Ppi Compensation: Thousands Owe Tax On Payouts

[interestrateripoff]

http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/10615367/PPI-compensation-thousands-owe-tax-on-payouts.html

Tax experts are warning that tens of thousands of recipients of PPI compensation have failed to meet a deadline to pay tax on the interest element of their payments.

The banks have already paid out £12bn to those who say they were mis-sold payment protection insurance (PPI) on credit cards, loans or other lending products.

Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants, said some of rise in the number of people who need to settle tax bills – estimated at a rise from 9.5 million last year to 10.5 million this year – may be due to PPI settlements.

Hilarious really!

I wonder how many have spunked the money on buying a new car and now face a tax bill perhaps have several hundred or maybe a few thousand which could take a bank loan to pay....

Still it's all helping velocity.

[CHF]

http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/10615367/PPI-compensation-thousands-owe-tax-on-payouts.html

Hilarious really!

I wonder how many have spunked the money on buying a new car and now face a tax bill perhaps have several hundred or maybe a few thousand which could take a bank loan to pay....

Still it's all helping velocity.

A lot of PPI refunds are paid net of the tax now but in the early days they almost all went out gross.

[olliegog]

lots of recipients probably viewed the 8% interest (good rate that) as 'compo' and all theirs

if they were not sufficiently savvy to realise they could refuse/cancel PPI or understand it, they would probably not get that interest payments are taxable.

wish I had paid PPI and have the premiums returned with 8% simple interest - but I used my head and just said no.

Edited February 3, 2014 by olliegog

[koala_bear]

http://www.telegraph...on-payouts.html

Hilarious really!

I wonder how many have spunked the money on buying a new car and now face a tax bill perhaps have several hundred or maybe a few thousand which could take a bank loan to pay....

Still it's all helping velocity.

I needed a good laugh.

[Tin Foil Hat]

How will HMRC know who to chase? And is it going to be profitable? My payout I got myself without a parasite company was 2 grand inc interest and I have no idea if it was taxed or not.

Also is it worth their while when I suspect the majority were small beer payouts like mine.

[The Ayatollah Buggeri]

Forgive my ignorance, but why is tax payable on these payments at all?

The insurance premiums were originally paid for out of post-tax income, and furthermore were presumably taxed themselves (5% VAT on insurance). So this is not new, pre-tax income that these people are being given, but a refund of money they should not have been asked to pay in the first place and was already net income when they paid it. I can't see any basis for taxing these refunds.

[19 year mortgage 8itch]

Forgive my ignorance, but why is tax payable on these payments at all?

The insurance premiums were originally paid for out of post-tax income, and furthermore were presumably taxed themselves (5% VAT on insurance). So this is not new, pre-tax income that these people are being given, but a refund of money they should not have been asked to pay in the first place and was already net income when they paid it. I can't see any basis for taxing these refunds.

There is 8% annual interest on these refunds. If your policy went back 10+ years, the refund is mostly interest component.

The interest is taxable. Like on savings.

[Brendan110_0]

Forgive my ignorance, but why is tax payable on these payments at all?

The insurance premiums were originally paid for out of post-tax income, and furthermore were presumably taxed themselves (5% VAT on insurance). So this is not new, pre-tax income that these people are being given, but a refund of money they should not have been asked to pay in the first place and was already net income when they paid it. I can't see any basis for taxing these refunds.

The tax is on the interest part of the PPI not the actual refund of payments made. Can't see HMRC ever actually contacting people about the tax owed, they have bigger fish to fry, never mind the fact it'd cost £1000's to grab back £100's.

[SNACR]

There is 8% annual interest on these refunds. If your policy went back 10+ years, the refund is mostly interest component.

The interest is taxable. Like on savings.

Interest on savings you say, tell me more about this curious idea.

[The Knimbies who say No]

To be clear, single premium PPI policies attract interest at the prevailing rate of the loan since the policy is set up to be a loan; this interest is not taxable.

The taxable interest is the statutory 8% simple interest paid on payments made in relation to the PPI policy (whether single premium or not) and also on any 'loss upon settlement' for single premium policies, as when eg if a loan is refinanced the cancellation of the existing policy results in a very poor refund of the unused portion of the premium under the 'Rule of 78s'.

Refinancing loans was an absolute moneyspinner in many respects, even more so for single premium PPI payments. Rather than top up exisiting PPI provision to cover additional borrowings/term, they would cancel the current policy, issue a terrible refund and then sell a new policy to cover the whole lot again.

[little fish]

Many receivers of PPI claims will not even be registered with HMRC to do a self assessment, if due last month they are late and will likely incur late payment charges from HMRC. If still not paid they will end up paying interest or with debt collectors chasing them. From October 2013 lenders deduct basic income tax of 20% from the 8% interest payable at source leaving it up to the claimant to reclaim it back if BR tax is not applicable to their circumstances. Can't see many doing this. I would be interested to know how many people on benefits did not declare their PPI payments...

On a positive note claims companies are expecting that PPI will be over by this summer. They are now moving onto pension, life insurance and business loans.

I have no problem with anybody getting any thing back from the banks, on the contrary I wish any body genuinely scammed by them well with their claims. The problem is the claims companies. In 5 years or less the new misselling scandal will be against them. The large ones will simply register a new company, retain the same old staff and hey ho, lets claim against ourselves!

If properly regulated the banks would have been penalised and had to return any excess they collected directly to the customers. They have admitted misselling which is just an ambiguous term they use instead of fraud. Fraud is fraud, regardless of the amounts.

http://www.hmrc.gov....al/saim2105.htm