Repayment of loan interest from a Bank

Repayment of loan interest from a Bank

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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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By jndavs
02nd Apr 2014 11:19

Interest

The bank mistakenly overcharged interest and now they have refunded it.

Why would HMRC persue this?

 

Thanks (0)
Replying to Deena Charles:
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By JCTS
30th Jun 2014 11:20

bank mistakenly overcharged interest

jndavs wrote:

The bank mistakenly overcharged interest and now they have refunded it.

Why would HMRC persue this?

 

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!!!!

 

 

Thanks (0)
Replying to Deena Charles:
avatar
By JCTS
08th Sep 2014 12:19

bank mistakenly overcharged interest

Not best advice to client?

 

Thanks (0)
avatar
By JCTS
30th Jun 2014 10:22

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!!!!

 

 

Thanks (0)