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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4972
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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THE BANK HAS INCORRECTLY ASSESSED THE MORTGAGE ARREARS ON THE

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THE BANK HAS INCORRECTLY ASSESSED THE MORTGAGE ARREARS ON THE REPAYMENT OF THE ADVANCE. TWO YEARS ON THE BANK HAS ADMITTED WITH THE ASSISTANCE OF THE FOS THAT THE QUOTED FIGURE IS WRONG. IN ASSESSING THE SUM REPAID INCLUSIVE OF SIMPLE INTEREST THE BANK HAS DEDUCTED 20% IN LIEU OF STATUTORY COMPENSATION PAYMENT. SURELY THIS IS INCORRECT BECAUSE THE PAYMENT IS MADE IN RESPECT OF THE BANK ERROR
Submitted: 1 year ago.
Category: Tax
Expert:  taxadvisor.uk replied 1 year ago.
Hello and welcome to the site. Thank you for your question.
Please clarify for me -
You received compensation for incorrectly assessed mortgage arrears and because it took longer than normal, the bank paid you an additional sum to compensate you for interest.
Is it this additional sum that has been taxed at 20% or the whole amount..
As an example
Compensation for incorrect assessment - say 10,000
Interest for delayed repayment at simple interest - say 800
Tax deducted at 20% on 800 - say 160
Net amount paid to you (10,000+640) = 10,640
Many thanks
Customer: replied 1 year ago.
THE ARREARS WAS DISPUTED FROM DAY ONE. THE FOS INDICATED THAT THE BANK SHOULD PAY ARREARS OF £3534-52 WITH INTEREST AT 8% SIMPLE FROM REDEMPTION UNTIL DATE OF SETTLEMENT. PLUS £250-00 IN RESPCT OF DISTRESS AND INCONVENIENCE.
THE BANK HAS DEDUCTED 20% FROM THE INTEREST ONLY 18/1/2013 TO 10/9/2015. WE ARE REQUIRED TO DEDUCT INCOME TAX AT 20% FROM YOUR 85 STAUTORY COMPENSATION PAYMENT. THE TAX DEDUCTION HAS BEEN FORWARDED TO HMRC ON YOUR BEHALF
Expert:  taxadvisor.uk replied 1 year ago.
Thank you for your reply and for the explanation.It appears the bank paid you additional interest for the delay in settlement.If the compensation includes -simple interest at a rate of 8% per annum which is to compensate the customer for being deprived of the money they had paid then this interest is taxable at source as explained in HMRC manual Ref SAIM2015 herehttp://www.hmrc.gov.uk/manuals/saimmanual/SAIM2105.htm If you think you are entitled to a repayment because you may be a non-taxpayer, you should complete Form R40 - Claim for repayment of tax deducted from savings and investments.You can download the form from HMRC website herehttps://www.gov.uk/government/uploads/system/uploads/attachment_data/file/419506/R40_M__internet_v2.0.pdf More information on this can be found herehttps://www.gov.uk/government/publications/income-tax-claim-for-repayment-of-tax-deducted-from-savings-and-investments-r40 I hope this is helpful and answers your question. If you have anyother questions, please ask me before you rate my service – I’ll be happy to respond.
Expert:  taxadvisor.uk replied 1 year ago.
Here are the linkshttp://www.hmrc.gov.uk/manuals/saimmanual/saim2105.htmhttps://www.gov.uk/government/uploads/system/uploads/attachment_data/file/419506/R40_M__internet_v2.0.pdf Many thanks
Customer: replied 1 year ago.
THANK YOU, ***** ***** DO NOT LIKE YOUR DECISION.
Expert:  taxadvisor.uk replied 1 year ago.
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