Loss of Earnings

[xanadu]

Hi

Does anyone know if it is normal for an insurance company to deduct tax and national insurance from a loss of earnings claim. 

Cheers

[Didwot]

Yes, compensation is calculated upon the basis of what one has lost, and that is the net amount of any income. If one has received any state benefits these should be deducted as well and paid back to the DSS

[xanadu]

Thanks for your reply.  We're very confused because we will have to declare the award we get from the insurance company for the loss of earnings in our next self assesment return and this will be added as income which will increase our tax liability.

Cheers

[Didwot]

Now I am confused. Please can you amplify the nature of the claim that you are bringing against the insurers.

[xanadu]

Hi

Sorry for the confusion.My husband is a self employed PHC driver. His vehicle was damaged in an accident over a year ago and the third party admitted liability. He put in a claim for loss of earnings for the period our vehicle was off the road being repaired.The third party's insurer has made an offer for the loss of earnings less tax and national insurance. We are due to send our self assesment for last year 2003-2004 to the Inland Revenue which will show the loss of earnings during that period and I assume that means we will have to declare the award in the 2004-2005 self assesment as income which will contribute to the total tax liability. I just can't understand why the insurance company should also deduct tax and national insurance.

[Didwot]

Your explaination is pretty much as I assumed. Unless I am very much mistaken, your claim from the third party's insurers is not taxable, and does not need to be declared to the revenue. There is nowhere to put such details into the tax form SA103, and nothing about it in the help sheet IR222. It is not income, it is compensation for loss of income.