End of the tax year - are you up or down?

Total defaults = defaulted amount - recovered amount

If you are assuming zero recovered it will make your returns look much worse. Even HMRC doesn’t allow that kind of accounting.

Last tax year was my first in P2P, mainly in the higher risk end of the pool. Applying the government guidance for defaults* I calculate last tax year earned me +9% through P2P.

The guidance is very woolly when it says "Tax relief applies when there is no reasonable prospect of the peer to peer loan being repaid". Who makes that judgement? There are loans I have written off any chance of recovery on (The only remaining security is a personal guarantee ) that the platforms are still chasing.

*This method does push losses into future tax years. Realistically I expect a lower % than this over the long term.

Loans that are classed as defaulted by the platform. Clarification : They should be in recovery for a valid claim (as advised by ilmoro ).

Collateral wasn't authorised, no tax relief could be claimed. Loans haven't defaulted though so this is academic.

I have loans in default that are backed by a first charge on a property. I expect to get a large % recovery on them, i'm not sure the taxman would agree on 'No reasonable prospect of repayment'?

EDIT:

Reading further, I come across the following:
"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." I have not yet had any platform tell me that a loan has become 'irrecoverable'.

However "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 "When loans are made against security, a loan may be treated as becoming irrecoverable as if the security did not exist."

So should I treat anything in default as 'irrecoverable'?

I'm up. The MT loans will be handy from a tax bill perspective but personally I'm not going to worry about them until they crystallise (and probably would have waited for actual crystallised losses before claiming tax relief if MT hadn't counted them on the statement). Anyway whatever happens I'll remain in the black both for tax purposes and in reality as each of these loans is a lot less than 1% of my p2p pot. Took a lot of patience to get "fully" invested but results in a far more que sera sera attitude towards defaults.

As for collateral I'll worry about it later. If we end up with losses there we can't claim against income due to their lack of authorisation, perhaps they can be claimed as capital losses instead

No, platforms may classify loans as in default but that doesn't mean loss relief can be claimed. They have to be in formal recovery. Lots of loans on AC classed as in default, incl one for about 2 years, but none are classified as in recovery. HMRC definition (as quoted above) is fairly clear ISTM

Having had "disputes" with HMRC previously, including having to restate previous years' returns I now replicate whatever the platforms' tax report says (providing I can reconcile it). Given that my tax band is likely to remain stable, I feel it really is the simplest and safest thing to do.