james
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Post by james on Jul 8, 2016 22:27:02 GMT
I'm probably being thick but I don't see the possibility for capital gains on MT given that it is not possible to buy in the SM at a discount (or a premium). Of course capital losses are possible but there haven't been any yet. On Friday I made a gain of £30 by buying an investment, collecting cashback and then selling the investment. Under the simple loans treatment there was no capital gain for income tax purposes. Under the Ablrate advised view there was a taxable capital gain because the cashback provided me with a discounted purchase price so when I sold I had taxable gain, though maybe no tax if the total of my gains is within my CGT allowance. Whether we have or haven't seen taxable capital gains depends on the advice MoneyThing receives and the view they take. Or is it irrelevant to HMRC that no gain or loss was made and you have to report all of your break-even disposals of chargeable assets to them as well?! Depends on how the transactions are regarded. The simple debt sales by a person who got the loan on the primary market wouldn't have any reporting requirement, regardless of how much they sold. Simple debts are simply exempt from the CGT regime, entirely. But if the professional advice is that they are not simple debts, the Ablrate case, then there is no need to report unless there is a gain that leads to capital gains tax being due or the total value of disposals (including repayments by a borrower) exceeds four times the annual CGT allowance. Above that threshold HMRC wants reporting even if there is no CGT due. As pom wrote, even if there was no gain or loss the purchase and disposals would need to be reported if the value was over the threshold. This would cause so much work that it's pretty much essential for platforms to provide the reporting needed to do it - imagine having to report a capital gain or loss (loss only possible of bought at a premium, so not at MoneyThing) with every monthly payment by a borrower. In that case I would have thought that all loans on MT (SM or otherwise) would need reporting as we have already been told these work via assignment of part of the loan, not the creation of a new loan. They cannot be simple debts. If they are simple debts they are exempt but the rest I'll have to leave for MoneyThing to comment on. Essentially we just need to wait for the professional opinions to come in then we can be confident based on their past record that MoneyThing will do what's necessary to make sure that things aren't unduly onerous for us.
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Post by markp2p on Jul 8, 2016 22:47:50 GMT
On Friday I made a gain of £30 by buying an investment, collecting cashback and then selling the investment. Under the simple loans treatment there was no capital gain for income tax purposes. Under the Ablrate advised view there was a taxable capital gain because the cashback provided me with a discounted purchase price so when I sold I had taxable gain, though maybe no tax if the total of my gains is within my CGT allowance. Whether we have or haven't seen taxable capital gains depends on the advice MoneyThing receives and the view they take. Depends on how the transactions are regarded. The simple debt sales by a person who got the loan on the primary market wouldn't have any reporting requirement, regardless of how much they sold. Simple debts are simply exempt from the CGT regime, entirely. But if the professional advice is that they are not simple debts, the Ablrate case, then there is no need to report unless there is a gain that leads to capital gains tax being due or the total value of disposals (including repayments by a borrower) exceeds four times the annual CGT allowance. Above that threshold HMRC wants reporting even if there is no CGT due. As pom wrote, even if there was no gain or loss the purchase and disposals would need to be reported if the value was over the threshold. This would cause so much work that it's pretty much essential for platforms to provide the reporting needed to do it - imagine having to report a capital gain or loss (loss only possible of bought at a premium, so not at MoneyThing) with every monthly payment by a borrower. In that case I would have thought that all loans on MT (SM or otherwise) would need reporting as we have already been told these work via assignment of part of the loan, not the creation of a new loan. They cannot be simple debts. If they are simple debts they are exempt but the rest I'll have to leave for MoneyThing to comment on. Essentially we just need to wait for the professional opinions to come in then we can be confident based on their past record that MoneyThing will do what's necessary to make sure that things aren't unduly onerous for us. i) [Edited] Misread. You are saying that the acquisition cost of the loan is reduced by the cashback. I didn't think of that - I assumed that the acquisition and disposal consideration was still £3,000. (And I also think that the £30 is not any kind of income). It doesn't seem obviously correct to me that the acquisition cost is reduced, but if Ablrate think so they have probably taken advice on it. ii) I don't agree that primary market purchases are simple debts. I think the opposite follows ineluctably from the fact that we have been told that there is an assignment of part of the loan between MT and B, and not a new loan between User and B. MT is the original creditor so this is not a simple debt.
