Loans deemed claimable as a loss pending recovery

There is a HMRC guidance note which implies/infers that only the P2P lending platform should know best when to declare a loan to be in default. 
I totally disagree with this GN as the platform (Lendy and others?) clearly has a self internest to kick the can down road and so cannot act impartially.

Therefore I recommend as a consequence of this and in order to show due diligence and demonstrate that we the lenders have made a reasoned decision, we start a permanent pinned thread of loans that we (a reasonable number of lenders) declare a loan to be in default, such that if and when any one of us are investigated by HMRC we are not seen as acting without authoratitive opinion.

I suggest that the Lendy's existing criteria of 6 months in default (without repayment or extension) is more than adequate for HMRC purposes.

MODERATORS Can you help here as the 2018 tax year end is a few days away (e.g. to have this escalated somehow?? Create a pinned thread, set up a voting system).


PS For what it is worth I took the unilateral decision in April 17 that any Lendy loans over 6 months old were in default. Many poster poo-poo'd this deision, It wouldl help if we also did this retrospectively to cover all late loans (YEs of 2016 and 2017).

Hi SteveT. Not as straight forward as you state (see my highlights(


When does a peer to peer loan become irrecoverable

A peer to peer loan may be accepted as having become irrecoverable when there is no reasonable

prospect of the recovery of the loan. When assessing recoverability, the funds available and

potentially available to the borrower must be considered. A claim therefore cannot be established

simply because the borrower has insufficient liquidity on the date the loan had been called in.

Whether a loan has become irrecoverable should be judged on a case by case basis, however as the

loan will be managed by a platform, the platform would usually be in a position to determine when a

loan has become irrecoverable. The platform would then inform the lender that the loan had

become irrecoverable.

If the platform does not undertake this action, then the lender may still determine that the loan has

become irrecoverable. However it will be the responsibility of the lender to show that there is no

reasonable prospect of the recovery of the loan and it is NOT simply a case of late payment.




When is a peer to peer loan treated as irrecoverable?

Under the legislation for income tax relief for irrecoverable peer to peer loans in certain

circumstances a loan may be treated as irrecoverable for the purposes of the relief even if there may

be a prospect that the lender could recover some of the amount outstanding.

This is the case for the following situations:

Loans with security

When loans are made against security, a loan may be treated as becoming irrecoverable asif

the security did not exist.

Loans where legal recovery action is taken

When the borrower has entered legal recovery procedures such as liquidation, administration,

receivership or bankruptcy the loan may be treated as becoming irrecoverable as if such

action was not available.

Subsequent Recoveries

If a loan has been treated as irrecoverable in either of the scenarios outlined above then the relief

will be given at the point where the loan becomes irrecoverable other than for the specified recovery

actions.

If any value is then recovered, either through these actions or by any other means, then this

recovery would then be taxed as additional interest received by the lender


My main point is that Lendy are incompetent at carrying out this function promptly and in a reasonable manner, not least because they have a vested interest. All the loans that I personally declared as unrecoverable in my 2017 self assessment, remain so today (another year later) thus I feel well justified in having taken the risk in doing so.

I just feel that we lenders can collectively make this decision ourselves as permitted by the HMRC guidance, given the failure of Lendy to do this is a timely manner. The reality is that Lendy dont give a SH*T or aren't even aware of how they could assist their invetors at each tax year end.

Hi Web wizard

Lendy has a track record of appointing an LPAR very very late in the debt recovery process (they exhaust every other avenue first).

Consider this event - by not declaring promptly irrecoverable investments (and thus not being able to offset interest received from a current tax year against these losses), you are then left with a load of irrececoverable debts to declare to HMRC but at this time you decide to quit P2P (for whatever reason) in which case you rececve no P2P  interest against which to offset your tardily declared irrecoverable loans, in which case all you can now do is offseet it against any £11k+ capital gains (which you probably don't have).

I am not sure that it is very late for all loans. Those listed on the partially repaid tab are late in the recovery process but still have options of recovery but the LPA receiver was appointed some time ago. The key point my accountant made was to be very consistent in your approach otherwise if you move the goal posts each year for the tax return it will create suspicion.

The one problem is that Lendy indicate legal recovery is underway but there is no fficial documentation to support it ie notice of appointment at CH so should there be any query from HMRC for self declared losses it will be harder to show evidence

True, except those of us that have identified the borrowing entity based on the charges filed at CH, can clearly see that when Lendy say they have appointed a receiver/administrator in a number of cases they legally havent as the appointment requires the relevant form to be filed with CH within 7 days & usually reported in the Gazette if the appointment is via a court. At least AIUI.

56.2.92 Registration of appointment of LPA receiver - companies

The appointment of an LPA receiver should be registered by the lender with the registrar of companies within 7 days of his/her appointment. Failure to register the appointment is an offence subject to a fine

In a number of cases Lendy have subsequently said or implied that it isnt a formal appointment, the reciever/admin is merely assisting the borrower with his repayment issues. Therefore the loan cant be treated as in legal recovery and loss relief claimed.