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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4795
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Hi I invested a large sum of money directly with my IFA in

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Hi I invested a large sum of money directly with my IFA in a scheme to process gold in Ghana. It was in the form of a loan - he would pay me interest quarterly - which he did for 18 mths then he vanished off the face of the earth. Seems it was a ponzi-type scheme & he paid me out of my own money. I am now doing last years tax return & have to declare the interest payments as income but I know I am not likely to ever see any of the principal again. It seems crazy that I should pay tax on what was effectively my own money being paid back to me - is there any provision to treat this not as income & not pay tax on it? The police are currently investigating the case.
Hello, I'm Keith and happy to help you with your question.

I have a preliminary question before I can respond. You indicate that the payments were made via a company. Were any of these repayments taxed at source?
Customer: replied 4 years ago.

No payments were made gross

I would suggest that they be treated as repayments of the debt and thus do not enter into the tax computation at all. They therefore do not need to be declared on your self assessment return.
Customer: replied 4 years ago.

OK - 2 supplementary questions then - what about the payments I declared & paid tax on in the previous tax year (2011-12) & what would happen if by some miracle the IFA shows up & pays me back some or all of the principal? Would I amend the declaration next year??

You should write a letter to your tax office telling them that there was an error on your tax return for previous year(s) and asking them to amend the position. The letter should also say that you are formally correcting an existing return.

The return of your capital is again the repayment of a debt and would have no tax consequences. It is just possible that HMRC might consider the original item an acquisition for Capital Gains Tax purposes, but as there is no gain it's a rather pointless exercise in financial futility!

Hope I have been of assistance.
Customer: replied 4 years ago.

A great help thank you - will rate you shortly! - would you suggest advising HMRC what I am doing overall (for last year & this year too)


thanks again



Yes, I think that is most appropriate. Despite many peoples' opinions all HMRC employees are not ogres!
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