TAX TREATMENT OF LATE PAYMENT COMPENSATION

TAX TREATMENT OF LATE PAYMENT COMPENSATION

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Can anyone advise whether VAT is chargeable on compensation payments due under the Late Payment of Commercial Debts (interest) Act 1998 as amended by the Late Payments of Commercial Debts Regulations 2002. (I cannot find any definitive guidelines from HMRC). On a similar theme a Solicitor has mentioned to me that compensation received may not be liable to corporation tax? Anyone any thoughts?

Many thanks

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By User deleted
20th Aug 2015 13:34

The compensation is not a consideration against a taxable supply but a payment made in compliance with a piece of legislation, so VAT should not apply. Corporation tax should apply because I can't see anything 'capital' about the receipt.

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By Manchester_man
20th Aug 2015 13:58

I agree with the above.  VAT

I agree with the above.  VAT - no, CT - yes

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By redboam
21st Aug 2015 10:19

compensation as revenue

I too agree with the above. The purpose of the compensation is simply to remedy the loss of what could itself be subject to CT.

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By jonnyd
21st Aug 2015 10:56

Many thanks for your helpful comments. Much appreciated!

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