PPI refund and CT

PPI refund and CT

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Hi

One of my clients - a Ltd company - has had a PPI refund and some interest. I have investigated and come to the conclusion that as it's a company and the payments of PPI were claimed against CT, then the refund is taxable.

I know if it was an individual the refund is not taxable.

However my client has just rung HMRC CT in Norfolk and they have told him it's not taxable, even though it's through a company.

Does anyone have any links or references I can use to confirm which is correct?

Thanks

Pip 

Replies (7)

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By George Attazder
28th Dec 2012 13:22

Companies can't have PPI insurance

The PPI insurance would be the director's personal liability.  The receipt of compensation is the director's receipt and isn't taxable, regardless of whether he donates it to the company.

If the company had been paying the original PPI payments, then I agree that they are tax deductible for the company, but they should also have been processed through payroll as a pecuniary liability.

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By pipper01
28th Dec 2012 13:35

Sorry I should have confirmed that it was a business loan in the company name that was covered by the PPI. The refund was issued in the company name and paid into the company.

It was paid long before my time but the Director's have confirmed that the payments (interest and insurance) were all put through as a business expense.

Does that make any difference?

Thanks

Pip

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By non-sequitor
28th Dec 2012 17:43

Without being able to point to specific guidance, I'd say that if tax relief was claimed on the original payments, then a return of the premiums (and any additional interest) would be subject to CT in this case.

The problem with asking for guidance from HMRC is that if you call 3 times, you'll usually get 3 different answers. If you wanted to cover yourself in not including it, it may be worth confirming this directly with the CT office again, and ask for a call reference/name, and see if they'll put it in writing.

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By George Attazder
29th Dec 2012 13:52

Agreed

The reason for the compensation is that the PPI has been missold.  Companies can't have PPI insurance.  Either the original payments shouldn't have been deductible, or the compensation receipt is taxable.

The reason that it isn't taxable is that the premiums should never have been deductible; they're a personal expense of the proprietor, rather than an expense of the business.

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By Novakova
29th Dec 2012 21:38

Misselling epidemics?

Companies cannot eat wear clothes etc. etc., are company purchases foodstuffs, clothing and many other things cases of misselling?

 

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By pipper01
29th Dec 2012 22:24

Thanks

OK as the payments were originally included against tax, I think the receipt should be but if someone at HMRC is willing to advise otherwise and give their name and rank - I'll take that. I'll call them Monday.

Thanks for all your help.

Pip

 

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By Novakova
31st Dec 2012 19:25

Keyman insurance

For HMRC approach, see:-

http://www.hmrc.gov.uk/manuals/bimmanual/bim45525.htm

 

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