Scottish Widows made a mistake which caused a bond holder to incur an additional tax liability and be investigated by HM Revenue and Customs (HMRC).
A man, referred to as Mr K, had invested in an investment portfolio bond with Scottish Widows.
In February 2013 Mr K encashed the majority of this Scottish Widows bond so the provider sent him and HM Revenue & Customs a certificate which set out the chargeable gain resulting from his withdrawal.
But the figure included was miscalculated and significantly more than the actual chargeable gain.
Mr K said he didn’t receive this letter, so didn’t declare any chargeable gain for this bond to HMRC – and that as a result of this discrepancy the tax office launched an investigation into him.
Mr K paid a greater amount of tax than he would’ve needed to had the correct chargeable gain been declared, plus interest on this for late payment.
He also incurred accountant fees in relation to the matter.
Mr K fully surrendered the bond in 2016 and was able to mitigate his losses by claiming deficiency relief but felt Scottish Widows should cough up compensation.
Scottish Widows accepted it had calculated the chargeable gain incorrectly and paid Mr K £2,282.80 for the financial loss attributed to the additional income tax he paid.
It also paid him £750 compensation for the upset and frustration caused.
But Scottish Widows argued it should not have to pay for the interest he incurred for late payment or his accountant’s fees because it issued Mr K with a chargeable event certificate which would’ve informed him of what he needed to declare to HMRC.
A Financial Ombudsman Service investigator agreed with Scottish Widows and thought Mr K ought to have known that there was a chargeable gain to declare and that the provider had done enough to put matters right in relation to its miscalculation.
But Mr K didn’t agree and demanded an ombudsman review the case.
In a final decision, ombudsman Stephanie Mitchell said Scottish Widows should pay towards the late interest plus part of Mr K’s accountant’s fees.
Scottish Widows was told to pay a further £500 for the late interest he incurred plus a small amount of compensation plus £930 towards his accountancy fees.
emma.hughes@ft.com
