pikestaff
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Post by pikestaff on Dec 13, 2014 8:24:37 GMT
They have to pay it as soon as they withhold it. I think you will find it's quarterly, within 14 days of the end of the quarter in which the interest is paid. On the question of whether the borrower is right to deduct the interest, my post here p2pindependentforum.com/post/32201/thread contains a suggestion as to why other borrowers may not. It's only a suggestion and I could very well be wrong, but there must be a good reason why other borrowers don't. Edit: Having just looked at the HMRC manual on the subject, my suggestion seems unlikely to be correct. However, there must still be a good reason.
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Post by geoffrey on Dec 13, 2014 8:51:07 GMT
We'll also be keeping the loan out of the GEIA or the time being due to the complications of the tax treatment and the provision fund. Thank you, chris, that's very sensible and alleviates my concern regarding non-tax-payers and the GEIA, even though we'll need a better long-term solution if such withholding actions become more common. It will be interesting to see how such issues are dealt with if/when P2P and P2B loans become eligible for ISAs.
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JamesFrance
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Port Grimaud 1974
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Post by JamesFrance on Dec 13, 2014 9:28:33 GMT
As there seems to be a way of paying interest gross to companies, should this also apply to non residents? I know that a bank needs to deduct tax from interest payments unless they hold the appropriate certificate signed by the lender, but if a resident of another country lends to an ordinary British trading company would they be right to make a tax payment to HMRC on behalf of the foreign lender who is not liable?
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Post by geoffrey on Dec 13, 2014 9:38:11 GMT
As there seems to be a way of paying interest gross to companies, should this also apply to non residents? I know that a bank needs to deduct tax from interest payments unless they hold the appropriate certificate signed by the lender, but if a resident of another country lends to an ordinary British trading company would they be right to make a tax payment to HMRC on behalf of the foreign lender who is not liable? I'm no tax expert, but I do know that non-UK residents are liable to withholding of tax on rental payments for property they hold in the UK, and also for withholding tax on bank interest. So I can't imagine P2P and P2B would be any different once the withholding regime has been clarified.
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JamesFrance
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Post by JamesFrance on Dec 13, 2014 9:48:16 GMT
Income from UK property is taxable in the UK and not in the country of residence. Of course I could put the interest payment into ny French tax return, but have no wish to enter something which looks peculiar and may attract the attention of the tax people. If all the payments from Assetz had tax deducted as maybe they will one day that would appear normal.
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tonyr
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Post by tonyr on Dec 13, 2014 10:59:18 GMT
Anyone fancy doing a few sums to work out what impact this will have on the borrowers, say lost interest per annum per £1k invested in loans that withold tax. . Quick check using XIRR on libreoffice, I'm not a tax expert/account/lawyer,... blah blah, not giving advice, and am probably wrong, but here goes:- Assume worst case, a 1 year loan draws down with no delays on 8th March, pays monthly on time and repays on time. Assume 9.5% gives an IRR of 9.92% (due to monthly compounding) with no withholding and no tax. For a 20% taxpayer paying tax on 25th Jan year later (no point leaving it to the very last day), and assuming that they don't make you make payments on account, this is a net IRR of 8.07%. If there is withholding from the borrower this falls to 7.87%. So a 0.2% loss (I think). I haven't considered the impact of tax on the extra interest earned, which I need to; I need to think about it a bit more. There's a bigger flaw. P2P income results in a tax liability and after the first year you can either chose to pay the *estimated* amount for next year via a change in your tax code or by payment on account. In either case you are paying the estimated tax as you get the income so there is no substantial monetary difference whether borrowers withhold tax or not.
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tonyr
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Post by tonyr on Dec 13, 2014 10:59:33 GMT
The repayment has now been processed. Your tax statements and transaction histories should show the retention of tax, but as the timeline for this development has been somewhat forced upon us please do let me know if you have any questions. Everyone has been defaulted to 20% tax, as per the tax law the borrower is invoking, unless you have been flagged on the system as a limited company at time of registration. What happens to the SIPP accounts? They can't claim the tax back.
