rogerbu
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Post by rogerbu on Apr 9, 2018 9:03:11 GMT
O wise ones - your thoughts please. My understanding from HMRC guidance. www.gov.uk/capital-gains-tax/lossesIf you sell a loan on the SM below par, you have suffered a Capital Loss, and (assuming no other gains or losses in a tax year) this loss may be carried forward to future tax years. However in general, if you sell or gift a loan to Family or connected people, you cannot claim a loss or gain. On the SM, we are selling and buying at arms length even when we sell a loan amount and (hopefully) buy a similar amount into an IFISA. So my question. Can I offset and and hence carryover an SM loan capital loss even though I may have similar opposing transactions in an IFISA which do not have to report capital gains? |
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hazellend
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Post by hazellend on Apr 9, 2018 9:06:24 GMT
O wise ones - your thoughts please. My understanding from HMRC guidance. www.gov.uk/capital-gains-tax/lossesIf you sell a loan on the SM below par, you have suffered a Capital Loss, and (assuming no other gains or losses in a tax year) this loss may be carried forward to future tax years. However in general, if you sell or gift a loan to Family or connected people, you cannot claim a loss or gain. On the SM, we are selling and buying at arms length even when we sell a loan amount and (hopefully) buy a similar amount into an IFISA. So my question. Can I offset and and hence carryover an SM loan capital loss even though I may have similar opposing transactions in an IFISA which do not have to report capital gains? I do wonder if it is worth it. You get 11.5k per year capital gains allowance. Are you really making enough gains to beat that and enough losses to make it worth offsetting?
One other point, if you "sell" to family you could claim a loss or gain, but if you gift then the cost basis transfers to them and when they sell they harvest the loss or gain. That is the way it is for shares anyway.
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blender
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Post by blender on Apr 9, 2018 10:00:04 GMT
Trading on the SM is anonymous. Best to treat it consistently as a sale to / purchase from a third party, in all cases, imo.
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rogerbu
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Post by rogerbu on Apr 9, 2018 10:59:06 GMT
O wise ones - your thoughts please. My understanding from HMRC guidance. www.gov.uk/capital-gains-tax/lossesIf you sell a loan on the SM below par, you have suffered a Capital Loss, and (assuming no other gains or losses in a tax year) this loss may be carried forward to future tax years. However in general, if you sell or gift a loan to Family or connected people, you cannot claim a loss or gain. On the SM, we are selling and buying at arms length even when we sell a loan amount and (hopefully) buy a similar amount into an IFISA. So my question. Can I offset and and hence carryover an SM loan capital loss even though I may have similar opposing transactions in an IFISA which do not have to report capital gains? I do wonder if it is worth it. You get 11.5k per year capital gains allowance. Are you really making enough gains to beat that and enough losses to make it worth offsetting?
One other point, if you "sell" to family you could claim a loss or gain, but if you gift then the cost basis transfers to them and when they sell they harvest the loss or gain. That is the way it is for shares anyway.
Is it worth it? From an Ablrate perspective, probably not. However we have an inherited property that will need to be sold in the next few tax years. We have owned 33% of it for 20 years, so there is considerable Capital Gains in the property. Any losses in previous year that are built up can be set off against the eventual property sale. So yes for me. Sorry, but I am not sure that your second point is quite correct. Selling is treated the same as gifting to family.From www.gov.uk/capital-gains-tax/losses - 'Losses when disposing of assets to family and others
- Your husband, wife or civil partner
- You usually don’t pay Capital Gains Tax on assets you give or sell to your spouse or civil partner. You can’t claim losses against these assets.
Other family members and ‘connected people’
- You can’t deduct a loss from giving, selling or disposing of an asset to a family member unless you’re offsetting a gain from the same person.
This also applies to ‘connected people’ like business partners.'I assume that this applies to all capital, P2P, Shares, Property etc.
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hazellend
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Post by hazellend on Apr 9, 2018 11:08:11 GMT
I do wonder if it is worth it. You get 11.5k per year capital gains allowance. Are you really making enough gains to beat that and enough losses to make it worth offsetting?
One other point, if you "sell" to family you could claim a loss or gain, but if you gift then the cost basis transfers to them and when they sell they harvest the loss or gain. That is the way it is for shares anyway.
Is it worth it? From an Ablrate perspective, probably not. However we have an inherited property that will need to be sold in the next few tax years. We have owned 33% of it for 20 years, so there is considerable Capital Gains in the property. Any losses in previous year that are built up can be set off against the eventual property sale. So yes for me. Sorry, but I am not sure that your second point is quite correct. Selling is treated the same as gifting to family.From www.gov.uk/capital-gains-tax/losses - 'Losses when disposing of assets to family and others
- Your husband, wife or civil partner
- You usually don’t pay Capital Gains Tax on assets you give or sell to your spouse or civil partner. You can’t claim losses against these assets.
Other family members and ‘connected people’
- You can’t deduct a loss from giving, selling or disposing of an asset to a family member unless you’re offsetting a gain from the same person.
This also applies to ‘connected people’ like business partners.'I assume that this applies to all capital, P2P, Shares, Property etc. Interesting, I thought you had to "gift" to family if you wanted to transfer a capital gain.
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Post by dan1 on Apr 9, 2018 11:48:18 GMT
One could accrue significant capital losses selling at 25% discount on ABL, conversely one could make significant gains.
