Guidance

Payment Protection Insurance: Additional Fully Reportable Countries (PPIAFRC) Return 2015 to 2016

Guidance notes to a new return for the 2015 to 2016 tax year under schedule 23 to FA 2011. The return is to be completed, if they have anything to report, by those financial institutions who have to complete Bank and Building Society Interest (BBSI) Other Interest (OI) or European Union Savings Directive (EUSD) returns.

Overview

Some Financial Institutions are currently making redress payments to compensate customers who were miss-sold Payment Protection Insurance (PPI). In general, the redress paid consists of an amount of compensation and an amount of interest (hereafter PPI interest) calculated as a percentage of the compensation. The PPI interest is, in general, taxable and Financial Institutions pay over a net amount of interest withholding the appropriate amount of tax at 20%.

For those customers who live in states outside the UK the PPI interest will be taxed, or not, according to the tax laws of that other state. Even for those customers who live overseas but have tax withheld in the UK the amount of interest should be reported by the UK to the tax authorities in the other state. That currently happens for the states on the original Fully Reportable countries list. However, the UK version of the reporting requirement for the EU Savings Directive, which is called Savings Income Reporting, does not provide for PPI interest information to be reported to HM Revenue and Customs (HMRC) for onward transmission to EU partners. Despite this, the UK still has treaty obligations to provide details of PPI interest paid to residents of other states on the Prescribed Territories list to those states.

What HMRC now requires

HMRC will collect the required information under schedule 23 to FA 2011, under which they currently collect similar Bank and Building Society Interest (BBSI) and Other Interest (OI) information. Schedule 23 allows HMRC to set out what information it requires Financial Institutions to provide and exactly what format that information must be provided in. HMRC will, in order to make things straightforward, require the information using the current Savings Income Reporting format and arrangements. This will allow HMRC to most easily get the information, convert it into the EU inter-state reporting format and transmit it to the other EU Member States with the rest of its Savings Income Reporting information.

There are some differences between the Savings Income Reporting structure and the schedule 23 one and these are explained and dealt with below.

The name of the return (PPIAFRC) has been agreed between HMRC and the BBA as the trade association for the largest group of PPI redress payers.

Although HMRC guidance is to treat your PPIAFRC return data exactly as if it was Savings Income Reporting data, they are not exactly the same thing. Legally, however, the only difference will be that if you do not have a piece of information, like a town of birth, you will not legally be able to require the customer to provide it, just so you can report it to HMRC. This is because when reporting under schedule 23 you cannot be required to provide data you don’t actually have. In addition, schedule 23 does not give you the power to go and get it from you customer either.

Schedule 23 does allow HMRC to lay down the exact format your return must be in. In order that making your return is as straightforward as they can make it, HMRC has decided to require PPIAFRC returns in the current Savings Income Reporting format.

If you don’t have a piece of information just complete your return in the Savings Income Reporting format that shows you don’t have it. Pad with spaces, put in 0, whatever the Savings Income Reporting format tells you to do.

When completing your return there is no legal problem with marking your PPIAFRC return as yes in the column for SI 03/3297. Putting a tick, a ‘yes’ or a ‘1’ in that place on the return just means that that part of the return has been completed in the Savings Income Reporting format.

What to report

HMRC uses the term ‘report’ ” in the sense of what interest payments to include in your PPIAFRC return. You must report the interest included in PPI redress payments that you make to residents of any state on the list of Additional Fully Reportable Countries. This list has been created so that it includes all states that you would normally report under Savings Income Reporting.

When to report

You must report, each year, the PPI redress interest payments made during the UK tax year. The notice to make a report will normally be issued with the usual BBSI, OI and SIR notices in February. For the first year the period starts on 6th April 2015 and ends on 5th April 2016. The notice to make a return will be issued towards the end of February 2016 and the return must be with HMRC with the other returns mentioned above by the end of June 2016.

How to report

You should report payments that you need to put on your return exactly as if they were Savings Income Reporting payments. If the Savings Income Reporting guidance says you must report every participant then report every participant, and not just the first 2 that you would for some other schedule 23 returns.

If you are in doubt, do what you would do if the payments were reportable under Savings Income Reporting and report in the Savings Income Reporting format. Guidance notes are available for Reporting Savings Income.

New return reference numbers

You can produce a separate return for your PPIAFRC return or you can combine your PPIAFRC return with any of your other interest returns, BBSI, OI or Savings Income. If you want a separate return sub number you should contact HMRC at the address or telephone number below.

HM Revenue and Customs
Centre for National Information
Ground Floor
Ty Glas Road
Llanishen
Cardiff
CF14 5ZG

Email: tpi.c@hmrc.gov.uk

Telephone: 0300 058 2413

Particular cases

Partnership and joint accounts

It may be that some of your customers had a joint account that was miss-sold PPI. You should report those accounts according to the residence of the people you pay the PPI redress to. Those resident in the UK and the existing Fully Reportable countries should go on your BBSI or OI return depending on which you would normally report them. You must report those resident in the Additional Fully Reportable Countries as part of your PPIAFRC return. This may lead to different forms of reporting depending on the residence of the redress recipients. This is no different to the current situation where joint account holders are not resident in the same country and different reports are needed.

Forms R85 and R105

A financial institution may hold either R85 or R105 forms for particular accounts or in relation to particular customers. In general, the data on these forms is coded into the financial institution’s systems so that interest is paid gross or, where appropriate, the ultimate beneficial owner of the interest is reported to HMRC instead of any trustee or other intermediary. In this PPIAFRC return neither type of form should have its data reported. This is because, although the PPIAFRC return is made under schedule 23, like BBSI and OI, the format to be used for the PPIAFRC return is that of the European Union Savings Directive return which does not use R85 or R105 data.

Further information

Revenue and Customs Brief 33/2014 provides further information about reporting payment protection insurance interest payments to HMRC.

Published 30 October 2015