Taxman to make money from Payment Protection Insurance

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Taxman to make money from Payment Protection Insurance

This is a duplicate of the Blog Entry made on 13th November 2011 18:47.

Millions of people are facing an unexpected tax bill on their Payment Protection Insurance (PPI) claims payouts, the BBC has learned. The banking...

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Re: Taxman to make money from Payment Protection Insurance

Millions mis-sold PPI insurance to be taxed on compensation

Millions of consumers who were mis-sold Payment Protection Insurance by banks will be forced to pay tax on their hard-fought compensation, it emerged yesterday. Victims of the scandal are expected to have to pay £350million to the Treasury. The average tax payment is likely to be £50 per person, but some could end up paying thousands. PPI, sold with credit cards and personal loans, covers repayments if a borrower becomes too sick to work or loses their job.....Read more here---> Millions mis-sold PPI insurance to be taxed on compensation

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Re: Taxman to make money from Payment Protection Insurance

PPI compensation prompts tax concerns

Victims of the mis-selling of payment protection insurance (PPI) could "inadvertently" be underpaying tax after receiving compensation payments. HM Revenue and Customs (HMRC) has confirmed that no tax is levied on the compensation sum victims receive, but it is on any additional interest paid. Chas Roy-Chowdhury, of the ACCA, called on the government to withdraw this tax. Last year, banks paid out £1.9bn to the victims of mis-sold PPI. An estimated £5bn is still expected to be paid out. PPI is supposed to cover borrowers' loan repayments if they fall ill, die or lose their jobs. It became highly controversial after the policies were sold, often without the customer's knowledge, along with loans and mortgages. Law change call

The average payout in compensation is £3,000. This includes a capital sum - based on the PPI premiums paid - and interest that would have accrued if the individual still had never made those payments. Only the latter is taxable. The interest on this may or may not have had tax already deducted, depending on the type of company making payment of the interest, HMRC said. Mr Roy-Chowdhury, head of taxation at the ACCA accountancy body, said: "There is huge scope for people to be underpaying tax inadvertently." He said that the Treasury should not benefit from a tax windfall owing to the compensation payments, but should instead change the law in order to cancel any tax charged relating to PPI compensation..........Read more here: PPI compensation prompts tax concerns