p2pfan
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Post by p2pfan on Apr 4, 2020 22:35:16 GMT
To confirm, is it the case that you can't claim loss relief on tax for loans on BridgeCrowd because it is not classified as a P2P platform by HMRC?
Despite BC being brilliant at getting payments from borrowers thusfar, far better than most platforms, with the Coronavirus situation there will invariably be non-payments and defaults even on this platform. Therefore do you see the inability to get loss relief as being a significant negative for lending through BC?
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ilmoro
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Post by ilmoro on Apr 4, 2020 22:50:26 GMT
To confirm, is it the case that you can't claim loss relief on tax for loans on BridgeCrowd because it is not classified as a P2P platform by HMRC? Despite BC being brilliant at getting payments from borrowers thusfar, far better than most platforms, with the Coronavirus situation there will invariably be non-payments and defaults even on this platform. Therefore do you see the inability to get loss relief as being a significant negative for lending through BC? Correct. SAIM 12000 only allows you claim losses against income on platforms that have 'operating an electronic platform in relation to lending' permissions which BC do not currently have. You may be able to claim losses against CGT if applicable (not something I have any knowledge of) Is it a significant negative? Depends on your view of BC loan book and likelihood of significant losses … so far it hasn't been AIUI
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p2pfan
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Post by p2pfan on Apr 5, 2020 20:13:10 GMT
Thank you. That's useful.
For my curiosity why do other P2P platforms qualify for loss relief but not BC?
I'm factoring it in as a minor but notable negative because in the environment we are likely to be in going forward defaults are going to become more prevalent on every platform. While BC have been much better than most other platforms thusfar, that was during a bull market.
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ilmoro
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Post by ilmoro on Apr 5, 2020 20:47:23 GMT
Thank you. That's useful. For my curiosity why do other P2P platforms qualify for loss relief but not BC? I'm factoring it in as a minor but notable negative because in the environment we are likely to be in going forward defaults are going to become more prevalent on every platform. While BC have been much better than most other platforms thusfar, that was during a bull market. Because they have the relevant FCA p2p permission and offer article 36h compliant loans.
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nick
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Post by nick on Mar 16, 2021 13:36:31 GMT
Thank you. That's useful. For my curiosity why do other P2P platforms qualify for loss relief but not BC? I'm factoring it in as a minor but notable negative because in the environment we are likely to be in going forward defaults are going to become more prevalent on every platform. While BC have been much better than most other platforms thusfar, that was during a bull market. Because they have the relevant FCA p2p permission and offer article 36h compliant loans. And at a higher level, BC are not p2p, lenders are lending to BC and not the underlying borrower. A trust structure has put in place to help protect lenders in the event of BC going under, but the effectiveness of this structure is very dependent on BC ensuring that it operating precisely under the terms of the trust.
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p2pfan
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Post by p2pfan on Mar 16, 2021 16:54:07 GMT
Because they have the relevant FCA p2p permission and offer article 36h compliant loans. And at a higher level, BC are not p2p, lenders are lending to BC and not the underlying borrower. A trust structure has put in place to help protect lenders in the event of BC going under, but the effectiveness of this structure is very dependent on BC ensuring that it operating precisely under the terms of the trust. BridgeCrowd/SoMo are a brilliant lending platform in so many ways and by far one of the best in the industry. But the fact that there is no loss relief as available with lending through P2P platforms worries me. I've suffered very significant losses with other P2P platforms suddenly closing down, but at least I know that one day I will be able to write-off those hefty losses against taxes payable on my profits from lending on other P2P platforms. With SoMo we can't do that (I believe). With so many borrowers and P2P platforms going bust and more likely to in the remaining three quarters of this year, how stable and secure do SoMo seem to be? My understanding is they are in a healthy state - but I was led to believe that about quite a few investing/lending companies that then suddenly collapsed!
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Greenwood2
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Post by Greenwood2 on Mar 16, 2021 18:19:59 GMT
And at a higher level, BC are not p2p, lenders are lending to BC and not the underlying borrower. A trust structure has put in place to help protect lenders in the event of BC going under, but the effectiveness of this structure is very dependent on BC ensuring that it operating precisely under the terms of the trust. BridgeCrowd/SoMo are a brilliant lending platform in so many ways and by far one of the best in the industry. But the fact that there is no loss relief as available with lending through P2P platforms worries me. I've suffered very significant losses with other P2P platforms suddenly closing down, but at least I know that one day I will be able to write-off those hefty losses against taxes payable on my profits from lending on other P2P platforms. With SoMo we can't do that (I believe). With so many borrowers and P2P platforms going bust and more likely to in the remaining three quarters of this year, how stable and secure do SoMo seem to be? My understanding is they are in a healthy state - but I was led to believe that about quite a few investing/lending companies that then suddenly collapsed! I think you have four years after write off to offset against tax, and of course you need profitable 'real' P2P sites to offset against, if you have hefty losses you will need hefty gains somewhere else, I wouldn't know where to suggest. So far there are no losses on Somo (touch wood) and I would think the last thing you need is more allowable losses to offset!
