited the remainder to the card, which is, I suppose, correct.

I have (in the past) received payments both with tax deducted and without - from the same bank (RBS).

I accept that compensation can be taxable but feel (at least morally) that it should be viewed as a payment for loss or suffering and I should have the choice on how I use it.

[SXGuy]

Re: PPI interest payments - or did I dream this?

I agree and I also believe pensions shouldn't be taxable either but it is what it is.