I have been asked a question that I'm not sure how to answer, so I am hoping one of you might be able to help.
I have a client that has received a PPI reclaim along with interest which has not yet had the tax deducted from it. When entering the interest for self assessment purposes, is it OK to deduct the cost that the client incurred to recover the PPI reclaim?
In my head i'm thinking no and that they should just enter the interest at it's full amount but want to be totally sure that this is correct.
Without looking this up, my gut instinct is that the costs are nothing to do with interest received. I agree though that the interest should be entered on the S.A. as unearned income.
Q. What specific costs were incurred, Vicki and is there any indication that these have been reimbursed along with the PPI premiums?
This is an interesting question and I'll look forward to seeing if anyone has a differing view.
Instead of recovering the mis-sold PPI themselves they went to an independent company who recovered it for them. The total interest received was around £10,000 but the cost they had to pay to recovery company was about £6,000.
Sorry I probably should have explained that in the first place. I am entrigued to find out what everybody else thinks too.
Hi Vicki, have you seen the documentation? £10,000 is a staggering amount of interest! The fact that no tax has been deducted is not surprising to me but it might indicate that £10,000 is the refund of premiums, which in itself would be an awful lot of money to pay for insurance. The £6000 fees seem hefty too. What exactly does the documentation state?
I haven't actually seen any documentation, I don't actually look after the books for this client, I just give advise when need be.
Since your last message I have found out a little more about the figures involved. The PPI refund for the premiums was for around £10,000 the interest paid was around £2500 and the fee from the recovery company about £3700.
According to HMRC the banks are under no obligation to deduct the tax because it's not interest on a deposit account. Any other companies would be under the obligation to deduct the tax when making the payment of interest.
Now looking at the figures I have received this afternoon there is no way they can deduct the fee from the interest otherwise they will be left with a negative value.
Sorry for this all to be rather vague Tim, thank you for your time.