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Post by chris on Dec 13, 2014 11:58:37 GMT
Income from UK property is taxable in the UK and not in the country of residence. Of course I could put the interest payment into ny French tax return, but have no wish to enter something which looks peculiar and may attract the attention of the tax people. If all the payments from Assetz had tax deducted as maybe they will one day that would appear normal. The law as written is that only UK companies are exempt, no other exceptions even for SIPPs, ISAs, etc. I know andrewholgate is looking to discuss all this in detail with HMRC when he meets them on Wednesday.
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pikestaff
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Post by pikestaff on Dec 13, 2014 12:03:33 GMT
As there seems to be a way of paying interest gross to companies, should this also apply to non residents? I know that a bank needs to deduct tax from interest payments unless they hold the appropriate certificate signed by the lender, but if a resident of another country lends to an ordinary British trading company would they be right to make a tax payment to HMRC on behalf of the foreign lender who is not liable? At present I don't think there is. The R85 (for residents) or R105 (for non-residents) applies only to bank and building society interest. I'd be surprised if this were to change where interest is deducted by companies, because it's always been so. If sanity reigns and we end up where we thought we were, with no deduction by companies but (post April 2017) with deduction by the platforms, there will be a consultation period and that will the time to lobby for the R85 / R105 regime to be extended to p2p.
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sand2880
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Post by sand2880 on Dec 13, 2014 12:09:33 GMT
In relation to tax deducted, I believe the SIPP/ISA manger would reclaim the tax for these accounts on the holders behalf.
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sand2880
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Post by sand2880 on Dec 13, 2014 12:16:12 GMT
If sanity reigns and we end up where we thought we were, with no deduction by companies but (post April 2017) with deduction by the platforms, there will be a consultation period and that will the time to lobby for the R85 / R105 regime to be extended to p2p. Investments within fixed interest assets do have tax deducted at source and there is no exemption like deposit accounts. As the P2P sector is an investment with capital risks I cant see this being given special consideration over traditional fixed interest funds. I think its something that will become the norm once the tax authorities have caught up with way the P2P market is structured.
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pikestaff
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Post by pikestaff on Dec 13, 2014 12:31:53 GMT
If sanity reigns and we end up where we thought we were, with no deduction by companies but (post April 2017) with deduction by the platforms, there will be a consultation period and that will the time to lobby for the R85 / R105 regime to be extended to p2p. Investments within fixed interest assets do have tax deducted at source and there is no exemption like deposit accounts. As the P2P sector is an investment with capital risks I cant see this being given special consideration over traditional fixed interest funds. I think its something that will become the norm once the tax authorities have caught up with way the P2P market is structured. You may well be right but it's got to be worth lobbying for. There are a lot more small investors in p2p than in corporate loans generally and the political wind might be behind us.
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Post by bracknellboy on Jan 3, 2015 14:51:50 GMT
anyone know why this one is still on 'Investments Paused' ?
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Post by mrclondon on Jan 3, 2015 17:36:57 GMT
anyone know why this one is still on 'Investments Paused' ? AIUI we are waiting for the tax that was deducted to be received from the borrower ... I guess it will be easier to try and rebuild the database records without subsequent sales activity to confuse things. Possibly will have to wait for Jan's payment before everything balances correctly.
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Post by batchoy on Jan 3, 2015 21:01:52 GMT
anyone know why this one is still on 'Investments Paused' ? AIUI we are waiting for the tax that was deducted to be received from the borrower ... I guess it will be easier to try and rebuild the database records without subsequent sales activity to confuse things. Possibly will have to wait for Jan's payment before everything balances correctly. As you say it will be easier to distribute the withheld funds without there being a lot of activity but it potentially depends on whether the Borrower has already paid the tax to HMRC, who are not well known for acting particularly quickly when giving money back.
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