Tax warning for PPI mis-selling victims
The warning from the Association of Chartered Certified Accountants (ACCA) said that while the PPI compensation itself is not taxed, any interest accrued on the redress is taxable.
Chas Roy-Chowdhury, ACCA head of taxation, said: “Failure to declare [interest] in the self-assessment form could lead to a knock at the door from HM Revenue & Customs. It’s not obvious at all in completing the necessary forms.”
Hundreds of thousands of extra people are expected to complete a self-assessment tax return for the first time by 31 October thanks to changes to the child benefit system and an increase in the number of self-employed workers.
Roy-Chowdhury said: “Even those who have gone through the self-assessment process before will see some new elements to [the form], making what was originally meant to be an easy process much more complicated and vulnerable to mistakes. It’s not just completing the form that’s tough, its knowing what can and can’t go in that could trip you up.
“Self-assessment was supposed to be a DIY tax, but we are at a stage now where guidance from an ACCA finance professional may be a necessity to avoid the potential of being penalised for unpaid tax.”
Parents who earn over £50,000 and continue to claim child benefit but do not complete a self-assessment form could be liable to tax, not only to repay part of all of the benefit claimed by way of a tax charge on the highest earner of the couple, but also interest and penalties on the tax unpaid.