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Millions of consumers are facing an unexpected tax bill on their PPI claims
payouts, it has emerged.
Consumers were awarded compensation plus interest of 8% by the Financial
Services Authority on the money they originally spent on PPI.
This interest will be subject to tax - earning the government tens of millions
of pounds.
A spokesman for HMRC commented: "No tax is generally due on the repayment
element of compensation paid to those missold PPI.
But the additional interest is taxable, in line with other compensation claims.
"Nobody should be worse off, as had the customer not purchased PPI, but kept
that money in an interest-bearing account, the interest received would have been
taxable.
"Customers should check with their PPI provider as to whether tax has been
deducted at source."
Credit card customers do not automatically receive interest at 8%. They only
receive this if the value of the PPI refund would have meant that they were in
credit.
Mike Warburton, tax director at Grant Thornton, said the government would be due
a significant sum in tax.
He explained: "The compensation will attract interest at a relatively high rate
of 8%. This will be taxable and the government will expect to raise several
hundred million pounds from this."
Source:
Getting Paid
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