Scenario-An IFA is required to make a compensatory payment to a client. The amount is to reflect the income lost that would have been earned from a more suitable product. Therefore it is agreed that the IFA should make a payment to their client as a compensation.
Is this disallowed in the tax comp?
Thank you for any confirmation
Replies (1)
Please login or register to join the discussion.
Probably ok
As set out in the HMRC manuals BIM42951, you need to consider whether the compensation was:
- Wholly and exclusively for trade purposes: which it probably was;
- On revenue account: which it probably was.
If the compensation is required due to an infraction of the law, then it will not be allowable.