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Post by Deleted on Jul 9, 2016 0:40:39 GMT
Yep - if they turn out to not be simple debts then the lack of losses/gains won't be relevant, they'll all be potentially reportable (if you meet the overall req'ts for CGT reporting) Oh, that seems like an odd waste of time for taxpayer and HMRC - how annoying! (Not that it affects me as I have no capital gains at all...) Yeah, there are 2 thresholds for CGT reporting, one for total capital gains, and one for total disposals of chargeable assets regardless of capital gains. You have to report if you breach either of the thresholds. Yes, its annoying, and a waste of time for HMRC too if you have high disposals of chargeable assets but no taxable gains.
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pom
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Post by pom on Jul 9, 2016 8:54:39 GMT
I'm probably being thick but I don't see the possibility for capital gains on MT given that it is not possible to buy in the SM at a discount (or a premium). Of course capital losses are possible but there haven't been any yet. On Friday I made a gain of £30 by buying an investment, collecting cashback and then selling the investment. Under the simple loans treatment there was no capital gain for income tax purposes. Under the Ablrate advised view there was a taxable capital gain because the cashback provided me with a discounted purchase price so when I sold I had taxable gain, though maybe no tax if the total of my gains is within my CGT allowance. Whether we have or haven't seen taxable capital gains depends on the advice MoneyThing receives and the view they take. Cashback should be tax free if it's the platform paying the incentive rather than the borrower (tho LC in particular still seem to be struggling to get everyone to agree on this). The main difference with ABL & MT is that MT is a fixed incentive, but at ABL it all depends how long the loan takes to fill, which apparently makes a difference. The ABL numbers are reasonably easy to work out in a spreadsheet once you get your head around it all (and how it affects amortising loans), tho I haven't quite worked out how to present it all to HMRC, specially as it needs to be uploaded in PDF so I need to worry about page breaks.. At least if we do need to do it for MT it should be much simpler, but I do hope the conclusion is simple debts! Whilst I expect most people who go over the chargeable asset disposal thresholds are probably sufficiently BHs that they also have lots of CGT stuff to report outside p2p, it's not that impossible that someone with no traditional capital transactions could end up going over it.
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mrflush
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Post by mrflush on Jan 25, 2017 10:01:56 GMT
Hi All, After a helpful reminder of this issue, I'm back on the case with this. I have picked up discussions with the tax advisor and solicitor and have also engaged with our regulatory advisor to make sure there is no impact from a compliance perspective. I have had an initial opinion that our primary loans are 'simple debts', BUT I need further advice before I can confirm this as it is not a simple issue. Secondary market loans under review also. I'll keep you informed. Kind regards Sophie Did we ever get an answer to this?
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Post by SophieThing on Jan 25, 2017 14:50:35 GMT
Hi MrFlush,
I am sorry for the lengthy delay in responding to this question. I have not forgotten about it, a lot of work has been completed in relation to it and I will be ready with a full response within the next two weeks.
Kind regards
Sophie
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mrflush
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Post by mrflush on Feb 18, 2017 23:48:38 GMT
Hi MrFlush, I am sorry for the lengthy delay in responding to this question. I have not forgotten about it, a lot of work has been completed in relation to it and I will be ready with a full response within the next two weeks. Kind regards Sophie Any news? Thanks Mr F.
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stevio
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Post by stevio on Feb 19, 2017 9:26:25 GMT
Hi All, After a helpful reminder of this issue, I'm back on the case with this. I have picked up discussions with the tax advisor and solicitor and have also engaged with our regulatory advisor to make sure there is no impact from a compliance perspective. I have had an initial opinion that our primary loans are 'simple debts', BUT I need further advice before I can confirm this as it is not a simple issue. Secondary market loans under review also. I'll keep you informed. Kind regards Sophie Hi SophieThing (and MoneyThing) This thread was started almost a year ago now with no real information provided - could we please have an update? Thanks
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hazellend
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Post by hazellend on Feb 19, 2017 10:12:11 GMT
Hello all,
Is this potential issue just for Moneything or does it apply to other platforms, in particular savingstream or ablrate.
What's the worse that could happen if you don't report to HMRC, given that there is no tax to pay anyway?
I have not sold any loans at par but nothing above par, and have kept capital sales on other assets at less than 44,400 total and 11,100 profit to avoid having to detail things in my tax assessment.
It will be big pain in the bum if I now have to detail everything in my self assessment though no tax is due.
