sl125
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Post by sl125 on Nov 26, 2015 17:17:12 GMT
The key thing from a taxation point of view is that accrued interest is taxable. So FC are correct to include the accrued interest that the seller has realised upon selling. The buyer will have a negative accrual for the interest portion of the loan part that they bought. So in the example you give, although the 30p interest they receive when the borrower pays their monthly installment will be taxed, this is offset by the negative accrual of 20p interest when they bought the loan part - resulting in 10p of interest being taxable.
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sl125
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Post by sl125 on May 20, 2015 13:23:07 GMT
Ah, good point. Even without CB, one noticeable effect with relatively new accounts is that because it takes around 6 months for bad debts to kick-in, the annualised return looks really healthy for many months. Once the bad debts kick-in 6-9 months after your first loans are taken out, the annualised return starts to move downwards.
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sl125
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Post by sl125 on May 20, 2015 13:03:06 GMT
Stevet: that's very good going. 15% of 95% of total amount invested in FC (ie. the other 5% being in bids/holding), means your overall return of money invested in FC is 14.25%. I salute you sir!
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sl125
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Post by sl125 on May 20, 2015 12:42:24 GMT
Quick question:
Are people quoting a return based on % of amount actually lent, or total amount with FC (including the dead money in the holding account / bidding)?
The former (which is the figure quoted by FC) is going to be significantly higher than the latter, especially if you quite a lot of funds not actually on loan.
FWIW: my annualised return based on the former is 24%, but only 13% based on the latter (the result of most of my money being in speculative bids earning no interest)
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sl125
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Post by sl125 on May 14, 2015 15:25:24 GMT
I'd also caution against the "paying the tax man" 12 month loans. Just because a company is technically "profitable" and therefore has a corporation tax liability does not mean they are running a financially prudent business.
It quite often masks a personal services company extracting as much cash out of the company, because the directors of such companies are often poorly disciplined to not think of their company's bank account as being available for their personal use. I've met far too many IT contractors etc that fall into the trap of extracting all the cash from their company, spending it on a "lavish" lifestyle, then get stung when the corp tax bill arrives 9 months after their trading year.
In other words, it's often a warning sign that the director isn't financially prudent.
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sl125
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Funding Circle (FC)
Flippin' 'Eck
Mar 18, 2015 11:02:08 GMT
via mobile
Post by sl125 on Mar 18, 2015 11:02:08 GMT
I am a... flipper (I know, I know... hiss the villain).
Or at least, I was a flipper until about 3 weeks ago. I've bought nothing to flip on in 3 weeks, and I've now sold most of my flippable holdings. It seems that the good days of buying at the highest marginal rate on the primary market with a view to selling at a premium on the secondary market are coming to an end.
Three factors appear to be at play: 1. More and more investors with very deep pockets and very fast bots are bidding and outbidding each other from the highest marginal rates downwards. 2. Fewer borrowers are closing early. Whether this is as a result of the first factor (since the average rate will now start at around 15% and drift down as time goes on, rather than starting much lower and drifting down only marginally), or because FC are advising borrowers to wait util the end, is not clear. 3. As very few flipping opportunities are now available, the flipping investors have a surplus of cash to invest, thereby perpetuating the first 2 factors.
So, a question for all those other flippers: what's your view? are you expecting the cycle to swing back, or are you coming to the same conclusion as me: it was good while it lasted, but markets will always revert to mean at some point.
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sl125
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Post by sl125 on Mar 13, 2015 18:15:01 GMT
It's the complete lack of any common sense in some of the botty bidders that amazes me. JCB.... and a few new entrants in the botting craze have dumped zillions of bids at 15% on A+, and chasing down in 0.1% increments. What's the point in that? No A+ goes for anywhere near those levels (max in 100 loans is 10.1%).
It'll be interesting to see if the arbitrage opportunities of flipping with bid-bots is finally over. There is now such a huge wall of cash, and so many bid-bots chasing from 15% down, that the market is simply reverting to mean. Eventually, the gains to be made by flipping (which have, admittedly, served me well) will increasingly become marginal, and will eventually be the same as the equilibrium net rate that the primary market achieves.
Interesting times....
