Is a Financial Ombudsman award taxable?

[Qwerty911]

I have just learned that after 2 years I have won my case against the finance company for a van that I bought new, but had engine problems, tried to reject, gave up and traded the van against a new one (I needed something reliable) but kept my case going with Financial Ombudsman. Two years later, 3 since buying the original van, I have been awarded compensation plus interest. I bought the van as a sole trader. Will I be taxed on this compensation?

[22]

I paid tax on the interest element many moons ago, but claim was against a bank (also happened to be my ex-employer). HMRC will help.

[Qwerty911]

Thanks 22

[Eric Mc]

What was the nature of the claim?

[Heathwood]

There should be details of any tax liability when you receive your offer from the relevant firm.

They should be paying the interest element net of basic rate tax and you would be liable for any additional tax if you are a higher rate tax payer. Conversely, you should be able to claim this back from HMRC if you’re a non tax payer.

[Eric Mc]

If the award was because of deemed excessive interest or finance charges levied by the finance company, an element of the reward will be a refund of those excessive charges. An element may also be "compensation" for upset and annoyance.

If the excess charges were originally claimed as business costs when paid by the business, that element of the award would be taxable.

Compensation is generally not taxable.