The Winner Takes it All - Well Almost

Claimants who successfully won their cases for mis-sold payment protection insurance (PPI) will now have to pay tax on any part of the cash which represents interest earned, according to HM Revenue & Customs.

Billions of pounds have been set aside by banks after the FSA won a judicial review forcing them to pay out on mis-sold PPI claims.  HMRC have said that any repayments constitute a compensation element and interest. The latter would normally be taxed at 20% before crediting an individual.

Individuals need to check whether the banks had automatically deducted tax on interest.  In most cases interest will have been paid gross leaving a liability.

Walker Thompson’s view:
Now that HMRC are aware of the issue it would not be a surprise for HMRC to ask banks for lists of recipients in order to assess tax due.