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nick
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Post by nick on Mar 16, 2021 20:02:50 GMT
And at a higher level, BC are not p2p, lenders are lending to BC and not the underlying borrower. A trust structure has put in place to help protect lenders in the event of BC going under, but the effectiveness of this structure is very dependent on BC ensuring that it operating precisely under the terms of the trust. BridgeCrowd/SoMo are a brilliant lending platform in so many ways and by far one of the best in the industry. But the fact that there is no loss relief as available with lending through P2P platforms worries me. I've suffered very significant losses with other P2P platforms suddenly closing down, but at least I know that one day I will be able to write-off those hefty losses against taxes payable on my profits from lending on other P2P platforms. With SoMo we can't do that (I believe). With so many borrowers and P2P platforms going bust and more likely to in the remaining three quarters of this year, how stable and secure do SoMo seem to be? My understanding is they are in a healthy state - but I was led to believe that about quite a few investing/lending companies that then suddenly collapsed! I wouldn't let the tail wag the dog, ie the offsetting of losses should really be a secondary consideration and a small offset in net returns you will get over the longer term. I had avoided SoMo for several years as I couldn't get my head around why they weren't authorised and regulated by the FCA in respect of their p2p activities. The responses I received from SoMo on another forum thread didn't make sense to me at the time so I avoided investing. I had previously been burn't investing on Collateral where I had raised regulatory concerns and accepted their explanations at face value only to find out my concerns had been valid and was a root cause of their demise! It wasn't until more recently when I took another look at how SoMo are structured and operate that I realised they are not p2p at all and that they are themselves are the principals, notwithstanding the trust structure they claim to have in place. I feel that they could be a lot clearer about their structure as I'm sure most people believe they are a p2p platform. Now that I fully understand their structure I have been happy to deploy capital on the platform. In respect of their financials, they appear to be in good shape (but I remember Lendy having strong financials before they overextended themselves on development loans). I like the fact that SoMo have a lot of skin in the game. This should ensure that strong underwriting is a key focus and that hopefully they will not be tempted to move along the risk spectrum. The major drawback of them not being true p2p is that we are very reliant on them policing their own conflicts of interest (eg there is nothing stopping them dumping their interests in problematic loans to lenders) and strictly following the terms of the trust to ensure the effective ringfencing of assets. In my experience when a firm is under pressure or stress it is tempting for them to start cutting corners for their own benefit at the expense of lenders/creditors. We have even seen this at regulated firms where the consequences are far more material, yet it still happens. The fact that they are not regulated as a p2p platform also means it will be more difficult to get redress in the event of any compliant/non-compliance with contract etc. That said, FCA regulation has proven to be fairly ineffectual when things have gone wrong at another platforms. I limit what I invest on any platform to what I'm comfortable losing 100% if the worst comes to the worst. Platform/borrower failure could come from any number of source from poor underwriting, change in market conditions and litigation name a few. However, nearly all the platforms that have failed (I was an investor in LY, MT, COL & FS) showed warning signs months if not year before their final demise so monitoring of forums can provide a good early warning and opportunity to reduce your exposure to those platforms. In respect of SoMo, as of today they seem to be good financial shape, their loan book looks okay and they appear fairly competent at the core business of originating, underwriting and administrating loans and I haven't come across any alarm bells, fingers crossed..........
