blender
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Post by blender on Jan 6, 2015 23:56:42 GMT
I see that parts of 9864 are on sale at a discount of 0.6%. This was the property loan at 7.5% with 1% cash back which closed today. After FC's fee the lucky sellers will get to keep 0.15% cash back. Wow!
Can anyone explain the logic behind these sales?
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sl75
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Post by sl75 on Jan 7, 2015 0:52:34 GMT
Maybe someone who wants to block you from selling yours at a 0.5% discount?  |
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adrianc
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Post by adrianc on Jan 7, 2015 8:48:39 GMT
Can anyone explain the logic behind these sales? Well, obviously, flipping is PROFITABLE! Flipping is how you get RICH through FC!
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Post by GSV3MIaC on Jan 7, 2015 8:49:16 GMT
Or maybe someone figures 0.15% a day beats having the cash uninvested for a week or more .. There hasn't Ben much else to spend it on. That one did fill up remarkably fast at the end!
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blender
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Post by blender on Jan 7, 2015 8:49:31 GMT
Mine are at par - the main attraction of this loan was the potential early repayment and retaining the whole cash back. That is why it is so odd, or does un-lent cash burn a hole in lenders' pockets. It's nothing to do with having no sales at par, of course.
(I suppose that making 7p from a £40 stake , or 0.175%, in a couple of days may be a worthwhile use of spare time. More profitable than posting on this board. But it must be annoying that one's efforts benefit Finely Chopped by 10p, or 0.25%. There should be a flipping limit which requires that First Charge must not benefit by more than the flipper. Less than that it's not really flipping, it's more like changing your mind about the purchase and returning the goods).
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Post by thesnoop on Jan 7, 2015 10:18:53 GMT
Can anyone explain the logic behind these sales? Well, obviously, flipping is PROFITABLE! Flipping is how you get RICH through FC! I'm starting to see this now too. Even with only light flipping activity , my current 'profits from loan part sales' = 1/5th of my 'Interest earned'. Cash back is about the same. Also I will be having to pay tax on that interest ( but not on the loan part sales if I have understood correctly ) so in total about half of my profits after tax are non Interest based... o.O
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TitoPuente
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Post by TitoPuente on Jan 7, 2015 10:58:47 GMT
You will pay taxes on interests and on any profit made from selling loan parts at a higher price. You only pay no tax on cash-backs which are considered to be a return of your own invested capital. Am I right?
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blender
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Post by blender on Jan 7, 2015 11:01:43 GMT
Well, obviously, flipping is PROFITABLE! Flipping is how you get RICH through FC! I'm starting to see this now too. Even with only light flipping activity , my current 'profits from loan part sales' = 1/5th of my 'Interest earned'.Cash back is about the same. Also I will be having to pay tax on that interest ( but not on the loan part sales if I have understood correctly ) so in total about half of my profits after tax are non Interest based... o.O No-one disputes that flipping and cashback can be profitable, but it has to be worth the effort. It goes against the grain to receive 20p as cashback on a £20 loan part and then to give 17p of it away. One of mine has now sold at par and I have kept 15p of the 20p, and so am feeling a bit better. Yes, it is believed that promotional cash back and sale profits are not chargeable to income tax. But "1/5th of my 'Interest earned' " sounds a bit generous. Suggest you take a look at the format of your 'tax statement', thesnoop, and consider which figure should be declared.
