Pang
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Post by Pang on Aug 19, 2017 16:35:30 GMT
New member here, hello to all, hope someone has some experience in this and can throw me a lifeline before I contact HMRC! My question is regarding the Zopa tax return statement. To paint a small back story, I have been with Zopa for a little over 3 years now and in all honesty I have had no issues, tax returns have always been relatively simple and there have been no hurdles till now. I have now read and re-read some of the guides produced by HMRC on the process, but they can be a little gray in places. I have added a simplified example of a tax statement below (inflated figures for ease of reading) The curveball that is making my head hurt is the section labelled 'Loan Principal Deemed Irrecoverable' and raises the following questions: 1. As I understand it, this is simply investment capital (not interest) that has been lost. Is this the case? Can tax relief be claimed based on that figure? 2. If tax relief is possible, would you simply deduct the £100 from the £2000 and declare £1900 to HMRC? Or is that already factored in for the statement? Am I overthinking the statement? Should I just disregard the loss as a write off? And declare what they say to declare? From what I gather, losses can be rolled over for 4 years? So maybe its not so urgent for relatively small figures? For anyone that has experience in this, your advice would be very much appreciated before I join the endless phone queues waiting to talk to someone at HMRC!   |
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ashtondav
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Post by ashtondav on Aug 19, 2017 16:38:43 GMT
You simply declare the Gross Earnings figure. Nothing else.
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Pang
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Post by Pang on Aug 19, 2017 16:56:22 GMT
You simply declare the Gross Earnings figure. Nothing else. Makes sense. I guess a loss on principal is a loss. Why is it at the bottom of the tax statement if it does not affect the return? Surely, they could just log the loss on account. Putting it at the bottom of the Tax statement merely causes confusion for simple people like me! 
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Aug 19, 2017 17:09:10 GMT
. Yes, capital loss only can be declared as a loss. 2. I woud deduct it as the interest figure appears to be just the interest earnt and the capital loss can be ofset against that. I believe the four years only applies if you cant benefit from the loss relief in a specific year. ie cumulative losses greater than cumulative p2p interest. Not advice, not a tax expert HMRC will have the figures from the platform. Relevant section in this and link within www.gov.uk/guidance/peer-to-peer-lending#claiming-tax-relief-on-unpaid-loans |
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aju
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Post by aju on Aug 19, 2017 17:32:39 GMT
Is that correct, I mean ashtondav's comment.
What does this bit mean that was missing from pang's detail
2. This figure relates to any repayment that was made on a Zopa loan that was marked as bad
debt after 6th April 2015 and is therefore treated as taxable income.
In pangs data this is zero but if it had a value it would be in the HMRC figure.
3. This figure relates to any Zopa loan that was written off and closed as bad debt during the tax
year, even if a recovery (recorded in Note 2) was subsequently made. Please note that as of
2015/16 tax year it is possible to claim tax relief on bad debt incurred from peer to peer lending
and this can be netted against your interest income.
So looking again at pangs picture. My view is that he should be recovering the £100 default from the hmrc figure. Thats the way I understood the notes anyway.
(If I'm wrong then please don't dob me in to Mr Taxman. Although to be fair in my case so far its not been as large as pang's example.)
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aju
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Post by aju on Aug 19, 2017 17:36:37 GMT
1. Yes, capital loss only can be declared as a loss. 2. I woud deduct it as the interest figure appears to be just the interest earnt and the capital loss can be ofset against that. I believe the four years only applies if you cant benefit from the loss relief in a specific year. ie cumulative losses greater than cumulative p2p interest. Not advice, not a tax expert HMRC will have the figures from the platform. Relevant section in this and link within www.gov.uk/guidance/peer-to-peer-lending#claiming-tax-relief-on-unpaid-loansPhew I can breath a sigh of relief then. Taxman can stand down again ;-)
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Pang
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Post by Pang on Aug 19, 2017 17:48:39 GMT
3. This figure relates to any Zopa loan that was written off and closed as bad debt during the tax year, even if a recovery (recorded in Note 2) was subsequently made. Please note that as of 2015/16 tax year it is possible to claim tax relief on bad debt incurred from peer to peer lending and this can be netted against your interest income. So looking again at pangs picture. My view is that he should be recovering the £100 default from the hmrc figure. Thats the way I understood the notes anyway. (If I'm wrong then please don't dob me in to Mr Taxman. Although to be fair in my case so far its not been as large as pang's example so far.) I gotta be honest, thats how I was reading into it as well. I should have pasted up the notes as well, oops! 
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aju
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Post by aju on Aug 19, 2017 18:09:33 GMT
Just had a thought, Surely if you don't claim it then line 2 will be taxing you twice would it not.
My line 2 says
'Capital recovered from bad debt that qualified for tax relief2 £9.79'
and added it to my HMRC taxable figure now if I hadn't claimed it previously would I not then be paying tax on capital. Perhaps its bad wording but seems like if you don;t claim it you could be penalised later.
I'm sure I'm confused but I know that zopa has no clue I claimed the defaults for previous years. I never told them what I told HMRC.
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Pang
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Post by Pang on Aug 19, 2017 18:40:20 GMT
Yup, I think I see what you mean.
Essentially, for example, this tax year (2016/17):
Loan principal deemed irrecoverable in the year = £100 - Which you can claim tax relief on, if you dont claim, you pay tax on the Gross interest figure
Then the following tax year (2017/18), potentially the above figure could be recovered, very late payment or whatever. Might expect to see this on the statement?
Capital recovered from bad debt that qualified for tax relief = £100 - Which would then be added to your Gross for the new year and you pay more tax.
I've mailed HMRC now to try and get some clarity. It certainly wont be the end of the world if I am wrong but I do like to understand these things better.
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panda
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Post by panda on Aug 20, 2017 12:15:16 GMT
Old rules were you could only claim a capital loss against capital gains, for P2P only possible in very limited circumstances and I don't think was ever possible for Zopa. New rules (from 2015-16) you can offset capital loss against interest earned for income tax purposes, which is much more useful to most people. But then any future recoveries of capital (that you have deducted) have to be accounted for in subsequent tax years.
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