ARTICLE · 08 AUGUST 2013

Weekly Tax Update - Monday 5 August 2013

Smith & Williamson

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We are seeing payments coming through for those policy holders who had pensions and annuities with Equitable Life who are receiving compensation for poor performance.

United KingdomTax

Smith & Williamson

1 PRIVATE CLIENT

1.1 Equitable Life compensation

We are seeing payments coming through for those policy holders who had pensions and annuities with Equitable Life who are receiving compensation for poor performance. The loss is calculated and then interest added and then the whole payment is subject to an adjustment leaving the client with 22.4% of the total as calculated.

The question arises whether the interest element is taxable. Interest would be taxable under normal principles, but in this case the Taxation of Equitable Life (Payments) Order 2011 clearly states that "An authorised payment shall be disregarded for the purposes of the Income Tax Acts" and this seems to cover the whole amount.

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