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Post by oldatheist on Dec 13, 2014 22:02:55 GMT
why would the record of tax paid come from AC? The tax has been taken by the borrower therefore they need to supply each lender whose tax they hold with a suitable statement.To my mind the record keeping and proof (as with VAT) should come from the entity that takes the tax Exactly, at as far as I can see that would be a big enough problem for most businesses to drive them away from P2B platforms, which is not a good prospect. Witholding tax makes perfect sense for savings accounts with banks and building societies, but not with loan split into a lot of micro parts. The ideal solution would be for the tax collecting responsibility to by taken on by the PTP platform, which would simplify things for the borrower, and allow non-tax paying lenders to be ably to register themselves as such so they could be payed gross.
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sl75
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Post by sl75 on Dec 13, 2014 22:07:01 GMT
I wonder if any of the platforms foresaw this. If not what an indictement of their legal advisers and accountants. On FC, the Loan Conditions (which form the contract between borrowers and lenders) explicitly state: "2.3 All repayments will be made to Lenders without deduction of income tax." Presumably if a borrower were unable to agree to that condition, they would be unable to proceed with the loan.
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hendragon
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Post by hendragon on Dec 13, 2014 22:15:36 GMT
why would the record of tax paid come from AC? The tax has been taken by the borrower therefore they need to supply each lender whose tax they hold with a suitable statement.To my mind the record keeping and proof (as with VAT) should come from the entity that takes the tax Exactly, at as far as I can see that would be a big enough problem for most businesses to drive them away from P2B platforms, which is not a good prospect. Witholding tax makes perfect sense for savings accounts with banks and building societies, but not with loan split into a lot of micro parts. The ideal solution would be for the tax collecting responsibility to by taken on by the PTP platform, which would simplify things for the borrower, and allow non-tax paying lenders to be ably to register themselves as such so they could be payed gross. why would a p2p platform do that? they don't have any part of the tax and it would be impracticable and expensive for them to maintain a system like that. If the borrowers don't like the current system borrow from somewhere else (like the banks)
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bugs4me
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Post by bugs4me on Dec 13, 2014 22:18:38 GMT
The problem I have with this or it's probably confusion is that there is just one borrower involved that has decided to adopt withholding tax at source. This is supposedly to comply with the law. Okay that's fair enough - the law is the law whether I like it or not and how it will be administered will at some stage be a nightmare I would have thought.
However, upcoming loans are declaring that interest will be paid gross. So either this is being applied by this one borrower and the other companies will in the future potentially be in breach of tax legislation or.........
Confused.com now here.
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pikestaff
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Post by pikestaff on Dec 13, 2014 22:29:25 GMT
why would the record of tax paid come from AC? The tax has been taken by the borrower therefore they need to supply each lender whose tax they hold with a suitable statement.To my mind the record keeping and proof (as with VAT) should come from the entity that takes the tax The borrower has no information on the identity of, or interest paid to, each individual lender. AC does, and other platforms might (depending on how their systems work). So, although borrowers have the statutory obligation to provide the tax statements (or so it appears), the only practical way to proceed is for borrowers to delegate the task to the platforms. With luck we will get a temporary extra-statutory concession out of HMRC, pending the forthcoming consultation on tax withholding by the platforms, and we will be back to the status quo.
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pikestaff
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Post by pikestaff on Dec 13, 2014 22:31:13 GMT
I wonder if any of the platforms foresaw this. If not what an indictement of their legal advisers and accountants. On FC, the Loan Conditions (which form the contract between borrowers and lenders) explicitly state: "2.3 All repayments will be made to Lenders without deduction of income tax." Presumably if a borrower were unable to agree to that condition, they would be unable to proceed with the loan. Although an unlawful condition is unenforceable.