For example, transfer of a full £20k ISA allowance would result in a £5k gain/loss. Taken to extreme, one of those ISA millionaires could rack up a cool quarter of a mil. Amortising loans and repayments offer further scope, which may go someway to explain the increased premiums for amortising loans on ABL.
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stevio
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Post by stevio on Apr 16, 2018 6:22:03 GMT
AB have their own guidance on SM taxation, see website
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nick
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Post by nick on Aug 12, 2018 23:15:14 GMT
It is worth noting that gains on sales of simple debts are not chargeable to CGT (see www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg53408 provided that you are the originator of the loan. Gains on sales of that debts that have not bee originated but purchased from someone else (eg on an SM) are chargeable to CGT. Conversely capital losses on originated debt is not deductible from other chargeable gains. Thus CGT only really becomes a potential issue if you buy and resell the same loan part on the SM. |
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blender
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Post by blender on Aug 13, 2018 8:08:48 GMT
Presumably if you 'transfer' a loan from your normal account to your ISA account via the SM, then you are no longer the originator (the SM being anonymous). If you have 'transferred' it at a discount, then any subsequent sale is going to attract a higher CGT liability. Such a nightmare of record keeping. Edit: Thanks Nick. I was forgetting that it was an ISA. The general point is that transferring through the SM makes you a purchaser.
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nick
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Post by nick on Aug 13, 2018 8:13:45 GMT
Presumably if you 'transfer' a loan from your normal account to your ISA account via the SM, then you are no longer the originator (the SM being anonymous). If you have 'transferred' it at a large discount, then any subsequent sale is going to attract a higher CGT liability. Such a nightmare of record keeping. I think that's right, but you then don't need to account for CGT when you make the subsequent sale from your ISA account (which is not subject to CGT) so that shouldn't cause issues (and no CGT is chargeable on the original sale into your ISA provided you were the originator).
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withnell
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Post by withnell on Aug 13, 2018 8:44:35 GMT
I can't think of many loans that would qualify as I think everything I hold on ABL is debt linked to a security, so not classed as simple debt
Unless you also trade a lot of shares or artwork you're unlikely to go over the CGT allowance anyway
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elliotn
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Post by elliotn on Aug 13, 2018 10:02:47 GMT
Presumably if you 'transfer' a loan from your normal account to your ISA account via the SM, then you are no longer the originator (the SM being anonymous). If you have 'transferred' it at a large discount, then any subsequent sale is going to attract a higher CGT liability. Such a nightmare of record keeping. I think that's right, but you then don't need to account for CGT when you make the subsequent sale from your ISA account (which is not subject to CGT) so that shouldn't cause issues (and no CGT is chargeable on the original sale into your ISA provided you were the originator). That tax avoidance loophole makes it all the more important that HMRC clarify that it is NEVER permissible to manufacture the purchase of your own taxable loan parts into your tax free account - platforms should disallow it immediately - perhaps ablrate could instigate best tax practise on their platform?
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ilmoro
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Post by ilmoro on Aug 13, 2018 10:46:39 GMT
I think that's right, but you then don't need to account for CGT when you make the subsequent sale from your ISA account (which is not subject to CGT) so that shouldn't cause issues (and no CGT is chargeable on the original sale into your ISA provided you were the originator). That tax avoidance loophole makes it all the more important that HMRC clarify that it is NEVER permissible to manufacture the purchase of your own taxable loan parts into your tax free account - platforms should disallow it immediately - perhaps ablrate could instigate best tax practise on their platform? HMRC dont appear to say anything of the sort. They say that sales have to be on an open market and have to be made using additional funds held within the purchasing account. Share sales can be made without additional funds as the nature of the market allows funds raised by selling to simultaneously purchase. The guidance has been tidied up so it is no longer reliant on interpreting rules applicable for share transfers between standard & ISA accounts.
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pom
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Post by pom on Aug 13, 2018 12:19:05 GMT
I can't think of many loans that would qualify as I think everything I hold on ABL is debt linked to a security, so not classed as simple debt Unless you also trade a lot of shares or artwork you're unlikely to go over the CGT allowance anyway Agree that you'd have to try pretty hard to go over the allowance on gains, but it's significantly easier to go over the reportable disposals threshold when loans repay (especially now repayments are happening more often), amortise as well as just regular sales. I'm quite sure there's probably a few people who assume they're much further from the threshold than they actually are. We really need ablrate to start generating CGT statements for us.....
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nick
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Post by nick on Aug 13, 2018 12:56:08 GMT
I can't think of many loans that would qualify as I think everything I hold on ABL is debt linked to a security, so not classed as simple debt Unless you also trade a lot of shares or artwork you're unlikely to go over the CGT allowance anyway I believe most (if not all) loans on P2P platforms are simple debts. Debts on a security (which are generally chargeable to CGT) refer to debts securities which are of fixed amounts, fixed maturities and usually specific rate of interest, eg bonds and commercial paper that are issued on a formal securitised basis ( www.gov.uk/government/publications/debts-and-capital-gains-tax-hs296-self-assessment-helpsheet/hs296-debts-and-capital-gains-tax-2016 ). Even then many bonds are qualifying corporate bonds which takes them out of CGT, eg bonds traded on LSE's orb market are not subject to CGT.
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