It has been revealed that the Tesco investor compensation scheme will launch in August.

The supermarket giant had previously agreed to set up a £85 million compensation scheme for around 10,000 investors impacted by its accounting fraud and market abuse in 2014.

KPMG, the administrators of the compensation scheme, has announced that brokers with a large number of clients who are potential claimants will be able to help them make a claim.

The firm says this route is preferable as it requires less effort for claimants and will allow any payment due to be made faster.

[Read more: This week's expert share tips − should you buy, sell or hold?]

KPMG says it is working with brokers representing over 50% of anticipated claimants, so the majority will be able to make a claim in this way.

However, investors with brokers with fewer than 100 eligible clients will not be able to get this assistance nor those that traded Tesco shares or bonds via multiple brokers.

Tesco profits scandal

Tesco agreed to pay a £129 million fine plus £85 million in compensation to investors in March after it was found to have overstated profits in 2014.

Tesco plc published a trading update on August 29, 2014, which stated that it expected trading profit for the six months ending August 23, 2014 to be in the region of £1.1 billion.

But on September 22, 2014, Tesco plc published a further trading update in which it announced that it had overstated its expected profit by £250 million, mainly because it booked commercial deals with suppliers too early.

The FCA says Tesco knew, or could reasonably have been expected to know, that the information in the August 29, 2014 announcement was false or misleading.

As a result of the mis-leading information within the announcement, the market price for Tesco shares and bonds were inflated, which continued until Tesco issued the corrective statement on September 22, 2014.

So those that bought shares or bonds between these dates paid a higher price than they would have if they were given the right information at the time.

"We sincerely regret the issues which occurred in 2014 and we are committed to doing everything we can to continue to restore trust in our business and brand," said Dave Lewis, Tesco chief executive.

What investors will get

Tesco has agreed with the FCA to pay compensation to investors who purchased Tesco shares and bonds when the market abuse occurred.

The group will establish a compensation scheme for investors who bought shares or bonds on August 29, 2014 up to September 19, 2014 (inclusive). Details of eligible bonds can be found here.

To claim you will need to be a ‘net purchaser’ so you must have purchased more than you sold by the time the statement was corrected on September 22, 2014.

The compensation will pay 24.5p per share plus 1.25% interest for institutional investors and 4% interest for retail investors. Interest will be paid from September 19, 2014 up to 120 days after the compensation scheme commences. This interest is taxable although it will be tax-free if your shares were held in an Isa or Sipp.

Those purchasers who sold all their shares or bonds before September 22, 2014 will not be eligible for compensation as they would not have suffered any loss as a result of the market abuse.

The FCA estimates there are 10,000 eligible retail and institutional investors who between them purchased approximately 320 million shares during the period and who may be eligible for compensation under the scheme.

Hargreaves Lansdown expects compensation for its retail investors to average £400.

[Read more: Tesco delivery meltdown: how to claim compensation]

How to make a claim

The Tesco investor compensation scheme will launch by August 2017 and it will be administered by KPMG.

Investors can make a claim directly (unless the claim relates to transactions held in SIPP) or through their broker.

If making a claim directly these are the steps you will need to go through:

  1. Investors need to supply their personal details and evidence of Tesco share transactions to the administrators KPMG when the scheme opens in August (date to be confirmed);
  2. They then receive log in details for a claims website from KPMG;
  3. Investors upload evidence of their identity for anti-money laundering purposes onto the claims website;
  4. Then download the discharge form from the claims website, sign and then upload onto the claims website;
  5. The compensation claim will be processed and then paid in 35 days.

You should check whether your broker offers help with the claims process. You will still receive the same amount of compensation, but it will be much simpler.

This process will avoid you having to submit all your details and evidence of your Tesco share transactions directly to KPMG (in step one) and the compensation is paid directly to your account (step five).

This will be quicker and easier than if you make the claim direct with KPMG. There is no charge for this service and investors will receive exactly the same amount of compensation whichever route they take.

However, if you would like to use the broker facilitated service you will need to supply authorisation to brokers to apply on your behalf pretty soon.

Hargreaves Lansdown for example says the deadline for its clients is by noon on Thursday July 13, 2017.

If your broker is helping you, your compensation will be paid as cash into the account in which you held the shares or bonds. You can then decide how to invest this money.

Compensation for shares held within an Isa won’t be paid directly back into the Isa. However, the compensation can be paid in without the amount counting toward your annual Isa allowance.

For Sipp investments, claims will have to be made by the pension trustees. Compensation will be paid directly back into the Sipp and will not be treated as a contribution.

This means the payment will not benefit from tax relief but also not count towards normal annual allowance entitlements.

When the scheme opens, you or your broker will only have six months to submit a claim.