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hendragon
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Post by hendragon on Dec 13, 2014 22:36:04 GMT
why would the record of tax paid come from AC? The tax has been taken by the borrower therefore they need to supply each lender whose tax they hold with a suitable statement.To my mind the record keeping and proof (as with VAT) should come from the entity that takes the tax The borrower has no information on the identity of, or interest paid to, each individual lender. AC does, and other platforms might (depending on how their systems work). So, although borrowers have the statutory obligation to provide the tax statements, the only practical way to proceed is for borrowers to delegate the task to the platforms. With luck we will get a temporary extra-statutory concession out of HMRC, pending the forthcoming consultation on tax withholding by the platforms, and we will be back to the status quo. good point. However the borrower would need to gain the agreement of the p2p platform. There is little incentive or practical reason for the platform to agree to do this without imposing charges that would negate any postive effect on the cashflow of the borrower gained by witholding the tax payments.
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sl75
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Post by sl75 on Dec 13, 2014 23:02:01 GMT
On FC, the Loan Conditions (which form the contract between borrowers and lenders) explicitly state: "2.3 All repayments will be made to Lenders without deduction of income tax." Presumably if a borrower were unable to agree to that condition, they would be unable to proceed with the loan. Although an unlawful condition is unenforceable. It would appear only unlawful for certain borrowers - i.e. I'd interpret it as acting as a prohibition on those borrowers obtaining loans through the platform. As a rough analogy - suppose someone signs a contract to receive "free" electricity, but as a condition of that contact they must allow the company to place solar panels on their roof (not an uncommon contract). For someone who does not own the rights to "their" roof, they would be unable to proceed with the contract... I don't see there'd be a get-out for them to say "but it's unlawful for you to insist on putting the solar panels on my roof, as I don't own it and cannot give you permission for that... but I still want the free electricity". Similarly, I'd tend to think that a borrower who cannot legally comply with the terms of the loan conditions should not expect to get the loan! (although I don't claim to know whose responsibility it would be for ensuring a borrower doesn't enter into a contract whose terms they cannot legally comply with).
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pikestaff
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Post by pikestaff on Dec 14, 2014 9:11:12 GMT
The borrower has no information on the identity of, or interest paid to, each individual lender. AC does, and other platforms might (depending on how their systems work). So, although borrowers have the statutory obligation to provide the tax statements, the only practical way to proceed is for borrowers to delegate the task to the platforms. With luck we will get a temporary extra-statutory concession out of HMRC, pending the forthcoming consultation on tax withholding by the platforms, and we will be back to the status quo. good point. However the borrower would need to gain the agreement of the p2p platform. There is little incentive or practical reason for the platform to agree to do this without imposing charges that would negate any postive effect on the cashflow of the borrower gained by witholding the tax payments. If the systems are good enough (as AC's seem to be) there will be a small one-off set up cost for the programming and then everything else will be pretty automatic. But I hate to think of TC doing everything manually! The incentive for the p2b platforms is that if HMRC puts its foot down. and insists that all corporate borrowers make the tax deduction, they will no longer have a business unless they play ball. The cost will be whatever it is and the platforms will have to pass it on. I do not think the borrower is doing this for a cash flow advantage. The admin cost and hassle is sure to outweigh the small benefit.
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pikestaff
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Post by pikestaff on Dec 14, 2014 9:29:16 GMT
Although an unlawful condition is unenforceable. It would appear only unlawful for certain borrowers - i.e. I'd interpret it as acting as a prohibition on those borrowers obtaining loans through the platform. As a rough analogy - suppose someone signs a contract to receive "free" electricity, but as a condition of that contact they must allow the company to place solar panels on their roof (not an uncommon contract). For someone who does not own the rights to "their" roof, they would be unable to proceed with the contract... I don't see there'd be a get-out for them to say "but it's unlawful for you to insist on putting the solar panels on my roof, as I don't own it and cannot give you permission for that... but I still want the free electricity". Similarly, I'd tend to think that a borrower who cannot legally comply with the terms of the loan conditions should not expect to get the loan! (although I don't claim to know whose responsibility it would be for ensuring a borrower doesn't enter into a contract whose terms they cannot legally comply with). If the legal position is as described, then it's unlawful for all UK companies, ie the vast majority of FC borrowers. I don't think it's right to interpret the condition as prohibiting UK companies from taking out loans through FC, because this is FC's core business. I think a court would simply sever the condition as unenforceable. If there is an outbreak of common sense at HMRC and there is an extra-statutory concession (which is a posh way of saying that they will not enforce the law) then I think the condition would probably be enforceable.
