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A hedge too far


Tax treatment of compensation for missold financial products


  • Interest rate hedging products may have missold to some businesses.
  • HMRC treat the redress payable as a taxable business receipt.
  • If the claimant company has been dissolved it will have to be restored to the Companies House Register.
  • Capital gains tax may be due if redress is received in a personal capacity.

Recent years have been marked by a succession of scandals related to missold financial products most of them in the retail consumer sector.

Although the principles dealt with in this article apply equally in many retail cases the only tax liabilities which arise relate to the interest element of the recompense.

Interest rate hedging products

In 2012 the Financial Services Authority (FSA) (now Financial Conduct Authority (FCA)) announced that it would be reviewing the sales...

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