Monetus
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Post by Monetus on Jun 4, 2018 12:49:06 GMT
I was just browsing through the SAIM12000 manual and noticed that it only covers tax relief on losses for individuals.
"Persons subject to corporation tax will not be eligible for this relief, but may be able to claim a deduction for any losses under the Loan Relationships regime (more detail in the Corporate Finance Manual at CFM30000)."
As myself and quite a few others lend in P2P through a limited company, does this essentially mean we are only able to claim for losses that are fully "crystallised"?
Like many here I have a decent amount of capital in loans that are defaulted or with receivers/administrators. For individuals they would be deemed as "irrecoverable" and tax relief would be possible but am I correct in thinking that's not the case for Ltd companies?
I would ideally like to claim Corporation Tax relief on these loans for this tax year if possible....
Thanks!
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SteveT
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Post by SteveT on Jun 4, 2018 13:16:13 GMT
If your company adopts the accounting policies specified under IFRS9 (as it may be obliged to anyway at some point) then it can provision for potential losses across all loans, taking account of their risk and prospects for repayment. The simple approach I follow at the end of each company tax year is explained here. In addition to applying a standard provision across all loans of a similar risk, when a specific "distressed" loan enters default and a larger potential write-down seems likely, I increase the provision as appropriate (10% / 25% / 50% / 75% / 100%). The net effect is much like SAIM 12000, reducing CT liability in the year the provision is taken but increasing it in down the line if/when the loan repays in full and the provision is backed out again to the P&L. |
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Post by jackpease on Jun 4, 2018 14:30:46 GMT
I don't have much invested via my ltd company at the moment but a limiting factor could be your accountant's appetite for tolerating the vagaries of p2p lending and whether you can be bothered with the additional hassle/risk of prompting a tax inquiry which'd lead to all sorts of extra paperwork/accountant's time.
For me losses less than £100 or so would be my threshold.
Jack P
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Monetus
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Post by Monetus on Jun 4, 2018 19:38:53 GMT
If your company adopts the accounting policies specified under IFRS9 (as it may be obliged to anyway at some point) then it can provision for potential losses across all loans, taking account of their risk and prospects for repayment. The simple approach I follow at the end of each company tax year is explained here. In addition to applying a standard provision across all loans of a similar risk, when a specific "distressed" loan enters default and a larger potential write-down seems likely, I increase the provision as appropriate (10% / 25% / 50% / 75% / 100%). The net effect is much like SAIM 12000, reducing CT liability in the year the provision is taken but increasing it in down the line if/when the loan repays in full and the provision is backed out again to the P&L. Thanks a lot for this Steve - seems like a good solution. Is this something you need to declare or "opt into" for your entity or just guidelines that your accountant would need to follow? Basically.... how do you adopt these IFRS9 policies?
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SteveT
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Post by SteveT on Jun 4, 2018 19:52:51 GMT
I think the board can simply decide to adopt them and then document this in the notes to the accounts, but your accountant or Comp Sec should be able to advise.
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Monetus
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Post by Monetus on Jun 14, 2018 16:22:09 GMT
Hi SteveT just a quick follow up on this.... I've spoken to my accountant who has sent me over a load of documents and advised me that "IFRS9 applies for accounting periods commencing on or after 1st January 2018". She is basically saying that I can't apply this for my current tax year and only from this date onwards but to be honest she doesn't seem very clued up on the whole thing. Having browsed some of your previous forum posts however I've noticed that you seem to been discussing and applying this since around 2016?  Am I correct in saying that any Ltd company can decide to adopt this system voluntarily at any time and that the mandatory date is the 1st Jan 2018? I have to go back to her with something so any ideas would be much appreciated... Thanks! |
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SteveT
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Post by SteveT on Jun 14, 2018 17:24:52 GMT
I don’t know when the mandatory date for adoption might be (although FCIF have now adopted it, so that may be right). But it’s certainly been available as an option for the last 3+ years. It’s an international accounting standard and different countries are implementing at different speeds, I believe.
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Monetus
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Post by Monetus on Jun 14, 2018 19:11:50 GMT
Thanks Steve... So just to confirm you’ve been doing this yourself for the last couple of years with no issues? I shall push back with that and hopefully get her on board!
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SteveT
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Post by SteveT on Jun 15, 2018 5:24:35 GMT
Yes
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duck
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Post by duck on Jun 15, 2018 6:17:18 GMT
My business has been investing in P2P since the early days when there was only zopa, FS and RS. Each year I have evaluated non performing loans and written down the capital where appropriate... just as SteveT has outlined. Never had a challenge from HMRC. The biggest challenge for me is keeping the spreadsheet updated, after all these years it is slightly 'busy'. |
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Monetus
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Post by Monetus on Jun 25, 2018 13:17:30 GMT
I've finally managed to get my accountant on board but they have never submitted a set of IFRS 9 accounts so are asking me if there are an examples or good relevant guidance anyone could share?
They want to know exactly what it is they need to submit and what the accounts should look like so if anyone has any examples it would be much appreciated.
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SteveT
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Post by SteveT on Jun 25, 2018 15:14:16 GMT
I've finally managed to get my accountant on board but they have never submitted a set of IFRS 9 accounts so are asking me if there are an examples or good relevant guidance anyone could share? They want to know exactly what it is they need to submit and what the accounts should look like so if anyone has any examples it would be much appreciated. Have PM'd you
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