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Post by mrclondon on Dec 12, 2014 14:11:34 GMT
I think another platform (can't remember which) said at one point they would be deducting tax before crediting investors. The platform was the now defunct Squirrl.com, but as with this wind loan, it wasn't the platform deducting the tax it was the borrowing company which was The D****** Group. The problem as I see it, is the borrowing company are then responsible for supplying tax certificates to each lender showing the tax deducted ... not the platform.
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baz657
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Post by baz657 on Dec 12, 2014 14:48:47 GMT
What would happen if, for whatever reason, the borrowing company was unable to pay the tax due on the interest when it became payable? Would HMRC have the ability or legislation to come after us?
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Post by chris on Dec 12, 2014 15:35:12 GMT
The borrower is deducting 20% tax from the interest payments, so this loan is not helpful for non UK residents, as it becomes too complicated to declare it separately from all other P2P loans. I do hope this will not become a habit. Wow that is a major disincentive for investment esp if your income is below tax threshold and/or you don't fill in a self assessment tax return. At least with bank interest you can register for gross interest. I really hope this does not catch on. Our tax certificates will show the gross interest received on all loans, tax deducted across all loans, and therefore the net interest received across all loans. We're putting in place a quick update for today but will work with our lenders to make sure the tax statement simplifies reporting for you as much as we can. We're meeting with HMRC shortly in order to discuss a sector wide solution and will be pressing these points with them as the current legislation is clearly out of date and impractical for this industry, especially with other changes coming like ISAs.
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Post by chris on Dec 12, 2014 15:35:45 GMT
What would happen if, for whatever reason, the borrowing company was unable to pay the tax due on the interest when it became payable? Would HMRC have the ability or legislation to come after us? I would assume that the borrower retains liability but will check and see if we can give an official answer to this.
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bugs4me
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Post by bugs4me on Dec 12, 2014 15:42:24 GMT
What would happen if, for whatever reason, the borrowing company was unable to pay the tax due on the interest when it became payable? Would HMRC have the ability or legislation to come after us? The tax has been deducted at source - arrangement with HMRC. Cannot see how an individual would be liable but then again, HMRC are a law to themselves. Haven't seen mention of the R85 or is this restricted to banks and b/s?
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Post by chris on Dec 12, 2014 15:48:39 GMT
What would happen if, for whatever reason, the borrowing company was unable to pay the tax due on the interest when it became payable? Would HMRC have the ability or legislation to come after us? The tax has been deducted at source - arrangement with HMRC. Cannot see how an individual would be liable but then again, HMRC are a law to themselves. Haven't seen mention of the R85 or is this restricted to banks and b/s? Internally we agree. As the borrower would have to be a UK company for this to be relevant, HMRC can never (in our teams insolvency experience) overreach the corporate body for a tax reclaim. It is the companies liability and HMRC's claim must be against the company. This is something we'll be confirming with our own tax advisers.
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bugs4me
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Post by bugs4me on Dec 12, 2014 15:58:01 GMT
The tax has been deducted at source - arrangement with HMRC. Cannot see how an individual would be liable but then again, HMRC are a law to themselves. Haven't seen mention of the R85 or is this restricted to banks and b/s? Internally we agree. As the borrower would have to be a UK company for this to be relevant, HMRC can never (in our teams insolvency experience) overreach the corporate body for a tax reclaim. It is the companies liability and HMRC's claim must be against the company. This is something we'll be confirming with our own tax advisers. Could you also mention the R85 please chris. Think it'll probably be an awaiting clarification issue and leave it to whoever gets elected next May!
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Post by chris on Dec 12, 2014 15:59:14 GMT
Internally we agree. As the borrower would have to be a UK company for this to be relevant, HMRC can never (in our teams insolvency experience) overreach the corporate body for a tax reclaim. It is the companies liability and HMRC's claim must be against the company. This is something we'll be confirming with our own tax advisers. Could you also mention the R85 please chris. Think it'll probably be an awaiting clarification issue and leave it to whoever gets elected next May! I'd imagine so but will mention it
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JamesFrance
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Port Grimaud 1974
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Post by JamesFrance on Dec 12, 2014 16:15:53 GMT
I feel that this borrower should have declared their intention to withhold tax before the loan was issued. I for one would not have chosen to lend under this arrangement and will now attempt to dispose of the thankfully small amount picked up by the bidding system. That could be difficult as I imagine there will be a rush for the exit to avoid aggravation. I have no intention of asking my controleur des impots how to treat this and thereby drawing attention to myself unnecessarily.
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Post by chris on Dec 12, 2014 16:42:17 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.
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gnasher
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Post by gnasher on Dec 12, 2014 17:03:52 GMT
In effect this looks like it will result in a reduced rate of return to us borrowers. OK tax paid in the end will be the same, however we do not get to use the full interest to earn more interest on other loans before we pay our tax, so we will earn less on our portfolio as a whole due to reduced compounding. Am I right?. Meanwhile as has already been pointed out, the borrower gets to keep the money thus improving their cash flow. It seems somewhat surprising that this is the first borrower who has spotted this opportunity across all the p2b platforms and hundreds of loans.
Now this little opportunity is in the open, I guess we can expect many more. I think that in future all borrowers should be forced to declare whether or not they will be withholding tax, so we can make our decisions accordingly.
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. .
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oldgrumpy
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Post by oldgrumpy on Dec 12, 2014 17:06:59 GMT
I wonder how many borrowers are/were not aware they can do this, and will seek to transfer to this system in the future, for various accounting reasons. I have had a friendly phone conversation with a nice lady from HMRC and it seems I still don't need to fill in a tax return (  ), but this differentiation between tax deducted and tax not deducted interest payments may make HMRC start demanding the extra work from us.  cross posted with Dennis's mut |
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duck
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Post by duck on Dec 12, 2014 17:07:16 GMT
Since I have small amounts in this loan both personally and through my business the potential to confuse my accountants grows!
Perhaps HMRC should also look at their policy of issuing advance demands where Gross interest has been received by individuals. Since the assessment is made on previous interest if more/most loans head in this direction the assessment will be artificially high!
OK I feel grumpy, my latest demand arrived today for payment before the end of Jan. 
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bugs4me
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Post by bugs4me on Dec 12, 2014 17:22:26 GMT
<snip> Now this little opportunity is in the open, I guess we can expect many more. I think that in future all borrowers should be forced to declare whether or not they will be withholding tax, so we can make our decisions accordingly. I expect this will always appear on the Q&A's in future. Things could get 'messy' with HMRC if you need to reclaim.
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oldgrumpy
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Post by oldgrumpy on Dec 12, 2014 17:28:29 GMT
 Aaargh! There must be some tight regulation on this activity....imagine the likes of CrappusScrappus or similar deciding to invoke this method of delaying paying bills!
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), but this differentiation between tax deducted and tax not deducted interest payments may make HMRC start demanding the extra work from us. 
Aaargh! There must be some tight regulation on this activity....imagine the likes of CrappusScrappus or similar deciding to invoke this method of delaying paying bills!