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Is PPI compo taxable?

pawncob
Posts: 4041
Joined: Wed Aug 06, 2008 4:06 pm
Location: West Sussex

Is PPI compo taxable?

Postby pawncob » Wed May 16, 2018 4:06 pm

Gladstone Brookes TV ad say compensation is subject to Fees, VAT and personal taxation. Has anyone ever declared PPI compensation to HMRC? Even where it was originally business related?
With a pinch of salt take what I say, but don't exceed your RDA

robbob
Posts: 2545
Joined: Wed Aug 06, 2008 4:01 pm

Re: Is PPI compo taxable?

Postby robbob » Wed May 16, 2018 4:25 pm

It tends to be the taxable statutory interest added that creates the tax problem/brucie bonus (20% tax may or may not have been deducted) , if you use 8% pa official rate and say claims are 5-6 years old on average the interest could easily be 50% of the overall payout. I am presuming the compensation will not normally automatically be taxable in itself but it may depend on the exact circumstances - eg if it was refunding premiums which originally secured a tax deduction due to being trade related ?

One random example
https://www.citizensadvice.org.uk/debt-and-money/tax/what-is-taxable-income/taxable-and-non-taxable-income/

compensation or damages awarded for personal injuries whether received in one lump sum or over a period and whether awarded by a court or out of court settlement

further info
https://www.moneysavingexpert.com/news/reclaim/2011/11/got-a-ppi-payout-you-probably-owe-tax

bd6759
Posts: 2726
Joined: Sat Feb 01, 2014 3:26 pm

Re: Is PPI compo taxable?

Postby bd6759 » Wed May 16, 2018 4:32 pm

The interest is taxable.

Whether the compensation is taxable depends on the facts. It is likely to be taxable if received by a business.

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