PPI Refunds could trigger Self Assessment

[SXGuy]

http://www.accountingweb.co.uk/artic...concern/536621

Basically, if you receive a PPI refund which includes Interest, then that interest should be taxed.

Some firms refund PPI with tax already deducted, which would not require you to file a Self Assessment.

However those which receive the full refund, may incur tax liability on the interest added to the refund.

Some high rate tax payers could have to pay up to 40% on any interest claimed.

If you receive a wage on PAYE for example, you may not be aware of the tax implications.

Further more, it could push some people on min wage over the tax allowance threshold thus resulting in a tax bill.

If the refund is due to be taxed, and you fail to file a Self Assessment and pay whats due by 31st January of the following year, you could also incur further penalties.

The thing is, some companies just send you a figure for the full amount, if they fail to show a breakdown of the interest, how can anyone know what tax is due.

EDIT: further more id speculate that if the refund is less than 8k to 10k its unlikely HMRC would know you received it.

[mgfboy]

Re: PPI Refunds could trigger Self Assessment

I think that some reclaim figures are just made up anyway and I know when my wife recieved hers , there was not break down. They had lost alot of the early files so they just took a guess at what the refund should be, so god knows how you would work that out.

I suppose if the stated the whole amount was compensation, there would be no tax charge.

[SXGuy]

Re: PPI Refunds could trigger Self Assessment

I think that some reclaim figures are just made up anyway and I know when my wife recieved hers , there was not break down. They had lost alot of the early files so they just took a guess at what the refund should be, so god knows how you would work that out.

I suppose if the stated the whole amount was compensation, there would be no tax charge.

True you may get away with that in the interim, however if you had a tax inspection id say the inspector would need a lot of convincing that 8% interest wasnt added to the payment.

My unprofessional advice would be, to keep your mouth shut and eyes closed and just take the money personally.

Unless however, if it was PPI on a massive loan or mortgage, then id consider asking for a breakdown and submitting a self assessment. Reason being is you dont want to find £1600 of your reclaim has now bee spent on penalities and interest charged to failure to declare tax due and unsubmitted returns.

[mgfboy]

Re: PPI Refunds could trigger Self Assessment

True you may get away with that in the interim, however if you had a tax inspection id say the inspector would need a lot of convincing that 8% interest wasnt added to the payment.

My unprofessional advice would be, to keep your mouth shut and eyes closed and just take the money personally.

Unless however, if it was PPI on a massive loan or mortgage, then id consider asking for a breakdown and submitting a self assessment. Reason being is you dont want to find £1600 of your reclaim has now bee spent on penalities and interest charged to failure to declare tax due and unsubmitted returns.

I agree entirely mate, I'm just saying HMRC can't just guess either if the figure hasn't been declared. I suppose following it to a conclusion the interest ( if on a large amount) could effect all sorts of benefits etc.

As you also say , even if the tax was paid at source there still would be a further liability for a 40% tax payer!!!!