which section of tax return

That is certainly where I've put it for the this return and last year's, and had no comeback.(I also noted in the box that it was net p2p income)

I got my wrist slapped for that by HMRC. Should be under the Gilt edged and other UK securities etc, box 3 Gross amount before tax, goodness knows why. 

I'm never sure what to do with nearly P2P like Somo?

I agree that's where it goes, but only because that's where the guidance says to put it!

The received wisdom is that p2p loans are not securities but "simple debts", the main reason IMO being that they can be redeemed at par without notice.  In this regard, HMRC's Capital Gains Manual states at CG53429 (NB "security" and "debt on a security" are essentially synonymous for tax purposes):

"You cannot say that a debt is not a debt on a security simply because it can be repaid at short notice. But it is reasonable to suggest that in such cases there should be some compensation for the creditor to counterbalance the uncertainty as to the term of the loan. For example, a penalty can turn an otherwise uncertain, and therefore inherently unattractive, loan into a worthwhile investment. If a loan can be repaid at short notice, but there is no compensating benefit for the creditor, this would count against accepting the loan as a debts on a security." [emphasis added]

It is open to debate as to whether this is sufficient grounds to treat p2p loans as simple debts, but it is clear that HMRC accepts the position because SAIM 12210 "Interaction of peer to peer tax relief with Capital Gains Tax" includes the following:

"A small proportion of peer to peer (P2P) loans have been historically eligible for relief as a capital loss under Taxation of Chargeable Gains Act (TCGA 1992).

This may be the case for peer to peer loans that have been assigned to another person (more details in the Capital gains manual at CG53480), or for ‘loans to a trader’ (more details at CG65900)."

The first statement in the second sentence applies only to debts that are not securities (including simple debts), and the second statement applies only to simple debts.

I would add that if p2p loans were securities, p2p loans in £ to UK companies would all be qualifying corporate bonds (QCBs), with significant consequences for UK individual taxpayers: (i) interest would be taxed under the accrued income scheme, whereby accrued interest to the date of sale would be brought into tax for the seller and excluded from tax for the buyer, and (ii) they are exempt from GCT, so there would have been no tax relief for losses in any circumstances, prior to the introduction of income tax loss relief. I have never seen it seriously suggested that either (i) or (ii) would apply.

Download needs user to be logged-in, so for those of us who can't be bothered to login, here's a link to the HMRC originals (both the Notes and the Form itself):

www.gov.uk/government/publications/self-assessment-additional-information-sa101

PS:  I've always just added my P2P interest to the interest received from banks & building societies and had no problems - my HMRC Self Assessment Statement for 2020/21 arrived last week with the comforting words "You have nothing to pay", so it looks like it's been accepted for last year too.  I'd guess this is only an issue when HMRC decide to do an audit...

Well, if they do decide to do an audit I guess you would not be amused. 



Reminds me that VWRL has reported Excess Reported income last tax year, which technically needs to be reported (as foreign dividends)

If you can document larger reported figures they'd probably accept yours and apologise.