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Greenwood2
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Post by Greenwood2 on Mar 16, 2021 20:30:02 GMT
BridgeCrowd/SoMo are a brilliant lending platform in so many ways and by far one of the best in the industry. But the fact that there is no loss relief as available with lending through P2P platforms worries me. I've suffered very significant losses with other P2P platforms suddenly closing down, but at least I know that one day I will be able to write-off those hefty losses against taxes payable on my profits from lending on other P2P platforms. With SoMo we can't do that (I believe). With so many borrowers and P2P platforms going bust and more likely to in the remaining three quarters of this year, how stable and secure do SoMo seem to be? My understanding is they are in a healthy state - but I was led to believe that about quite a few investing/lending companies that then suddenly collapsed! I wouldn't let the tail wag the dog, ie the offsetting of losses should really be a secondary consideration and a small offset in net returns you will get over the longer term. I had avoided SoMo for several years as I couldn't get my head around why they weren't authorised and regulated by the FCA in respect of their p2p activities. The responses I received from SoMo on another forum thread didn't make sense to me at the time so I avoided investing. I had previously been burn't investing on Collateral where I had raised regulatory concerns and accepted their explanations at face value only to find out my concerns had been valid and was a root cause of their demise! It wasn't until more recently when I took another look at how SoMo are structured and operate that I realised they are not p2p at all and that they are themselves are the principals, notwithstanding the trust structure they claim to have in place. I feel that they could be a lot clearer about their structure as I'm sure most people believe they are a p2p platform. Now that I fully understand their structure I have been happy to deploy capital on the platform. In respect of their financials, they appear to be in good shape (but I remember Lendy having strong financials before they overextended themselves on development loans). I like the fact that SoMo have a lot of skin in the game. This should ensure that strong underwriting is a key focus and that hopefully they will not be tempted to move along the risk spectrum. The major drawback of them not being true p2p is that we are very reliant on them policing their own conflicts of interest (eg there is nothing stopping them dumping their interests in problematic loans to lenders) and strictly following the terms of the trust to ensure the effective ringfencing of assets. In my experience when a firm is under pressure or stress it is tempting for them to start cutting corners for their own benefit at the expense of lenders/creditors. We have even seen this at regulated firms where the consequences are far more material, yet it still happens. The fact that they are not regulated as a p2p platform also means it will be more difficult to get redress in the event of any compliant/non-compliance with contract etc. That said, FCA regulation has proven to be fairly ineffectual when things have gone wrong at another platforms. I limit what I invest on any platform to what I'm comfortable losing 100% if the worst comes to the worst. Platform/borrower failure could come from any number of source from poor underwriting, change in market conditions and litigation name a few. However, nearly all the platforms that have failed (I was an investor in LY, MT, COL & FS) showed warning signs months if not year before their final demise so monitoring of forums can provide a good early warning and opportunity to reduce your exposure to those platforms. In respect of SoMo, as of today they seem to be good financial shape, their loan book looks okay and they appear fairly competent at the core business of originating, underwriting and administrating loans and I haven't come across any alarm bells, fingers crossed.......... I'm not sure how many Somo lenders are on (or not on) this forum, but a major reason lenders on here get confused about the Somo P2P status is because it is listed under 'more P2P platforms', which it has never claimed to be. Perhaps there should be a similar to but not actually P2P platform section on the forum.
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IFISAcava
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Post by IFISAcava on Mar 16, 2021 22:31:16 GMT
And at a higher level, BC are not p2p, lenders are lending to BC and not the underlying borrower. A trust structure has put in place to help protect lenders in the event of BC going under, but the effectiveness of this structure is very dependent on BC ensuring that it operating precisely under the terms of the trust. BridgeCrowd/SoMo are a brilliant lending platform in so many ways and by far one of the best in the industry. But the fact that there is no loss relief as available with lending through P2P platforms worries me. I've suffered very significant losses with other P2P platforms suddenly closing down, but at least I know that one day I will be able to write-off those hefty losses against taxes payable on my profits from lending on other P2P platforms. With SoMo we can't do that (I believe). With so many borrowers and P2P platforms going bust and more likely to in the remaining three quarters of this year, how stable and secure do SoMo seem to be? My understanding is they are in a healthy state - but I was led to believe that about quite a few investing/lending companies that then suddenly collapsed! Not entirely true - you can offset capital losses against capital gains elsewhere, and you can lend via a limited company and offset losses against corporation tax (and therefore indirectly also against dividend tax thereafter). If you apply the rules properly, you can't offset against P2P interest elsewhere, although I suspect plenty of people have.
