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Hello, Thank you, XXXXX XXXXX continue to look for a professional to assist you. Please let me know if I can be of any further assistance while you wait. Best,
Thanks for your patience as i was away.And also thanks for the clarification. The tax treatment of compensation for mis-sold pension schemes is complex and generally require a tax expert to review the compensation documents. However in most cases, compensation like yours where the the payment seek to put you in the position that you would be in if the adviser hadn’t made the error, tend to be free from income nor capital gains tax.
A typical case is Zim Properties Ltd v Proctor STC 90,
where the conclusion states that compensation will not be subject to income tax or capital gains tax if it related to bad investment advice given. However to get a complete tax picture one needs to review the documentation surrounding the compensation. It could have been made easier if the party making the payment had paid directly to your pension scheme in which case there would no tax on your part- in fact such payments are treated as a contribution by the member for which one might be entitled to claim tax relief. However i understand since April 2006 it is now difficult for payments of compensation to be made directly into pension policies, hence the reasons to pay directly to you.
Therefore in conclusion, our understanding is that compensation paid in this way would not usually be subject to income tax nor capital gains tax.
However should this be taxable you may consider contributing the sum or part of it to your personal pension, hence making a tax deduction.
Since the amount you are talking about is circa £70k i would suggest getting a local tax advise specialised in this area to review the compensation documentation and make a final assessment. You can easily get someone to do this sort of thing on sites like HERE and HERE for £200 or so but its worthwhile given the tax savings you can make. Posting your question on these sites is free and also remember to say that you are looking for someone with this specialty.Hope this helps.