keith
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Post by keith on Apr 9, 2018 8:42:44 GMT
I am just in the process of sorting out my tax statements from P2P accounts (and concluding that I really have too many). In some cases (MT is an example), the platform seems to be very quick to declare a default for tax purposes and which might get written back on again next year. Others (LY) appear to have a pristine record with no defaults.  I know they have discretion about when to declare the loan irredeemable. However, you would think at least one or two of the wave of defaults might be declared as such. A level of optimism on future recovery is admirable but this runs into the problem that a similar level of optimism was attached to initial valuations. Or, does LY see itself as the QANTAS of the P2P industry? |
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Post by carol167 on Apr 9, 2018 9:15:51 GMT
I am just in the process of sorting out my tax statements from P2P accounts (and concluding that I really have too many). In some cases (MT is an example), the platform seems to be very quick to declare a default for tax purposes and which might get written back on again next year. Others (LY) appear to have a pristine record with no defaults. I know they have discretion about when to declare the loan irredeemable. However, you would think at least one or two of the wave of defaults might be declared as such. A level of optimism on future recovery is admirable but this runs into the problem that a similar level of optimism was attached to initial valuations. Or, does LY see itself as the QANTAS of the P2P industry? Interesting piece in the Peer2Peer Finance News this morning on the quandry :- www.p2pfinancenews.co.uk/2018/04/06/investors-tax-quandary-defaulted-property-loans/I liked their ending sentance : "“If a lender wants to get a tax loss over with, they could set a limit of three years after the loan defaulted and, if there’s no movement on the debt, you might assume the loan is dead.” Not advice - just a suggestion by them.
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ianj
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Post by ianj on Apr 9, 2018 10:02:05 GMT
I am just in the process of sorting out my tax statements from P2P accounts (and concluding that I really have too many). In some cases (MT is an example), the platform seems to be very quick to declare a default for tax purposes and which might get written back on again next year. Others (LY) appear to have a pristine record with no defaults. I know they have discretion about when to declare the loan irredeemable. However, you would think at least one or two of the wave of defaults might be declared as such. A level of optimism on future recovery is admirable but this runs into the problem that a similar level of optimism was attached to initial valuations. Or, does LY see itself as the QANTAS of the P2P industry? I emailed them regarding loans in recovery, but the work experience lad, the one who's a dab hand at 'cut & paste', obviously didn't have anything directly related avaibleable to apply his expertise on, so I received a response to a different question, i.e. "Lendy will not deem there to be any capital loss until all viable recovery strategies have been exhausted.". Well, we should all know that by now, the way they keep harping on and on about it, as if it's some sort of virtue, and we should all be pleased about it!  Should have known better, obviously an act of supeme optimism to have posed the question in the first place!  The only advice was to "Please refer to the latest loan updates - you're on your own, kid!". Sorry, I made up that last bit, but that's how it sounds to me. 
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Post by skint4achange on Apr 9, 2018 10:19:53 GMT
Not knowing the in's and out of the tax system (So please don't quote me on this!), but if you choose to declare an investment as a loss but later there is a recovery made, provided you declare the recovery as taxable income I do not see that HMRC would have an issue with it?
Maybe I am wrong in how I see it, but even HMRC's definition of what to declare as a capital lose is quite sketchy.
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sl75
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Post by sl75 on Apr 9, 2018 10:55:12 GMT
Not knowing the in's and out of the tax system (So please don't quote me on this!), but if you choose to declare an investment as a loss but later there is a recovery made, provided you declare the recovery as taxable income I do not see that HMRC would have an issue with it?
