PPI Compensation

JodieR
JodieR Registered Posts: 1,002
Client took out a loan in 2006 which he was paying PPI on. Previous accountant has included PPI in with interest over the years on the P&L. In 2011/12 client received PPI refund of £3k, this will be taxable income won't it? HMRC's guidence only appears to cover the interest element of the claim.

Comments

  • anniem
    anniem Registered Posts: 1,326
    Hi Jodie

    I haven't had a case, but when I read up about it my understanding was that tax was only payable on the interest part. I suppose the rest is compensation, but I stand to be corrected.

    Anna
    FMAAT - AAT Licensed Member in Practice - Pewsey, Wiltshire
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    anniem wrote: »
    Hi Jodie

    I haven't had a case, but when I read up about it my understanding was that tax was only payable on the interest part. I suppose the rest is compensation, but I stand to be corrected.

    Anna
    That's my understanding too.

    However, where the PPI premium has been claimed as an expense against tax, the general principle is that any income arising from that expense is therefore taxable.

    Would be nice if that was wrong, though.
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