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Posted Fri, 19 Jan 2024 10:27:09 GMT by
I received am 'Inconvenience Payment' from my bank as a result of raising numerous complaints. I am unsure whether this form of compensation is taxable or not, and would need your guidance on this. The Bank was leaving the UK banking market and decided to close all accounts (fixed rate bonds) early. I felt this was handled badly, not clear/compliant and potentially leaving most customers in a situation that was not in their best interest. For example: - They used opt-out clauses, so if one does nothing, the customer is seen agreeing to the closure. - I opted out to keep the account open, but still they closed the account anyway. - They did not provide a balanced picture regarding the consequences of opting out, making it impossible to take informed decisions. I also suggested they should pay the outstanding interest to all customer at early closure. The bank however was adamant that that is not contractually the case (which I accept). Hence the compensation payment received is NOT interest. Finally the bank responded: [..] the Bank will pay you (i) The [..] inconvenience payment of £xxx [..] and (ii) A further amount of £xxx by way of a further inconvenience payment to reflect your strength of feeling over this matter. Could you please let me know your position. If it is taxable, would you please instruct me clearly where exactly it needs be entered into the online tax form? Thank you.
Posted Mon, 22 Jan 2024 15:32:09 GMT by HMRC Admin 5

The descriptions of 'wrong or injury', 'in his person' and 'in his profession or vocatation', can be found at CG13030.  
You will need to consider these descriptions, when determining whether the compensation you received is taxable or not, under the capital gains legistaltion at Section 51(2) TCGA 1992.  Please see CG13030 - Compensation: personal compensation or damages.  
If capital gains tax is payable, you have your annual exempt allowance to set against it, if not utilised against other gains.

Thank you

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