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pom
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Post by pom on Feb 19, 2017 15:00:30 GMT
Hello all, Is this potential issue just for Moneything or does it apply to other platforms, in particular savingstream or ablrate. What's the worse that could happen if you don't report to HMRC, given that there is no tax to pay anyway? I have not sold any loans at par but nothing above par, and have kept capital sales on other assets at less than 44,400 total and 11,100 profit to avoid having to detail things in my tax assessment. It will be big pain in the bum if I now have to detail everything in my self assessment though no tax is due. Yep you should definitely be considering your CGT tax trigger levels with ABL (mybelief until told otherwise is that MT&SS are ok) and it is a pain, tho once you get your head round their recommendations in the FAQ for how various things should be counted (including the instant returns) it's just a case of taking the time - at least now you can download all your records, I had to screen-scrape mine when I did my tax return last summer. Took me a fair bit of time for what turned out to be a gain of £15 I didn't owe anything on and a loss of £3!!! (although will also depend when you started using ABL - there was talk that the loans being restructured might change the loans back to simple debts, but haven't seen further clarification yet)
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hazellend
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Post by hazellend on Feb 19, 2017 16:29:30 GMT
Fortunately, haven't sold anything on ABLrate but have sold a lot on SS in particular so shouldn't have a problem this year.
I wish all these companies just reported direct to HMRC so we din't have to do anything other than pay the tax bill.
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jonah
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Post by jonah on Feb 19, 2017 19:04:59 GMT
Fortunately, haven't sold anything on ABLrate but have sold a lot on SS in particular so shouldn't have a problem this year. I wish all these companies just reported direct to HMRC so we din't have to do anything other than pay the tax bill. They do. Which is why getting our numbers right is more key... they have to match! Maybe in the future we won't have to provide our version of the numbers.
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stevio
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Post by stevio on Feb 19, 2017 19:08:43 GMT
Fortunately, haven't sold anything on ABLrate but have sold a lot on SS in particular so shouldn't have a problem this year. I wish all these companies just reported direct to HMRC so we din't have to do anything other than pay the tax bill. They do. Which is why getting our numbers right is more key... they have to match! Maybe in the future we won't have to provide our version of the numbers. I think only interest for IT is provided to HMRC by Ablrate, not CG for CGT. I know they don't provide it on Tax Statements requested - ablrate maybe you could confirm? Additionally, does anyone have a simple method or formula to work out the CG on the raw data Ablrate provide for transactions? Admin this conversation has digressed to Ablrate but is on the MT thread, would it be worth moving this some of the posts to the Ablrate board, I think there is a similar CGT thread?
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pom
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Post by pom on Feb 19, 2017 19:28:19 GMT
Fortunately, haven't sold anything on ABLrate but have sold a lot on SS in particular so shouldn't have a problem this year. I wish all these companies just reported direct to HMRC so we din't have to do anything other than pay the tax bill. If you got instant returns on an amortising loan, then even if you haven't sold anything you have in fact already made a (very small) gain. Recommend you go read their FAQ and the other threads on the ABL board.
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nick
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Post by nick on Mar 3, 2017 9:54:07 GMT
I take a fairly pragmatic approach when it comes to reporting capital transaction where there are no gains or losses. HMRC can only levy penalties in respect of returns if there is an error on the return or other documents which either understate the tax or misrepresent the tax liability (late filing and payment penalties are addressed separately). Penalties themselves are based on a fraction of the potential lost tax revenue. Therefore were HMRC to find out that you did not disclose disposals you would not be liable to any financial sanction if no tax were due. At the end of the day HMRC is only really concerned about under reported tax and will only penalise you if this transpires to be the case. A good summary of the current penalty regime is give at: www.rossmartin.co.uk/penalties-a-compliance/223-tax-compliance-new-regimeMore generally, the treatment of P2P debt seems to be a bit of grey area, in particularly whether loan parts are considered to be simple debts, securities and thus whether they are exempt from CGT when they are sold by the original purchaser as well as whether they fall under the accrued income scheme (ie whether accrued interest should be recognised as interest on sale rather than a capital gain/loss). This is illustrated by the differing treatment from platform to platform despite the legal form of the debt being similar if not the same in all material aspects. Tax law is rarely black and white and I suspect different accountants/lawyers will give different views (or in my experience will not commit to a view). In the absence of case law providing more clarity, the only way you could get real comfort would be to get a barristers opinion on your specific circumstances (which is way over the top for most people). It is disappointing that platforms have not collectively consulted HMRC to get their view/guidance so that a consistent approach can be adopted across the industry and which would give a lot more comfort that current treatments won't be challenged at a later date. |
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