Maybe I am wrong in how I see it, but even HMRC's definition of what to declare as a capital lose is quite sketchy. HMRC will also be informed by the platforms directly of the same figures they have provided us with. On a tax return HMRC only receive an overall total, but I'd guess their first level of checking for tax evasion/fraud would simply be cross-reference the figures they've already received by other means with the figures the person themselves has provided on their tax return. If they notice a discrepancy and choose to investigate, you'd better have detailed records showing exactly how and why you arrived at the declared figure that differs significantly from the figure(s) provided by the platform(s), and also that the same approach has been applied consistently across different tax years; even in the years when your chosen approach results in a higher taxable income than the "normal" method of using the platform-supplied figures... It would probably look suspicious if you'd been happily using the platform-supplied figures for several years and then chose a different approach only when it suited you, but as I understand it, tax fraud would only occur if you were to subsequently revert to the platform-supplied figures in a later tax year when that shows a lower figure, rather than making the appropriate amendments to take account of the recoveries on the loans you'd declared a loss despite the platform having not done so, and/or the platform-declared losses that you'd already claimed in a previous tax year. For me, the time cost of researching, implementing and maintaining any alternative calculation (and indeed of convincing my accountant[1] of these figures whilst paying for his time!) far exceeds any potential benefit that could be gained by moving a tax liability from one tax year to another, so "print off tax statements [as pdf to save paper!], and supply to accountant together with a convenient summary spreadsheet that adds up the totals for him" seems far preferable. Other people's cost/benefit analysis may vary of course... [1] (A similar cost-benefit analysis also led to me to choose to use a professional accountant to submit my UK tax return once my circumstances changed such that I can no longer use HMRC's online service)
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jwatson
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Post by jwatson on Apr 9, 2018 10:57:48 GMT
Not knowing the in's and out of the tax system (So please don't quote me on this!), but if you choose to declare an investment as a loss but later there is a recovery made, provided you declare the recovery as taxable income I do not see that HMRC would have an issue with it?
Maybe I am wrong in how I see it, but even HMRC's definition of what to declare as a capital lose is quite sketchy. That's my understanding too. However I would keep evidence of why the investment was considered unrecoverable at the time, as the taxman might say this was being used as a mechanism to transfer allowances from one year to another. Also I seem to remember that there was a previous discussion on all of this on here.
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ianj
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Post by ianj on Apr 9, 2018 11:08:49 GMT
Not knowing the in's and out of the tax system (So please don't quote me on this!), but if you choose to declare an investment as a loss but later there is a recovery made, provided you declare the recovery as taxable income I do not see that HMRC would have an issue with it?
Maybe I am wrong in how I see it, but even HMRC's definition of what to declare as a capital lose is quite sketchy. HMRC's definition is sufficiently clear for other platforms I'm in (AB, AC, FS, MT, TC, FS) to provide totals for 'declarable losses', in recovery, on their annual Tax Statements. So it's down to lenders to make the decisions, but Lendy are no more use that the Scottish Football Association when it comes to assisting lenders to determine, with total clarity, loans which are subject to official recovery action, or when that action was instigated. It's not beeing required to make a personal effort that riles me, it's their attitude. With all the problems they have currently you'd think they'd be bending over backward to at least sound accommodating towards the those that will make or break the business.
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Post by skint4achange on Apr 9, 2018 11:11:24 GMT
Not knowing the in's and out of the tax system (So please don't quote me on this!), but if you choose to declare an investment as a loss but later there is a recovery made, provided you declare the recovery as taxable income I do not see that HMRC would have an issue with it?
Maybe I am wrong in how I see it, but even HMRC's definition of what to declare as a capital lose is quite sketchy. So it's down to lenders to make the decisions, but Lendy are no more use that the Scottish Football Association when it comes to assisting lenders to determine, with total clarity, loans which are subject to official recovery action, or when that action was instigated. It's not beeing required to make a personal effort that riles me, it's their attitude. With all the problems they have currently you'd think they'd be bending over backward to at least sound accommodating towards the those that will make or break the business. Yes, but as we all know, no investor has lost a penny from investing with Lendy! 
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hazellend
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Post by hazellend on Apr 9, 2018 11:13:00 GMT
Not knowing the in's and out of the tax system (So please don't quote me on this!), but if you choose to declare an investment as a loss but later there is a recovery made, provided you declare the recovery as taxable income I do not see that HMRC would have an issue with it?
Maybe I am wrong in how I see it, but even HMRC's definition of what to declare as a capital lose is quite sketchy. That's my understanding too. However I would keep evidence of why the investment was considered unrecoverable at the time, as the taxman might say this was being used as a mechanism to transfer allowances from one year to another. Also I seem to remember that there was a previous discussion on all of this on here.
I don't think the tax man would say that if you were just putting in the figures you got from the platform. MT for example, have put all their defaulted loans into this years tax statement so I am claiming, but there is likely to be substantial recovery so I will pay tax on that next year, once MT have updated next years tax statement.
Lendy's method is much more complicated, you could be waiting years until ALL avenues have been exhausted. The latest they should put down a default should be after an asset has been sold for less than the loan amount.
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Post by skint4achange on Apr 9, 2018 12:29:56 GMT
This is why I say the rules are ambiguous:
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 as if 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.
This is the same treatment as any other subsequent recovery of a relieved irrecoverable loans (more detail in Subsequent recoveries).
So, looking at the above excerpt from HMRC guidelines, it is more than possible to "self certify" a loan as irrecoverable even if other proceedings are on-going.
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