HMRC continues to eye PPI tax gain
It has been reported that HM Revenue & Customs (HMRC) is continuing to eye a windfall tax year, with Payment Protection Insurance (PPI) customers having to pay tax on the interest from any compensation received. Though there is no tax levied on compensation from missold PPI, any additional interest that is also paid to customers is subject to tax.
In the last year, it is estimated that almost £1.9bn has been paid out in compensation to people who were wrongly sold PPI. This had the HMRC eyeing up a possible lucrative tax fall, with many individuals not realising that they have to pay tax on the interest that they receive. Accountancy body ACCA’s head of taxation, Mr Chas Roy-Chowdhury, said that whilst HMRC saw scandal as a way to make additional income, the law should be changed to withdraw the tax.
“There is huge scope for people to be underpaying tax inadvertently,” Mr Roy-Chowdhury said, adding that the law needed to be changed so that consumers did not have to pay any tax on compensation that they were rightfully entitled too.
Despite this call for action, consumers receiving compensation do have to pay tax on any interest added to the average £3,000 payout. This is often done at source, meaning that individuals do not have to do anything but enjoy the money that they receive. However, it is vital for people to check the status of their tax, with the tax authority having now set up a helpline for any people who are unsure of the correct procedures to follow.