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sl125
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Post by sl125 on Jan 8, 2015 11:47:45 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? Unfortunately, that's not how tax works. Take an overly simplified aspect of corporation tax as an example: Suppose company A purchases £100 of goods from Company B. Company A's profits are reduced by the £100 expense they incurred purchasing goods from Company B. But Company B's profits are increased by £100 for the sales they made to Company A. Therefore, the corporation tax of Company A has been reduced by £20 (20% of £100), whilst the corporation tax of Company B has been increased by £20. Net gain/loss to HMRC = £0.... but the important point is that each company has paid their appropriate share of the tax based on their own profits. All taxation works on a similar basis. Tax isn't just about the net funds flowing into the Treasury - it is about ensuring the tax burden falls proportionally on those who earn more / own more, etc.
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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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sl125
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Post by sl125 on Dec 17, 2014 15:46:01 GMT
An interesting viewpoint. Care to expand with specific examples of why you think it is a "disgraceful execution"?
I'm all for freedom to express an opinion, but to hide behind anonymity and come up with such harsh statements on a public forum, without any form of evidence....? hmmm
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sl125
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Post by sl125 on Dec 11, 2014 16:17:17 GMT
Yes, that makes sense. I was erring on the side of Other Debtors using the same reasoning.
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sl125
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Post by sl125 on Dec 8, 2014 15:56:14 GMT
I'd be interested in the views of other people that use FC to invest their Ltd company funds.
On the balance sheet, do you report under Cash and Cash Equivalents? or under Other Debtors (ie. non-trade debtors)?
I'm assuming that, for CT600 purposes, interest, premiums paid/received, etc, are all rolled into Interest and related transactions on the P&L?
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sl125
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Post by sl125 on Dec 8, 2014 10:19:04 GMT
I don't see a problem with flippers and auto-bots, as they keep the market liquidity up. But I do see a problem when an individual bidder can control an auction in a monopolistic manner.
Take the recent £52k A loan (**23). Taking out the British Business Bank's stake, that leaves about £47K for investors to bid on. But at 8:20pm on Friday, the B**ton Wanderer placed a staggering £21k in £100 bids at the highest marginal rate in the space of 3 minutes. By a strange coincidence, the borrower appears to have accepted the loan very shortly after. So this one bidder now controls over 40% of the loan.
FC's T&Cs are quite badly worded in this regard:
4.2 says "...which can be increased by increments of £20 to a maximum bid per business of £2,000. " The "maximum bid per business" is an interesting one. I suspect they mean maximum amount per bid, even though one can have multiple bids per business. Or do they really mean a maximum bid per business of £2k?
4.5 is perhaps more relevant: "...loans, a single lender is not permitted to bid for loan parts in a loan which add up in total to more than 20% of the requested amount for that loan if that lender is an API User". But again, rather odd wording: why is the maximum bid per loan set only for API users but not for general users?
If this was an isolated case, I wouldn't be so worried. But I notice this on many occasions with this one particular lender somehow controlling an auction prior to early acceptance, owing to having a ridiculously large holding account balance at his disposal.
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sl125
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Post by sl125 on Nov 4, 2014 14:21:56 GMT
That's right. It's the fiduciary principle laid out by the FCA's Client Money Rules, which means the platform is acting as an investment intermediary. So, moneys not lent out to borrowers have to be held in a segregated client account. If the platform went bust, subject to the costs of liquidation, the clients' moneys are protected as they do not belong to the platform.
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sl125
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Post by sl125 on Nov 2, 2014 13:04:33 GMT
I've never understood why the disparaging attitude to Autobid and those who use it.
Many investors in the "big 3" P2P sites (Zopa, Ratesetter and FC - ie. those that are going to appeal to the wider public) are looking for a relatively simple way of investing their cash at a rate that they can't get in a high street bank.
All three sites offer a simple auto-invest capability (in fact, Zopa now only allow auto-investing), which allows Joe Bloggs to invest his £10k or whatever without any hassle at a (to them, at least) decent rate.
Those of us with a) lots of time on our hands or b) programming experience to write a bot to do our bidding, go in for dynamically bidding the best rate we can get on each loan that we consider investable (whatever our criteria).
This situation good for the autobidders, because they are receiving a return that they are satisfied with without having a product that is too complicated for them or too much effort; and is good for the rest of us because the average rate of each loan is often substantially lower than the marginal rate that our parts contribute to the loan - which means a) more borrowers are inclined to accept loans, and b) our ability to liquidate our investment in the SM is better.
So, from a purely micro-economic point of view, we should celebrate Autobid
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