gnasher
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Post by gnasher on Dec 3, 2014 19:51:02 GMT
If the news means that the tax advantage of having provision fund protection is no longer there, which looks like it is the case, then that will probably mean less money from lenders coming in.
So given the same demand from borrowers that should see the market adjust upwards to balance?
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merlin
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Post by merlin on Dec 3, 2014 23:29:24 GMT
My guess is that it will in fact push rates down, not up. It may well also encourage providers to widen their take between what lenders get and borrowers pay.
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Post by geoffrey on Dec 4, 2014 6:12:04 GMT
For those as mystified as I was by this thread, please see: talk.zopa.com/topic/9300-autumn-statement-2014/ I don't see how this news will affect RS, since it has never had this particular "problem". Moreover, the PF is more than just protection from tax losses, it's protection from bad debt more generally, so it still represents an advantage over platforms that don't have one. |
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gnasher
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Post by gnasher on Dec 4, 2014 9:31:39 GMT
Apologies if I did not make myself clear in the OP, various p2p fora are awash with discussion on this topic, so I just thought I would start a thread on how this may impact RS particularly, assuming most people would understand the background. citywire.co.uk/money/peer-to-peer-lending-boost-investors-allowed-to-offset-loan-losses/a787588This is great news for p2x lending generally, but possibly bad news for RS as one of their key advantages over their competitors looks like it will be removed. Basically from April 15 p2p lenders will be able to offset capital losses against interest earned. This is a big deal, especially for higher rate taxpayers. As things stand a higher rate tax payer on say TC or AC, having put a lot of time and effort into loan picking and duedil and getting in excess of 10% interest on their loan portfolio, experiencing average annual capital losses of say 2%ish could be no better off than if had they thrown the lot into the RS 5yr market with no associated time and effort. If they were rash or unlucky it is quite possible that they would get less than a RS return. Unless you are in a position to use the capital losses to offset against capital gains elsewhere, then they are wasted and you are out of pocket. So the provision fund has the key advantage of no capital losses hence no tax disadvantage of p2p lending. That is a very significant change to the p2p landscape. So my original point was that many people will now be obviously better off putting their money into p2b higher rate/higher risk offerings because the tax disadvantage of doing that will be removed. So less lending money coming in, same demand, should push rates up? I cannot see any mechanism that will push RS rates down. Certainly for risk averse, ordinary tax payers RS will still be a good home for their money. |
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pikestaff
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Post by pikestaff on Dec 4, 2014 10:19:52 GMT
We are unlikely to see the actual legislation until the end of 2015, which is after the election so it may never happen.
If it does happen it will remove the main tax benefit of a provision fund, but there may still be benefits in terms of less hassle - we don't yet know what the process for claiming losses will be. If negligible value claims have to be made (as for worthless shares) it could be quite painful and could involve a lot of admin for the platforms without a PF.
Other things beiing equal though, I would expect RS rates to nudge up once we have more clarity about the legislation. I think there are a lot of higher rate taxpayers on RS who might look elsewhere at that point.
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ramblin rose
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Post by ramblin rose on Dec 4, 2014 16:44:34 GMT
The offsetting of losses against gains is only one part of the statement, which may or may not affect lending rates. However, the more ominous part of it is surely that bit that says that the blocks are being taken off institutional lenders being able to lend via p2p - that could bring a huge flood of money in from 'the big boys', and that would surely result in lower rates all round. (No, I don't have a link to hand, but I'm sure they aren't that difficult to find).
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pikestaff
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Post by pikestaff on Dec 4, 2014 17:12:28 GMT
The offsetting of losses against gains is only one part of the statement, which may or may not affect lending rates. However, the more ominous part of it is surely that bit that says that the blocks are being taken off institutional lenders being able to lend via p2p - that could bring a huge flood of money in from 'the big boys', and that would surely result in lower rates all round. (No, I don't have a link to hand, but I'm sure they aren't that difficult to find). Agreed. What I should have said is that rates on RS (and other products with a provision fund) are likely to nudge up relative to other p2p offerings. Since you ask, here is a link to the document www.gov.uk/government/uploads/system/uploads/attachment_data/file/382327/44695_Accessible.pdf. For ease of reference I also attach the key extracts.
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