Tax overpayment on a loan payout

I received a letter from bank to say they weren't entitled to charge interest from time of an error

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I'd taken out a Barclays Career Development Loan in 2008; falling behind with repayments during 2010, the loan was then paid off a few years later 2013.

In 2019, I received a letter from Barclays Bank to say “There were some changes to the Consumer Credit Act (CCA), which meant that we sent you either incorrect information or did not send information we should have. We are not entitled to charge interest from the time of the error until we corrected it.” Therefore, I received a refund of £1,953.36, early part of 2020.

Recently, reading an article online (Debt Camel and Martin Lewis MSE) I learned, with PPI and similar payouts, banks often automatically pay tax on the customers behalf. Even when not paying tax if they're under the threshold.

I contacted Barclays Bank and HMRC, I was told by Barclays that on this type of loan, tax would've been paid on my behalf at 20%. HMRC have then outlined the information I would need to give them in order for the amount to be repaid to me. Such as reason that I consider I have overpaid tax.

My question; will this simply be a case of working out 20% of £1,953.36 due back to me, or is there more to it than that?

The articles (Debt Camel and Martin Lewis MSE) talk about a statutory interest element of 8% added to such loans/payouts. People though, are allowed to earn some interest without having to pay tax. So, might, that be how I work out what I might be due back? i.e."from the time of the error, when they were not entitled to charge interest until they corrected it."

I wasn't earning above the threshold (of around £12,500) Year 2019-20. I understand this isn't PPI, but perhaps a similar course of action for reclaiming the overpaid tax.

I'd really appreciate some advice on this.
 

Replies (13)

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By K81
12th Feb 2024 13:27

you need the paperwork from the bank with the figures on - the amount that you received would be the net amount after tax. HMRC will want to see this.

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Replying to K81:
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By CW15
12th Feb 2024 16:21

Thanks so much, a really clear way to understand something I could not!

I have some paperwork but only shows individual payments I made at the time. Perhaps I’ll have to try and work out the difference between that and repayment. I contact the bank again to see if they’d have anything.

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Replying to CW15:
By K81
12th Feb 2024 16:31

see reply below - it may not have been taxed interest.

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By paul.benny
12th Feb 2024 13:37

+1

From what you've written, it sounds like the amount you have been refunded is interest that you were charged incorrectly. If that's the case, there is nothing to from which to deduct tax.

But they might have added statutory interest, in which case you should be able to recover tax paid. It won't be 20% because some is your original incorrect interest (non-taxable). And the way the maths works, the tax is 25% of the net

If they haven't, added statutory interest, I would say you have ground for a formal complaint.

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Replying to paul.benny:
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By CW15
12th Feb 2024 16:28

I’ll contact them again to see if they have any other documentation about the account from the time.

Many thanks for your reply

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By Ruddles
12th Feb 2024 16:06

+2

Only some, if any, of the payment will represent interest from which tax may or may not have been deducted. Paperwork is crucial.

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Replying to Ruddles:
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By CW15
12th Feb 2024 16:31

Thanks for your reply! I’ll see if I can get anymore paperwork.

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By DKB-Sheffield
12th Feb 2024 16:23

+3

And to add... on those figures, you may find the tax reclaim (20% of 8% of £X) is hardly worth the bother! I appreciate money is money but, you're possibly talking peanuts, and some hassle sorting a repayment out!

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Replying to DKB-Sheffield:
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By CW15
12th Feb 2024 16:56

I fear that, I was hoping a repayment (before 20% of 8%) was going to be in the hundreds. Many thanks

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Replying to CW15:
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By paul.benny
12th Feb 2024 17:29

Actually, it's 8% annually (not compounded), so we're looking at roughly 100% over the time period involved. So there might be £200-ish involved.

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Replying to paul.benny:
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By DKB-Sheffield
12th Feb 2024 18:00

That's roughly the figure I've got to (I misread the start date). Still... whilst it's £200... it also relates to a 2019/20 so, OPR claim before April, with supporting evidence etc...

It may, or may not, be worth the £200. The last OPR claim I submitted for a client took 9 months to process (all in)!

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Replying to DKB-Sheffield:
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By CW15
12th Feb 2024 18:46

HMRC, so far, had asked me to come up with a figure, the error was over around 3 and a half year period.

They haven’t yet asked for supporting evidence, yeah perhaps I’d be lucky to get that before April.

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Replying to paul.benny:
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By CW15
12th Feb 2024 18:30

It was over around a 3 and half year period. I appreciate the advice

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