ukinvestor
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Post by ukinvestor on Nov 28, 2020 15:46:39 GMT
I was looking through the forum, but the question doesn't seem to have been asked before...
I had bought some loans on the loan exchange and paid the accrued interest.
Checking my tax statement, it appears that the accrued interest is not taken into account.
For example, bought a loan mid month and paid £5 accrued interest. At the end of the month, I get £10 interest. The full £10 seem to be included in my tax statement although the net interest received is only £5.
Has anyone else made a similar observation?
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IFISAcava
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Post by IFISAcava on Nov 28, 2020 17:01:06 GMT
I was looking through the forum, but the question doesn't seem to have been asked before... I had bought some loans on the loan exchange and paid the accrued interest. Checking my tax statement, it appears that the accrued interest is not taken into account. For example, bought a loan mid month and paid £5 accrued interest. At the end of the month, I get £10 interest. The full £10 seem to be included in my tax statement although the net interest received is only £5. Has anyone else made a similar observation? Yes It used to happen on FS too You buy the accrued interest tax liability and all.
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ukinvestor
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Post by ukinvestor on Nov 30, 2020 22:25:41 GMT
What do you mean by "accrued interest tax liability"?
Are you trying to say that when I buy a loan on the loan exchange and pay the seller £5 for the accrued interest, I have to pay the tax for the £5 accrued interest and the seller gets the £5 accrued interest tax free?
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Dec 1, 2020 0:52:38 GMT
What do you mean by "accrued interest tax liability"? Are you trying to say that when I buy a loan on the loan exchange and pay the seller £5 for the accrued interest, I have to pay the tax for the £5 accrued interest and the seller gets the £5 accrued interest tax free? There has been quite a bit of debate about this previously. The question is whether loans count as securities and therefore whether the Accrued Interest System applies. Not sure if a definitive answer was ever established (Do a search for AIS on the forums if you want to see some of the discussion) Under AIS rules you are buying the 'security' 'cum div', therefore the seller would be taxed on the accrued interest and the buyer would get relief for the accrued interest. www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim4020 Different platforms seem to have different views - for what you said in your OP PL (like FS) seem to have taken the view that AIS doesnt apply so the answer to your question is yes, you pay, they dont. Probably need to ask PL for an explanation or seek tax advice.
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IFISAcava
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Post by IFISAcava on Dec 1, 2020 9:20:42 GMT
What do you mean by "accrued interest tax liability"? Are you trying to say that when I buy a loan on the loan exchange and pay the seller £5 for the accrued interest, I have to pay the tax for the £5 accrued interest and the seller gets the £5 accrued interest tax free? I forgot the comma "accrued interest, including tax liability". I guess up to you to justify it to HMRC if you think the tax cert provided by the platform is incorrect. PL's 10% fee is also (strictly speaking) not tax-deductible in the way they have set it up. Again, discussion on this elsewhere in the forum, and again, up to you (or your tax advisors) to justify whatever you do to HMRC.
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ukinvestor
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Post by ukinvestor on Dec 3, 2020 20:03:41 GMT
Thanks for the explanation - understand the logic. I had a look at the transactions from tax year 2018/19 and indeed the accrued interest received when selling a loan is not included in the interest calculation  For the tax year 2019/20 the accrued interest received when selling a loan on the loan exchange has been included in the interest calculation (this seems to be a change from the previous tax year). When buying a loan on the loan exchange the accrued interest paid is excluded from the interest calculation and the interest for the full period is included in the interest calculation (no recognition of the accrued interest). It seems the seller is paying tax on the accrued interest (included in the interest calculation) and the buyer is also paying tax on the accrued interest (full interest for the period included in the interest calculation and no credit for the accrued interest)  Can someone else check their transactions please in case I got myself confused by looking at my spreadsheet far too long  |
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IFISAcava
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Post by IFISAcava on Dec 3, 2020 20:17:38 GMT
Thanks for the explanation - understand the logic. I had a look at the transactions from tax year 2018/19 and indeed the accrued interest received when selling a loan is not included in the interest calculation For the tax year 2019/20 the accrued interest received when selling a loan on the loan exchange has been included in the interest calculation (this seems to be a change from the previous tax year). When buying a loan on the loan exchange the accrued interest paid is excluded from the interest calculation and the interest for the full period is included in the interest calculation (no recognition of the accrued interest). It seems the seller is paying tax on the accrued interest (included in the interest calculation) and the buyer is also paying tax on the accrued interest (full interest for the period included in the interest calculation and no credit for the accrued interest) Can someone else check their transactions please in case I got myself confused by looking at my spreadsheet far too long mine's in an ISA precisely so that I don't have to look at things like this! A related issue is that you when you sell you get the accrued interest WITHOUT the 10% PL fee, and the buyer pays the 10% fee on the whole interest for the month when they receive it. So another loss for the buyer.
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