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Post by diamon89 on Sept 17, 2020 12:02:21 GMT
I guess many others are trying to figure out the tax treatment of all these irrecoverable loans. Here's what I understand: - Losses on a P2P loan to an individual can only be offset against other P2P income. - Losses on any loan (inc. P2P) to a trader (i.e. a business loan, broadly speaking) can be usually offset against any capital gain (but see note below) But the fairly new provision to allow P2P losses to by offset against P2P income seems to have wiped out the long-standing provision that you can treat a loss on a loan to a business as a capital loss. Can this really be right? I'm relying on this document: Income tax relief for irrecoverable P2P loansThis seems like a big deal. Capital losses can be kept for ages (forever?) to use until such time as you have a capital gain to offset them against. Has this relief really been withdrawn? Offsetting P2P losses against P2P interest isn't so helpful. I'm not very keen on P2P investments now, it would take me more than a lifetime to build up enough future P2P interest to offset the Funding Secure losses I've enjoyed. Anyone else have any insight into this issue?
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james100
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Post by james100 on Sept 17, 2020 12:53:58 GMT
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cwah
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Post by cwah on Sept 18, 2020 6:13:44 GMT
The law seems really unfair on the little guys.
Not only we get screwed up by the FCA, but we also get screwed up by HMRC who only allows to offset against future P2P interest.
And... they added up to 4 years!
Imagine if they applied such rule for business... so many would go bust
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Post by diamon89 on Oct 5, 2020 16:16:49 GMT
James - Thank you. It seems to me that you can get CGT relief, from that link to the SAIM: "This [being eligible for CGT relief] could also apply if the amount of Income tax relief for irrecoverable peer to peer loans available is limited to less than the full amount lost by the lender. In that case it is also possible that the lender may be eligible for capital loss relief on the remainder of the loss that they incur, if the capital loss relief conditions are met." If I have very little P2P interest income then the "amount of Income tax relief ... is limited to less than the full amount lost". I'm still not 100% comfortable, because this is portrayed as such a rare edge case in the guidance, but surely is actually very common. Lots of investors would find themselves left with a rump of loans which eventually default, in a year when the investor hasn't made any new investments therefore no new interest to offset against.
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