smee
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Post by smee on Mar 4, 2015 10:17:51 GMT
I am totally at sea about the tax situation on p2p lending. I had assumed that it was classed as taxable income at the normal rate. When I did start to wonder about cgt I was unable to find anything about it with regard to p2p lending. I see j mentioned it earlier in a post. Can anyone enlighten me please about what tax would be payable on interest levels above the current cgt threshold (having never been in this position before the discovery of p2p)? Is all interest liable for cgt regardless of its source?
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Post by bracknellboy on Mar 4, 2015 10:46:35 GMT
I am totally at sea about the tax situation on p2p lending. I had assumed that it was classed as taxable income at the normal rate. When I did start to wonder about cgt I was unable to find anything about it with regard to p2p lending. I see j mentioned it earlier in a post. Can anyone enlighten me please about what tax would be payable on interest levels above the current cgt threshold (having never been in this position before the discovery of p2p)? Is all interest liable for cgt regardless of its source?Sounds like some confusion. Assume you are lending as an individual rather than a company. If so then your original assumption is correct. CGT does not come into it. It is only relevant in regards to offsetting capital losses, which currently you cannot do against income (so capital losses not offset against the interest received). But for that of course you can only benefit if elsewhere you have capital gains above your allowance which you'd like to reduce.
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smee
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Post by smee on Mar 4, 2015 11:01:39 GMT
Thanks bracknelboy. I don't have capital gains elsewhere so that's another problem solved. Your help much appreciated.
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Post by GSV3MIaC on Mar 4, 2015 11:40:04 GMT
Except next (tax) year (? well 'someday, one day, time not too far away'..) the losses WILL be able to be offset against the interest income. So it is claimed ..
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Post by bracknellboy on Mar 4, 2015 12:43:24 GMT
Indeed, if the draft legislation is finalised and agreed, which i would expect (caveat: election). Which has got me to thinking whether now is time to stand back somewhat from further investment and hold out for post start of tax year. (albeiit with some platforms most 'bidding' now will be loans which may not draw down/complete until tht point anyway).
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Post by whitmanthecat on Mar 4, 2015 13:46:14 GMT
Would it perhaps be possible for AC to do a bed and breakfast deal on the leaky pipes, whereby the loan is repaid and then immediately reissued to the same lenders, on some date after the cutoff? It would be certainly be against the spirit of the rules, yet compare this loan to the the bridging loans in difficulty. It is mainly for administrative reasons due to expiry of a term, but those extended loans are given a new loan number and to all intents and purposes appear as a new loan. If any extension loans have to be extended again after April and another new loan number is given, at first glance they would appear to qualify for the relief should a loss arise. Whether they genuinely should qualify is another matter.
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Post by GSV3MIaC on Mar 4, 2015 14:18:37 GMT
Indeed, if the draft legislation is finalised and agreed, which i would expect (caveat: election). Which has got me to thinking whether now is time to stand back somewhat from further investment and hold out for post start of tax year. (albeiit with some platforms most 'bidding' now will be loans which may not draw down/complete until tht point anyway). And hopefully won't go bad until well after that. I wonder what the 'carryback' (or in this case forward) deal will be on capital losses from P2P?
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gb007
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Post by gb007 on Mar 4, 2015 14:36:43 GMT
How many years do we have to declare any losses in p2p to HMRC? I'm thinking of the wonderful Southerly-based, pipe-challenged AC loan.
Also, whilst I'm sure I know the answer but will ask, we can only offset the loss against current tax year in which loss happens (ie not 2014-15 as most likely outcome will not be know till well after April this year) or future tax year if resolved by then? As I understand it, for the purposes of capital gains taxation, for situations similar to this where there will be a partial recovery, you can make a claim for an allowable loss when the receiver or liquidator has announced a recoverable amount and has indicated that no further dividends are likely. See: www.gov.uk/government/uploads/system/uploads/attachment_data/file/323727/hs296.pdf I think it is unlikely final losses will be quantified by April 5th. However, for the purposes of the recently proposed p2p income tax relief, we may have to wait for the legislation to be written!
