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Tax on UK interest.Loan miss selling interest


Jazzer
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I have been lucky to receive a payment in respect of a miss selling of insurance on a car loan. The company have paid the sum of £706 basic tax on the settlement figure. I normally receive interest gross on the little interest I get from my UK accounts. How do I fare with my French tax return? Is there a way of claiming it back, or does it come under double taxation?
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[quote user="Jazzer"]I have been lucky to receive a payment in respect of a miss selling of insurance on a car loan. The company have paid the sum of £706 basic tax on the settlement figure. I normally receive interest gross on the little interest I get from my UK accounts. How do I fare with my French tax return? Is there a way of claiming it back, or does it come under double taxation?[/quote]

If I understand correctly, you purchased a car in the UK by way of a loan from a credit broker. Attached to this loan there was a PPI policy with respect  to its' repayment guarantee. Subsequently under the FCA guidance procedure you filed a claim of 'mis-selling' of the loan protection insurance. This claim was successful and you received a settlement from the insurance company.

What now appears to be clouding the issue is where you state "The company have paid the sum of £706 basic tax on the settlement figure'. As basic tax in the UK is levied at 10% are you implying your settlement was for £7600 and the company withheld £760 tax from that settlement or are you saying the settlement was for £760 which was subjected to a withholding of 10% tax?

Which ever figure the settlement was for it will not be that significant but how you structure your claim will be. I assume you incurred costs in the servicing of the loan in the form of repayments for the insurance. If this is the case those costs will not be classed as income so would need to be deducted from the settlement amount and not declared. The remaining figure should be declared as unearned income to the French tax authorities.

As to the reclaim of the tax deducted in the UK, HMRC form DT-Individual has a section under D for what I would initially classify (payment of interest on a loan) this type of claim if I were to be making a claim. The notes attatched below the form give an explanation.

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Thank you Cajal for your comprehensive reply. The Loan was from a Bank, and the settlement was as follows:

Refunds due £2185

Refund of interest on premiums paid at contractual rate£1869

Interest at 8% £3533

Total redress ££7588 less Basic rate tax £706

Final cash payment £6882
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Ok, I will assume that:

£2185 represents the capital outlay of repayments on the insurance.
This sum should be refunded tax free as capital expenditure by you in servicing the insurance premiums.

£1869

represents interest you will have incured by the bank incorporating the

insurance repayments rolled up with loan repayments and subject to

contracted interest charges.
This sum should be refunded tax free as capital expenditure by you in servicing of the interest on the repayments.

£3533

represents the interest at 8% per annum you would have earned on the

capital outlay you made during the term of the mis-sold insurance.

If for tax purposes you are a UK resident I would make a refund claim for all tax minus the amount payable on the interest element of the settlement.

If, however you are a French resident for tax purposes I would reclaim the whole of the tax element (£760) using HMRC form R43 sections C2.6/7 and 8.

When filing your French tax return I would include £3533 along with any other UK interest you receive under the catagory the Impots decide they are using this year for interest received.

I will add a caveat that I am in no way shape or form an accountant or financial advisor and all of the above should not be seen as advice but as how I would approach this issue if I were to find myself in your situation.

Good luck with it all. 

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