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Post by masquedefer on Nov 17, 2017 8:04:12 GMT
That time of year again. Hmrc S. A. Form ready to be filled in.
Having read hmrc guide (see below) can I deem that Gloucester and Leather head and other loans now with lpa receiver are deemed irrecoverable for tax purposes?
I suspect lendy will not deem it so as this would be bad publicity. If so tax deferred is tax saved (so some say).
Any thoughts?
When does a P2P loan become irrecoverable?
A loan may be accepted as having become irrecoverable when there is no reasonable prospect of the recovery of the loan. When assessing recoverability, the funds available and potentially available to the borrower must be considered. A claim therefore cannot be established simply because the borrower has insufficient liquidity on the date the loan had been called in.
Whether a loan has become irrecoverable should be judged on a case by case basis, however the following common examples are relevant:
When the borrower has entered formal recovery procedures such as liquidation, administration, receivership or bankruptcy the debt would normally be considered irrecoverable.
If the debt is released by the lender it would normally be considered irrecoverable.
As the loan will be managed by a platform, the platform would usually be in a position to determine when a loan has become irrecoverable. The platform would then inform the lender that the loan had become irrecoverable.
Loans with security
Where loans are made against security, the loan would be treated as becoming irrecoverable as if the security did not exist.
If the lender or the platforms has entered into formal recovery procedures (collection, administration, receivership, seizure or liquidation of security, transfer to a recovery agent etc) the loan would normally be considered irrecoverable.
If the bad debt relief is given on an irrecoverable loan, and value is subsequently recovered from any loan security then this would be treated in the same way as any other subsequent recoveries of relieved irrecoverable loans (more detail in Unexpected recoveries).
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Post by masquedefer on Nov 17, 2017 8:35:43 GMT
Having just posted this (see above) I can see it listed in the list of friends at top of list but it does not say "new post." I wonder why?
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bloodycat
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Post by bloodycat on Nov 17, 2017 9:09:41 GMT
Having just posted this (see above) I can see it listed in the list of friends at top of list but it does not say "new post." I wonder why? Because you wrote it and have therefore presumably read it. For everyone else it will have appeared marked as a new post.
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Post by masquedefer on Nov 17, 2017 15:27:01 GMT
Thank you for the links.
I don't think it would be tax evasion to reasonably offset "irrecoverable" capital losses in a tax year where one would be paying 40% tax and then a year later include any recovered capital to be taxed at 20% in that year (due to chaging personal circumstances - e.g. looming retirement = lower income).
Any thoughts?
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Post by GSV3MIaC on Nov 17, 2017 16:48:12 GMT
/mod hat off ..
I don't believe HMRC would have a problem with that, since you'd not KNOW (for sure) that later tax year would be at a lower rate (stuff happens) and anyway it is only avoidance, not evasion (pretty clean compared to the recent Paradise leaks).
You obviously can't claim it until/unless it is (by HMRC's reasonable definition) 'irrecoverable', and you might be on dodgy ground if you delayed doing the claim 'unreasonably' in order to shuffle it into a tax year of your choosing. However, this is not tax advice ... if you want some, that'll cost a lot more (and unless the amount under discussion is huge, probably won't be worth it).
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david42
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Post by david42 on Nov 17, 2017 23:04:34 GMT
Thank you for the links. I don't think it would be tax evasion to reasonably offset "irrecoverable" capital losses in a tax year where one would be paying 40% tax and then a year later include any recovered capital to be taxed at 20% in that year (due to chaging personal circumstances - e.g. looming retirement = lower income). Any thoughts? The law allows you some discretion in deciding which loans are irrecoverable but you must be able to justify your decisions with reasons other than tax avoidance. Otherwise your reasons could be open to challenge as being a sham. If you can justify your decision in other ways and the tax saving is a fortunate consequence, that is fine.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Nov 18, 2017 1:11:17 GMT
To be honest the rules are pretty clear, if its in legal recovery it can be claimed as a loss.
There are however two problems. One Lendy says recievers/administrators have been appointed which would allow the loan to be treated as irrecoverable but no RM1 has been filed at CH to document the appointment.
Two where the SM isnt suspended when recievers are appointed any parts bought after the appointment are not eligible for loss relief as they are not irrecoverable as they have a value by virtue of sale on the SM.
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Post by masquedefer on Nov 18, 2017 16:41:11 GMT
To be honest the rules are pretty clear, if its in legal recovery it can be claimed as a loss. There are however two problems. One Lendy says recievers/administrators have been appointed which would allow the loan to be treated as irrecoverable but no RM1 has been filed at CH to document the appointment. Two where the SM isnt suspended when recievers are appointed any parts bought after the appointment are not eligible for loss relief as they are not irrecoverable as they have a value by virtue of sale on the SM.
If you can justify your decision in other ways and the tax saving is a fortunate consequence, that is fine.Thank you again for your responses (especially the two cited above): Taking account of what posters have said, opinions please on the following rational and proposed action. Givent that: - Each lending platform have their own system/rules for stating when a loan is deemed irrevocerable.
- Lendy has a maximum180 day grace period before deeming a loan to be in default.
- The Lendy default period can even be less if the borrower does not attempt to e.g. renegotiate the loan, pay ongoing interest, sell the secured assett or some other confidence building exercise).
- Lendy does not consistently call in the LPA receiver on day 181 (e.g there are cases where the borrower fobs of Lendy, by saying that refinance or a sale is iminent and all capital and interest will be paid soon - e.g Gloucester Convent and Leatherhead loans, to name a couple.
it is therefore reasonable for an individual lender (independent of the various lender platform decisions/declarations) to determine that any loan is irrecoverable after 180 days or earlier period if lending platform declare loan to be in default (even if no LPA appointment). After all 6 months grace is very generous period. On this basis for 2016/2017 tax year all loans in default on 05/04/2017 are IMHO irrecoverable . It so happens that I am 40% taxpayer in 2016/17 but with a fair wind will be a 20% taxpayer in 2017/2018 (which I could even guarantee if I made pesonal pension contributions in 17/18 equal to my earned income). I'm just worried whether HMRC use the Furness case to argue that my main objective is to reduce my tax bill My concern is that HMRC in their guide irrecoverqable loans state: Whether a loan has become irrecoverable should be judged on a case by case basis, however the
following common examples are relevant:
When the borrower has entered formal recovery procedures such as liquidation,
administration, receivership or bankruptcy the debt would normally be considered
irrecoverable.
If the debt is released by the lender it would normally be considered irrecoverable.
As the loan will be managed by a platform, the platform would usually be in a position to determine
when a loan has become irrecoverable. The platform would then inform the lender that the loan
had become irrecoverable.
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