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nick
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Post by nick on Mar 16, 2021 22:56:38 GMT
BridgeCrowd/SoMo are a brilliant lending platform in so many ways and by far one of the best in the industry. But the fact that there is no loss relief as available with lending through P2P platforms worries me. I've suffered very significant losses with other P2P platforms suddenly closing down, but at least I know that one day I will be able to write-off those hefty losses against taxes payable on my profits from lending on other P2P platforms. With SoMo we can't do that (I believe). With so many borrowers and P2P platforms going bust and more likely to in the remaining three quarters of this year, how stable and secure do SoMo seem to be? My understanding is they are in a healthy state - but I was led to believe that about quite a few investing/lending companies that then suddenly collapsed! Not entirely true - you can offset capital losses against capital gains elsewhere, and you can lend via a limited company and offset losses against corporation tax (and therefore indirectly also against dividend tax thereafter). If you apply the rules properly, you can't offset against P2P interest elsewhere, although I suspect plenty of people have. In the case of SoMo, I don't think that a capital loss would be eligible to claim as an allowable loss. One of the conditions for a loan to qualify for CGT relief is that the borrower must use the money wholly for the purposes of a trade, excluding that of money lending. www.gov.uk/government/publications/debts-and-capital-gains-tax-hs296-self-assessment-helpsheet/hs296-debts-and-capital-gains-tax-2017#losses-on-loans-to-traders
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p2pfan
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Post by p2pfan on Mar 16, 2021 23:42:27 GMT
BridgeCrowd/SoMo are a brilliant lending platform in so many ways and by far one of the best in the industry. But the fact that there is no loss relief as available with lending through P2P platforms worries me. I've suffered very significant losses with other P2P platforms suddenly closing down, but at least I know that one day I will be able to write-off those hefty losses against taxes payable on my profits from lending on other P2P platforms. With SoMo we can't do that (I believe). With so many borrowers and P2P platforms going bust and more likely to in the remaining three quarters of this year, how stable and secure do SoMo seem to be? My understanding is they are in a healthy state - but I was led to believe that about quite a few investing/lending companies that then suddenly collapsed! Not entirely true - you can offset capital losses against capital gains elsewhere, and you can lend via a limited company and offset losses against corporation tax (and therefore indirectly also against dividend tax thereafter). If you apply the rules properly, you can't offset against P2P interest elsewhere, although I suspect plenty of people have. IFISAcava as regards the "you can't offset against P2P interest elsewhere", does that mean that - outside of a limited company - one can't offset P2P losses on one platform against tax payable on P2P interest on another P2P platform? Or are you referring to the corporation tax scenario? nick thank you for the information. I see what you mean. The link you've provided states the following as an "allowable loss": "A trade includes a profession or vocation, but doesn’t include money lending. If the loan is made to a company, that company can pass the money to another company in the same group to be used in that other company’s trade." So I suppose SoMo would be excluded, which is a real pity.
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michaelc
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Post by michaelc on Mar 16, 2021 23:52:58 GMT
BridgeCrowd/SoMo are a brilliant lending platform in so many ways and by far one of the best in the industry. But the fact that there is no loss relief as available with lending through P2P platforms worries me. I've suffered very significant losses with other P2P platforms suddenly closing down, but at least I know that one day I will be able to write-off those hefty losses against taxes payable on my profits from lending on other P2P platforms. With SoMo we can't do that (I believe). With so many borrowers and P2P platforms going bust and more likely to in the remaining three quarters of this year, how stable and secure do SoMo seem to be? My understanding is they are in a healthy state - but I was led to believe that about quite a few investing/lending companies that then suddenly collapsed! I think you have four years after write off to offset against tax, and of course you need profitable 'real' P2P sites to offset against, if you have hefty losses you will need hefty gains somewhere else, I wouldn't know where to suggest. So far there are no losses on Somo (touch wood) and I would think the last thing you need is more allowable losses to offset! How many losses were there on most of the failed platforms before they failed? Very, very few and in some cases none. It is in the nature of "p2p" loans that losses typically take years before they are crystallised. Since this platform isn't p2p we may not even know if a loan had defaulted unless we're told. This is one of many reasons why I feel the FCA needs to define a minimum set of information that needs to be disclosed to investors.
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ilmoro
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Post by ilmoro on Mar 17, 2021 1:06:50 GMT
I think you have four years after write off to offset against tax, and of course you need profitable 'real' P2P sites to offset against, if you have hefty losses you will need hefty gains somewhere else, I wouldn't know where to suggest. So far there are no losses on Somo (touch wood) and I would think the last thing you need is more allowable losses to offset! How many losses were there on most of the failed platforms before they failed? Very, very few and in some cases none. It is in the nature of "p2p" loans that losses typically take years before they are crystallised. Since this platform isn't p2p we may not even know if a loan had defaulted unless we're told. This is one of many reasons why I feel the FCA needs to define a minimum set of information that needs to be disclosed to investors. They have. COBS 18.12 but Somo isn't covered by those rules Actually there were lots of allowable losses on the P2P platforms before they failed. A loss doesn't have to have crystallised to qualify under HMRC rules.
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IFISAcava
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Post by IFISAcava on Mar 17, 2021 8:15:07 GMT
Not entirely true - you can offset capital losses against capital gains elsewhere, and you can lend via a limited company and offset losses against corporation tax (and therefore indirectly also against dividend tax thereafter). If you apply the rules properly, you can't offset against P2P interest elsewhere, although I suspect plenty of people have. IFISAcava as regards the "you can't offset against P2P interest elsewhere", does that mean that - outside of a limited company - one can't offset P2P losses on one platform against tax payable on P2P interest on another P2P platform? Or are you referring to the corporation tax scenario? nick thank you for the information. I see what you mean. The link you've provided states the following as an "allowable loss": "A trade includes a profession or vocation, but doesn’t include money lending. If the loan is made to a company, that company can pass the money to another company in the same group to be used in that other company’s trade." So I suppose SoMo would be excluded, which is a real pity. you can do that for P2P, but the issue here is that by the strict definition, SoMo isn't doing P2P.
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