Redress Payments
Newsletter issue - September 2014
Was your business mis-sold an interest rate hedging product (IRHP) by its bank? The Financial Conduct Authority (FCA) has required the banks concerned to make redress payments to the wronged businesses, and some of those payments are coming through now.
If you receive an IRHP redress payment it will be made up of:
- consequential losses and basic redress; and
- interest is paid at 8%.
The bank may deduct tax at 20% from the interest element, where it is paid to an unincorporated business. Look out for such tax deductions declared in the documentation supplied by the bank. The interest and any tax deducted needs to be shown on the business tax return. However, if you trade as a company the interest should be shown as loan relationship income not as trading income.
If the original IRHP payments were treated as trading deductions for your business, the redress payment should be included as trading income in your accounts. It should be included in the accounts for the period in which it is received. If the redress is paid by instalments, each instalment should be included in the business accounts for the period in which it is received.
If the original IRHP payments were not treated as taxable deductions (perhaps because the product was treated as a hedging asset in your company accounts) the redress payment may be treated as a capital receipt. We can advise you on the correct accounting and tax treatment.
BLOG POSTS
Posted on Mon, 3 Aug 2015
Posted on Mon, 3 Aug 2015
Posted on Wed, 29 Jul 2015
TWITTER
Tweets by @OWSupportLATEST TAX TIPS AND NEWS
It has been revealed that companies across the UK have paid £95.2 billion in Business taxes in the financial year just finished (23/24) - a rise...
Baroness Ros Altmann, a leading campaigner on pensions, has highlighted her fears after figures showing that the number of pensioners liable for tax...
Business owners need to be aware of a batch of new laws that have just taken effect covering employees' rights....
The saga over whether HMRC will axe its tax helpline continues to rumble on, with the latest comments suggesting it may still close after all....
Q: I've started a new job quite recently with a hybrid working arrangement. I work from home 3 or 4 days per week,...
5th Companies House fees are increasing due to the recent introduction of the ECCTA....