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mikeb
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Post by mikeb on Jan 7, 2015 18:55:25 GMT
But "1/5th of my 'Interest earned' " sounds a bit generous. Well, if you were flipping in November, it was probably quite productive. Selling loan parts was about 1/3rd of interest earned. Income breaks down as 50% Interest, 15% Sales, 34% Cashback, 1% Rounding error 
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blender
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Post by blender on Jan 7, 2015 19:53:12 GMT
But "1/5th of my 'Interest earned' " sounds a bit generous. Well, if you were flipping in November, it was probably quite productive. Selling loan parts was about 1/3rd of interest earned. Income breaks down as 50% Interest, 15% Sales, 34% Cashback, 1% Rounding error Sorry Mikeb but I cut instead of copied from thesnoop's post and my post then did not make sense. Thesnoop was speaking of paying 20% of interest earned as tax. Nothing to do with the breakdown of income. Yes flipping on cash back can be very productive. My cashback is 21% of gross earnings over 28 months, interest 79%. Net sales is almost zero through selling property parts at a small discount. The key objective is to keep net earnings above gross interest. Then the income tax bill is not too bad.
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Post by Deleted on Jan 7, 2015 21:26:02 GMT
I've come to a view that I don't "get" flippiing.
I can see that you are aiming for the 3% premium plus first month's interest, or cash back, a premium and a first month's interest
I can see you have to lose 0.25%
What I struggle with is the parameters to maximise returns, 60 months? bid on everything above a certain percentage (but not using the auto system) to maximising depth of investment and to turn the money fast enough.
Is that all?
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pikestaff
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Post by pikestaff on Jan 8, 2015 7:54:46 GMT
You will pay taxes on interests and on any profit made from selling loan parts at a higher price. You only pay no tax on cash-backs which are considered to be a return of your own invested capital. Am I right? Not necessarily. According to the FAQ on FC's website, FC loans are "simple debts" which are outside the scope of capital gains tax. As such, an investor who makes disposals incidental to his investment activity should not normally be taxed on any profit on sale. However, anybody who sets out to make a significant part of their return from "flipping" could well be regarded by HMRC as a trader, who would be liable to income tax on those profits. This is a very grey area.
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sl125
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Post by sl125 on Jan 8, 2015 10:01:05 GMT
"This is a very grey area."
You hit the nail on the head. If in a year you earn £10k interest and about £200 of profit from selling at a premium, then the profit from selling at a premium is fairly incidental; so HMRC would view it as being in the spirit of the law surrounding the taxation of simple debts.
But if you earn £5k interest and £5k profit from selling at a premium, HMRC will start to question the nature of your loan trading activity, and will seek to bring those activities into account.
As a Ltd company investor, there's a similar grey area when it comes to what proportion of my company's turnover comes from investments such as FC, and my company's trading activity (ie. my company's core business). If investment income is greater than around 20% (but again, it's grey and fuzzy this definition), then my company's status can be viewed as a Closed Investment Holding Company, and it would lose the small company's corporation tax rate on its profit as a result. (thankfully, the main rate and small company's rate are converging with each Budget).
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sl75
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Post by sl75 on Jan 8, 2015 11:27:21 GMT
I don't really see that HMRC would gain anything overall by applying tax to gains and losses made by buying and selling loan parts at a level other than par.
For every party who makes a gain on the secondary market, there is a counterparty who (ignoring the FC fee) makes an equal and opposite loss... if the gains are taxable, then obviously the losses would be offset against that taxable gain, and HMRC would be effectively back in the same position they started - at least if both parties pay the same tax rate. In fact they'd perhaps be worse off, as there would then be an arguable justification for offsetting the sale fee against tax too.
It would indeed seem a lot fairer to move to a tax system where the "overall profit within the FC account for the year" was the amount taxed - so that buying loan parts at a premium, selling loan parts at a discount, defaults, and all FC fees ended up offset against income for tax purposes. However, to the best of my knowledge and understanding that is NOT the tax system we presently have. Maybe for 2015/16 tax year?
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Post by tybalt on Jan 8, 2015 11:41:27 GMT
"if the gains are taxable, then obviously the losses would be offset against that taxable gain" It does not work like that. If you trade consistently at a profit then they will access you occasional losses are simply no allowable. Similar logic applies to gambling where in the unlikely event, at current rates, of you consistently winning then the winnings are accessible but the losses of the general public are not allowed to be offset .
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