Post by mrclondon on Apr 6, 2016 15:11:01 GMT
This email was sent out by FK on 4th April 2016
Tax Treatment of Losses
HMRC has made some significant updates to the treatment of P2P losses for tax.
Welcome to your investor update! Some significant changes are coming which may affect you, so please take a minute to read this note.
HMRC have now published their final guidance on how and when losses on Peer to Peer (P2P) loans can be used to reduce tax liabilities.
The new rules are very generous in that a loan can be treated as irrecoverable for tax purposes once there is no reasonable prospect of the recovery of the loan from the borrower. The ability for the investor to be repaid from other sources, such as via personal guarantees or security, can be ignored.
Tax Year 2015/16, ending on the 5th April 2016
In the current tax year - 2015/2016 - claims for loss need to be made by you, as the investor. Losses can be claimed against either Income Tax or Capital Gains Tax, and claimed differently for different loans.
New Tax Year 2016/17 - The changes
* From 6th April, the loss claims will normally be made by the P2P platform, for example FundingKnight.
* From 6th April, losses will automatically be treated as losses for Income Tax and offset against your income with us.
If losses in a tax year exceed your income with us, you can use the balance against P2P income from other platforms in the same tax year and, to the extent that you still have residual losses, then against subsequent tax years. If you wish to do so then you must notify HMRC.
FundingKnight - Loans In Recovery
We have reviewed each of the FundingKnight loans that are currently "In Recovery" and have determined that they meet the HMRC criteria for them to be treated as irrecoverable for tax purposes and for investors to make a claim for loss.
FundingKnight classifies loans as "In Recovery" when we have serious doubts about the borrower’s ability to meet their obligations, but still consider that some or all of the monies owed to investors will still be paid, albeit generally by guarantors and/or by realisation of any security and outside of the original payment schedule.
Income Tax or Capital Gains Tax
If you have loans in this category you can choose whether to use the loss against either Income Tax or Capital Gains Tax, according to your personal circumstances. As a general principle, if you wish to use the loss for Income Tax purposes, it will need to be against your 2015/16 income, whereas for Capital Gains Tax you can carry this forward until you need it.
Future monies recovered from the borrower and/or guarantor will be added to your account and you will need to separately report these receipts to the HMRC, as either Capital Gains or interest, depending on which relief you claimed.
All loans will remain in recovery on your Dashboard. We will only re-classify loans as "written off" once we know there will be no further monies coming in from either security held or from personal guarantors.
Seek Advice
Please speak to your tax advisor for advice regarding which course of action is best for you.
As always, we are here to help so if you have any questions please email me
Kind regards,
Kay C.
Head of Investor Support & Development
HMRC has made some significant updates to the treatment of P2P losses for tax.
Welcome to your investor update! Some significant changes are coming which may affect you, so please take a minute to read this note.
HMRC have now published their final guidance on how and when losses on Peer to Peer (P2P) loans can be used to reduce tax liabilities.
The new rules are very generous in that a loan can be treated as irrecoverable for tax purposes once there is no reasonable prospect of the recovery of the loan from the borrower. The ability for the investor to be repaid from other sources, such as via personal guarantees or security, can be ignored.
Tax Year 2015/16, ending on the 5th April 2016
In the current tax year - 2015/2016 - claims for loss need to be made by you, as the investor. Losses can be claimed against either Income Tax or Capital Gains Tax, and claimed differently for different loans.
New Tax Year 2016/17 - The changes
* From 6th April, the loss claims will normally be made by the P2P platform, for example FundingKnight.
* From 6th April, losses will automatically be treated as losses for Income Tax and offset against your income with us.
If losses in a tax year exceed your income with us, you can use the balance against P2P income from other platforms in the same tax year and, to the extent that you still have residual losses, then against subsequent tax years. If you wish to do so then you must notify HMRC.
FundingKnight - Loans In Recovery
We have reviewed each of the FundingKnight loans that are currently "In Recovery" and have determined that they meet the HMRC criteria for them to be treated as irrecoverable for tax purposes and for investors to make a claim for loss.
FundingKnight classifies loans as "In Recovery" when we have serious doubts about the borrower’s ability to meet their obligations, but still consider that some or all of the monies owed to investors will still be paid, albeit generally by guarantors and/or by realisation of any security and outside of the original payment schedule.
Income Tax or Capital Gains Tax
If you have loans in this category you can choose whether to use the loss against either Income Tax or Capital Gains Tax, according to your personal circumstances. As a general principle, if you wish to use the loss for Income Tax purposes, it will need to be against your 2015/16 income, whereas for Capital Gains Tax you can carry this forward until you need it.
Future monies recovered from the borrower and/or guarantor will be added to your account and you will need to separately report these receipts to the HMRC, as either Capital Gains or interest, depending on which relief you claimed.
All loans will remain in recovery on your Dashboard. We will only re-classify loans as "written off" once we know there will be no further monies coming in from either security held or from personal guarantors.
Seek Advice
Please speak to your tax advisor for advice regarding which course of action is best for you.
As always, we are here to help so if you have any questions please email me
Kind regards,
Kay C.
Head of Investor Support & Development
kayfundingknight I trust you have no objection to me pasting this in its entirety other than redacting your surname and email address.