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Tax position on bank compensation paid for mis-selling of hedge/swap products.
One of our clients has been approached by a firm that previously advised them in connection with a VAT matter. Our client a UK resident limited liability partnership (LLP) carries on a trade here and took out hedging products. The costs of these were charged through the profit and loss account so that tax relief was obtained.
A substantial redress payment plus interest was received from the bank. We included the redress element in the partnership accounts as a trading receipt. The other firm says that many businesses have ‘mistakenly believed the redress payments should be declared for taxation purposes’ and are offering to make a claim on behalf of our client for repayment on a contingent fee basis.
Do readers consider that there is any possibility that the redress compensation is free of tax as suggested in these circumstances?
A further point is that it is too...
