Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

Compensation for missold interest rate hedging products

13 November 2018
Issue: 4672 / Categories: Tax cases

V Gadhavi and others (TC6762)

The taxpayers received basic redress payments from NatWest Bank in compensation for having been missold interest rate hedging products when they restructured a loan on their property letting business. HMRC treated the compensation as taxable income.

The taxpayers appealed saying the redress should be treated as capital.

The First-tier Tribunal said the objective of redress was to put the customer in the position they would have been had they not taken the product. Referring to London and Thames Haven Oil Wharves Ltd v Attwooll 43 TC 491 the judge concluded that the compensation was paid for the taxpayers’ liability to pay the amounts due under the swaps that had been missold to them.

The whole of the redress payments were revenue receipts of their property business because the swap payments had been correctly deducted from the profits of the business. They were liable to income tax as a post-cessation receipt...

If you or your firm subscribes to Taxation.co.uk, please click the login box below:

If you are not a subscriber but are a registered user or have a free trial, please enter your details in the following boxes:

Alternatively, you can register free of charge to read a limited amount of subscriber content per month.
Once you have registered, you will receive an email directing you back to read this item in full.

Please reach out to customer services at +44 (0) 330 161 1234 or 'customer.services@lexisnexis.co.uk' for further assistance.

back to top icon