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gb007
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Post by gb007 on Dec 14, 2014 9:35:00 GMT
I wonder if any of the platforms foresaw this. If not what an indictement of their legal advisers and accountants. On FC, the Loan Conditions (which form the contract between borrowers and lenders) explicitly state: "2.3 All repayments will be made to Lenders without deduction of income tax." Presumably if a borrower were unable to agree to that condition, they would be unable to proceed with the loan. A quote from Samir Desai, FC CEO: in response to the question "On the subject of taxation, is it correct that there may be a requirement for FC, along with other platforms, to start deducting tax at source?" (March 2013): See forum.fundingcircle.com/forum/talk-to-fellow-members/all-about-lending/258-income-tax-deductibility-labour-party-recommends-changesIt appears that HMRC has provided a concession; is there any reason why it cannot be applied for AC's borrower on this occasion? The regulations now look like they will start from April 2017 and it would appear that there is no need to jump the gun.
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shimself
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Post by shimself on Dec 14, 2014 14:35:08 GMT
If it came to pass that this had to be done (heaven forfend) then it would have to be the platform (eg AC) doing the admin.
The borrower doesn't know all our names (and probably has no right to know them for all loans to date). Only the platform knows who is a company and who is a private person. Only the platform knows about loan slices bought and sold mid year.
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niceguy37
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Post by niceguy37 on Dec 14, 2014 16:24:54 GMT
If it came to pass that this had to be done (heaven forfend) then it would have to be the platform (eg AC) doing the admin. The borrower doesn't know all our names (and probably has no right to know them for all loans to date). Only the platform knows who is a company and who is a private person. Only the platform knows about loan slices bought and sold mid year. It will be very difficult for borrowers to keep track of loan parts bought and sold on a daily basis, but AC already do this for interest calculations. It should not prove too difficult for them to calculate 20% of interest earned for those who are tax-payers. If AC don't offer to do this on behalf of borrowers then I think it would discourage quite a proportion of borrowers, so let's give andrewholgate a chance to look into the feasibility and legality of AC doing so.
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Post by chris on Dec 14, 2014 17:54:41 GMT
If it came to pass that this had to be done (heaven forfend) then it would have to be the platform (eg AC) doing the admin. The borrower doesn't know all our names (and probably has no right to know them for all loans to date). Only the platform knows who is a company and who is a private person. Only the platform knows about loan slices bought and sold mid year. It will be very difficult for borrowers to keep track of loan parts bought and sold on a daily basis, but AC already do this for interest calculations. It should not prove too difficult for them to calculate 20% of interest earned for those who are tax-payers. If AC don't offer to do this on behalf of borrowers then I think it would discourage quite a proportion of borrowers, so let's give andrewholgate a chance to look into the feasibility and legality of AC doing so. We're already doing this on the loan that's triggered these discussions. We can enable this facility on a per loan basis with either the borrower or the platform retaining the tax. As I've previously posted we're now thoroughly prepared for this but hope we don't have to use it.
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Post by andrewholgate on Dec 14, 2014 22:12:33 GMT
On FC, the Loan Conditions (which form the contract between borrowers and lenders) explicitly state: "2.3 All repayments will be made to Lenders without deduction of income tax." Presumably if a borrower were unable to agree to that condition, they would be unable to proceed with the loan. A quote from Samir Desai, FC CEO: in response to the question "On the subject of taxation, is it correct that there may be a requirement for FC, along with other platforms, to start deducting tax at source?" (March 2013): See forum.fundingcircle.com/forum/talk-to-fellow-members/all-about-lending/258-income-tax-deductibility-labour-party-recommends-changesIt appears that HMRC has provided a concession; is there any reason why it cannot be applied for AC's borrower on this occasion? The regulations now look like they will start from April 2017 and it would appear that there is no need to jump the gun. Hmmmm, a mate of a mate says..... Until HMRC make a definitive public statement, the borrower is correct in their stance.
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