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Paying Tax on Contractual Interest Victories


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I recently claimed successfully for a refund of charges against MBNA together with a refund of interest paid on the charges together with contractual interest at 22.9% (over £800). In theory should we be paying tax on the contractual interest element as this is effectively interest received (i.e. we should be reporting this to the tax man). I have a few claims on the go so the sums involved could be large and I wouldnt put it past the banks to report the claims to the inland revenue !

All comments are my personal views - if in doubt then seek professional advice. If you think i've helped then please tip my scales.

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You might be able to argue that if, despite the contractual interest, you remained in debt for most of the period in question, then you didn't "earn" that interest, since you were paying it on the debt.

You won't need to declare it until at least 11 months time, so for now I'd let it lie. See what happens, don't worry prematurely!

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Two things:

 

one - you're reclaiming charges (and interest paid thereon) which you have paid out of after-tax income - i.e., money you've already paid tax on. All you're doing is getting your own, already-taxed money back.

 

two - court awards are not, generally, taxable anyway. They are not generated as part of your trade, profession or vocation.

 

three - I've checked my tax return (and the guide) and it doesn't mention anything about court awards and civil damages at all.

 

So don't worry about it.

 

Having said that, if you're a business and have put down bank charges as a business expense, then the situation may be different.

 

But having said THAT, most payments are 'goodwill payments', are they not? They aren't, technically, repayments of charges - but they still aren't income from trade, profession or vocation. But the business aspect is something I wouldn't claim to be anything approaching an expert on.

 

Westy

Westy

 

 

 

If you like my post, click the scales!!

 

Nov 1 2006 Preliminary letter

21 Feb 2007 - cheque arrived for charges+DEBIT interest +Statutory Interest! Hurray!

Read all about it: natwesttookmymoney - v- NatWest

DONATE AS MUCH AS YOU CAN TO KEEP THE SITE GOING.

 

What can you claim? Vampiress has a good idea:

http://www.consumeractiongroup.co.uk/forum/general/69877-what-can-you-claim.html

Anything I say is just a suggestion. I'm a bigmouth, not a lawyer!

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Two things:

 

one - you're reclaiming charges (and interest paid thereon) which you have paid out of after-tax income - i.e., money you've already paid tax on. All you're doing is getting your own, already-taxed money back.

 

two - court awards are not, generally, taxable anyway. They are not generated as part of your trade, profession or vocation.

 

three - I've checked my tax return (and the guide) and it doesn't mention anything about court awards and civil damages at all.

 

So don't worry about it.

 

Having said that, if you're a business and have put down bank charges as a business expense, then the situation may be different.

 

But having said THAT, most payments are 'goodwill payments', are they not? They aren't, technically, repayments of charges - but they still aren't income from trade, profession or vocation. But the business aspect is something I wouldn't claim to be anything approaching an expert on.

 

Westy

Thanks for this but i'm talking about contractual interest - i.e. my claim was for;

1. the charges

2. a refund of the interest paid on the charges

3. contractual interest - i.e. I'm charging them interest for using my money.

my point is that regarding 3 above as its interest received you should probably be reporting this in your tax return as interest received ?

 

Cheers

All comments are my personal views - if in doubt then seek professional advice. If you think i've helped then please tip my scales.

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Ys, point 2 from Westy gives me a lot of comfort, thanks guys.

All comments are my personal views - if in doubt then seek professional advice. If you think i've helped then please tip my scales.

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Hi, Stornoway

 

"Thanks for this but i'm talking about contractual interest - i.e. my claim was for;

1. the charges Fine

2. a refund of the interest paid on the charges Also fine

3. contractual interest - i.e. I'm charging them interest for using my money. Errrmmmmmm.......Not sure, but my feeling is that this is pushing it a bit. 1+2 and statutory interest is fine, in my book; charges plus their interest rate plus their interest rate again looks like double-charging and I would be surprised if you got it if you went all the way to court. Have a look at the 'contractual interest' thread, where the arguments are very thoroughly thrashed out. Personally, I feel the best route is charges plus 'unauthorised' interest rate - it's one amount, easier to argue and, if I was starting over at this time, that's the route I would go.

my point is that regarding 3 above as its interest received you should probably be reporting this in your tax return as interest received ?

But don't worry about the tax!!!!

 

Westy

Westy

 

 

 

If you like my post, click the scales!!

 

Nov 1 2006 Preliminary letter

21 Feb 2007 - cheque arrived for charges+DEBIT interest +Statutory Interest! Hurray!

Read all about it: natwesttookmymoney - v- NatWest

DONATE AS MUCH AS YOU CAN TO KEEP THE SITE GOING.

 

What can you claim? Vampiress has a good idea:

http://www.consumeractiongroup.co.uk/forum/general/69877-what-can-you-claim.html

Anything I say is just a suggestion. I'm a bigmouth, not a lawyer!

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