This is going to be a bit of an obvious one but hey ho - just in case there is something out there that i'm not aware of!! Ok so I have a client - small company - with a commercial mortgage on a commercial property. The Bank - surprise surprise - have made a total mess of the interest charged on the loan to the extent that a refund of £64,754 has just been paid to my clients. In addition to this, the bank has paid out £16,133 in interest arising from the overpayments. The £64k has been claimed over the last 7 years through the accounts. So
Interest received figure - £16k - to be declared in the year received I guess?
Repayment of interest previously claimed - £64k - I guess this has to be declared to HMRC - in the year received or do I have to adjust the relevant historic accounts?
None of the above is my clients fault - however will HMRC levy interest and penalties as a result of the underpayment of tax for the last 7 years?
all comments welcome
Replies (4)
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Interest
The bank mistakenly overcharged interest and now they have refunded it.
Why would HMRC persue this?
bank mistakenly overcharged interest
Hi nmfs and jndasThe bank mistakenly overcharged interest and now they have refunded it.
Why would HMRC persue this?
What have you done about this , it is similar to my ? see below . DO I HAVE to declare this? and add it to my clients business income ?
I AM CONFUSED < CAN I IGNORE FOR TAX AND ACCOUNTS OR ARE THERE TAX IMPLICATIONs
PLEASE HELP!
Thanks
see my ? posted 25.06.14 Quoted below
"tax treatment of Ombudsman decision on Business Loan
Clients are BR taxpayers they run a B&B, so mortgaged to buy building in Sept 2005
1.Sept 2005 mortgage with Lloyds on a variable rate
2.In 2007 after a discussion with the bank manager they changed the mortgage to a fixed rate ,but in doing so extended the mortgage by 5 years in error
3.After another couple of years found the mistake and asked the bank to put it right.
4.They refused and so went to the ombudsman.
5.In 2013 the ombudsman upheld the complaint against the bank.
6.The ombudsman asked the bank to put me back to where they would have been had the error not happened.
7.After the bank had done the sums they found client had paid £84,920 too much in interest
.
, they received overcharged interest repaid to their Business loan account, only overcharged interest , no compensation or interest on this overcharge
I was hoping to be able to split over last 4 years, to avoid the 40% band, as if all in one year, it will take them to next band , and they certainly wont be in position they would have been see
""The ombudsman asked the bank to put me back to where I would have been had the error not happened."
and reply from
BKD
What you haven't actually said ... 1 thanks
BKD PM | Thu, 26/06/2014 - 14:39 | Permalink
... is what happened to the overpaid interest. Have your client's received a refund? If so, I would simply treat it as a taxable receipt when received. There is no need to revise earlier accounts/returns because the deduction was correctly claimed on the basis of interest actually paid. The fact that the bank screwed up, overcharged that interest and are now compensating the taxpayer for that doesn't alter the earlier facts."
I am confused , can I ignore it , or is there tax to pay!!!!
Repayment of loan interest from a Bank
Hi nmfs and jndas
What have you done about this , it is similar to my ? see below . DO I HAVE to declare this? and add it to my clients business income ?
I AM CONFUSED < CAN I IGNORE FOR TAX AND ACCOUNTS OR ARE THERE TAX IMPLICATIONs
PLEASE HELP!
Thanks
see my ? posted 25.06.14 Quoted below
"tax treatment of Ombudsman decision on Business Loan
Clients are BR taxpayers they run a B&B, so mortgaged to buy building in Sept 2005
1.Sept 2005 mortgage with Lloyds on a variable rate
2.In 2007 after a discussion with the bank manager they changed the mortgage to a fixed rate ,but in doing so extended the mortgage by 5 years in error
3.After another couple of years found the mistake and asked the bank to put it right.
4.They refused and so went to the ombudsman.
5.In 2013 the ombudsman upheld the complaint against the bank.
6.The ombudsman asked the bank to put me back to where they would have been had the error not happened.
7.After the bank had done the sums they found client had paid £84,920 too much in interest
.
, they received overcharged interest repaid to their Business loan account, only overcharged interest , no compensation or interest on this overcharge
I was hoping to be able to split over last 4 years, to avoid the 40% band, as if all in one year, it will take them to next band , and they certainly wont be in position they would have been see
""The ombudsman asked the bank to put me back to where I would have been had the error not happened."
and reply from
BKD
What you haven't actually said ... 1 thanks
BKD PM | Thu, 26/06/2014 - 14:39 | Permalink
... is what happened to the overpaid interest. Have your client's received a refund? If so, I would simply treat it as a taxable receipt when received. There is no need to revise earlier accounts/returns because the deduction was correctly claimed on the basis of interest actually paid. The fact that the bank screwed up, overcharged that interest and are now compensating the taxpayer for that doesn't alter the earlier facts."
I am confused , can I ignore it , or is there tax to pay!!!!