If you are due, or have already received, compensation in respect of the Government’s maladministration of Equitable Life pensions and policies you may be interested in the tax position of these payments.
1. There is no need to declare receipts to HMRC as they are not subject to Income Tax, Capital Gains Tax or Corporation Tax.
2. Payments under the scheme will not affect recipients’ eligibility for working or child tax credits.
3. For social security and social care purposes the payments will be classed as income (if linked to retirement annuities), or capital if linked to any other policies.
4. Payments to the estates of deceased policy holders will not be subject to Inheritance Tax.
Any interest received in addition to the compensation or rebated premiums will be taxable regardless of whether it has been taxed at source or not.
For a full run-down on the compensation scheme you can view FAQs at http://equitablelifepaymentscheme.independent.gov.uk/index.htm