pikestaff
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Post by pikestaff on Jul 17, 2014 7:09:47 GMT
See this post by Kevin Caley of TC: p2pindependentforum.com/post/16791/thread. It is mainly about SIPPs, but also reports HMRC's view (expressed at a meeting with the P2PFA yesterday) that fees charged to lenders cannot be offset against income. |
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pikestaff
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Post by pikestaff on Jul 17, 2014 8:00:34 GMT
I think KC was referring specifically to fees taken out of income (which, incidentally, are no longer charged by RS). They are simply a cost of sale, ie capital in nature.
For individuals, if we assume that p2p loans are "simple debts" (the FC view, which I believe to be sustainable) then gains and losses on sale are exempt from capital gains tax for the original purchaser, and hence the cost of sale is (and always has been) a non-deductible.
However, gains and losses on the sale of second-hand loan parts on TC (but not on FC, or so they claim, because of how they structure "sales") are subject to capital gains tax. In this case, the cost of sale should be included in the calculation of the gain or loss in just the same way as the broker's commission on the sale of shares.
All of which is somewhat academic unless you expect to have capital gains in excess of your annual allowance. However, if you are in that position and you are lending on TC, you will need to keep track of which loan parts you bought on SM.
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pikestaff
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Post by pikestaff on Jul 17, 2014 8:43:03 GMT
... I would have thought any fee would just be a reduction in a capital gain (or increased capital loss) same as a brokerage cost for selling a share or bond... Exactly. But if loan parts are simple debts the gain or loss is not taxed and hence the SM fee is not deductible.
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mikes1531
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Post by mikes1531 on Jul 17, 2014 12:51:50 GMT
However, I did get the impression on some threads that people were offsetting these SM fees against interest income and this was based on what they did on another platform (FC?). It might have been Zopa. Their 'Annual income statement' puts Interest from borrowers, Cashback earned, Tell-a-friend rewards, Lending fees, and Rapid Return fees above the line 'Gross earnings to declare to HMRC', so I presume all those entries are included. (I can't be sure because I've not had RR fees or TaF rewards in the past.) Bad debt losses and recoveries are shown below the gross earnings line. IIRC, at least one platform -- FC? -- considers Cashback to be non-taxable, while Zopa's advisors have a different opinion. Isn't income tax fun? 
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mikes1531
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Post by mikes1531 on Jul 17, 2014 19:11:15 GMT
For those who don't follow Zopa's forum, I posted Kevin Caley's statement there and invited Zopa to comment. The response from their CTO was...
Having been burnt once by a Zopa tax interpretation that subsequently turned out to be wrong, I responded with...
There hasn't been a further response from Zopa, but my posting was made at 1505 (Thursday) so they haven't had much time to think about it.
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mikes1531
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Post by mikes1531 on Jul 19, 2014 16:18:13 GMT
For those who don't follow Zopa's forum, I posted Kevin Caley's statement there and invited Zopa to comment. The response from their CTO was... Having been burnt once by a Zopa tax interpretation that subsequently turned out to be wrong, I responded with... There hasn't been a further response from Zopa, but my posting was made at 1505 (Thursday) so they haven't had much time to think about it. Zopa's CTO responded on Friday... So it looks like Zopa lenders -- and all lenders on platforms that charge a lender's fee -- may have to pay even more taxes on their interest income than they thought, making a further dent in their actual returns -- particularly if they pay tax at the higher-rate.
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mikes1531
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Post by mikes1531 on Jul 21, 2014 17:29:14 GMT
Zopa's CTO responded on Friday... So it looks like Zopa lenders -- and all lenders on platforms that charge a lender's fee -- may have to pay even more taxes on their interest income than they thought, making a further dent in their actual returns -- particularly if they pay tax at the higher-rate. Perhaps things aren't as grim as they first appeared. On Sunday evening, Zopa's MD added to the thread on the Zopa forum...
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Post by mattr on Jul 25, 2014 16:16:12 GMT
Very interesting. As a tax lawyer (and small-time Zopa / RS lender) I've always wondered about the legal basis for the supposed deductibility of Zopa lender fees. It's not at all clear from the legislation. However I took great comfort from the fact that Zopa had apparently received guidance from HMRC directly:- talk.zopa.com/topic/2417-how-do-i-report-my-zopa-earnings-to-hmrc-for-tax-purposes/second post down. But then HMRC can be relied upon to frequently change their mind. Depending on how big P2P grows to be, and whether it can be shown to be truly sustainable in different economic conditions, there must be a powerful argument for reform here. How do I report my Zopa earnings to HMRC f....html (19.02 KB) (For reference, talk.zopa now closed) |
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Post by GSV3MIaC on Jul 25, 2014 20:38:06 GMT
I guess we must be a softer target than Amazon, Google, Starbucks etc. 8<.
I think there is still debate going on as to whether fee rebates (eg from HL Vantage funds) are taxable too. Presumably just a matter of time before they get to Green Shield Stamps (showing my age there, I mean Nectar points, of course. 8>.).
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kermie
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Post by kermie on Jul 25, 2014 22:52:49 GMT
I guess we must be a softer target than Amazon, Google, Starbucks etc. 8<. I think there is still debate going on as to whether fee rebates (eg from HL Vantage funds) are taxable too. Presumably just a matter of time before they get to Green Shield Stamps (showing my age there, I mean Nectar points, of course. 8>.). The absurdity of taxing fees (and fee rebates in particular) is demonstrated if/when the rebate is removed and the fee is simply reduced when the product is bought through that particular platform - i.e., it's merely a 'special price'. If I spend £10 on widgets in Tesco's, the RRP being £10, and then buy the same widgets for £8 in Sainsbury's, I don't expect to pay tax on the £2...this is simply what is known as competition. The same applies when I shop around for a fund. I do wish HMRC would wise up! How I can pay income tax on money I don't receive is beyond me. (OK, analogy is not that great, but you get the idea).
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