Tax Forum :: Free Tax Advice

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?

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

The interest is taxable.

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