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Post by GSV3MIaC on Mar 4, 2015 18:49:46 GMT
I am not a tax advisor but AIUI .. (assuming you are not a limited company)
Interest income is income. Losses are CGT losses (until they change the rules). Profits (on sale of loan parts at a premium) are really fuzzy .. if HMRC thinks trading is your business, then it's income, else it might be Capital gain, or else it might be untaxed.
However check with your tax advisor - they won't probably know either. Don't ask HMRC, they definitely won't know. 8>.
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j
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Post by j on Mar 4, 2015 19:03:36 GMT
However check with your tax advisor - they won't probably know either. Don't ask HMRC, they definitely won't know. 8>. Can't argue with that. Many moons ago, I had some losses on sales of shares & asked an advisor at my local tax office if I needed to report them in order to crystallise against any future gains...the answer was a resounding NO. A few years later I found the opposite to be true. So much for a government-employed tax advisor working at a government tax office!
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j
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Post by j on Mar 4, 2015 19:09:20 GMT
I am not a tax advisor but AIUI .. (assuming you are not a limited company) Interest income is income. Losses are CGT losses (until they change the rules). Profits (on sale of loan parts at a premium) are really fuzzy .. if HMRC thinks trading is your business, then it's income, else it might be Capital gain, or else it might be untaxed. However check with your tax advisor - they won't probably know either. Don't ask HMRC, they definitely won't know. 8>. This was my understanding too until I read some of the comments & ended up, unnecessarily, adding 2+2 & coming up with -1 (all on my part btw...too much caffeine & cheese cake). Profit as you said is income-tax chargeable whilst losses crystalize against any cgt profit but, only on future profit & not previous year(s) profit. I doubt I'll bother asking HMRC (though I'm sure many here will tell me off for doing so) as I fear they might give another explanation that will make me up give up the whole b****y p2p investment excercise altogether.
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bigfoot12
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Post by bigfoot12 on Mar 4, 2015 19:36:00 GMT
Does anyone know how long a loss can be carried forward?
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kermie
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Post by kermie on Mar 4, 2015 20:34:02 GMT
Relevant quote on carry-forward of capital losses: "You don’t have to report losses straight away - you can claim up to 4 years after the end of the tax year that you disposed of the asset." from www.gov.uk/capital-gains-tax/lossesSo looks like the "plumber" losses (in my case) will be crystallized in the next couple of years (2017, say) and could be offset against capital gains up to 2021 approx. Clearly need patience in this game! |
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Post by bracknellboy on Mar 4, 2015 20:41:59 GMT
This thread is staring to confuse the hell out me now, where once i had surety. j1: what do you mean by "..how we class profit/loss on p2p as income or gain" (paraphrasing as quoting wasn't working) ? If you mean interest, ans = income. If you mean loss of principal on bad loans", ans = capital If you mean premium / discount on sales of loan parts: I believe the answer to be either 'jury is out', or 'it depends', 'neither', or capital. But I believe the common consensus is the latter. If in doubt use the tax statement from the platform. iirc FC don't include gain on sales in your tax statement, and I recall plenty of discussion rationalising why that was OK. If you mean 'cashaback' or 'early bidding / underwriter incentives/fees' then the jury is definitely out. Been loads of discussion on this (and a not unrelated topic of pre-draw down interest) here and on TC forum. And I think different p2p platforms have interpreted this differently when it comes to tax statements. iirc FC does not show this on your tax statements. A pretty good reason why FC can't continuously / indefintely provide cashback on listings to all bidders (as opposed to 'early bird bonuses) is it starts to become an underhand way of trying to hide income as something else ('incentive to buy' being the phrase that comes to mind to classify it as non income tax liable). All of the above written on assumption of individual not company, and currently in effect rules. bigfoot12: 'how long can we carry forward'. If you mean loss of capital to offset against interest in the brave new promised land, I guess its a case of wait for the legislation/new tax rules. If you mean in the general case of how long can one carry forward capital loss for cgt purposes, my recollection, and it is only a recollection, is that it is indefinite (though probably end stopped at ones demise). disclaimer: a) I am not an accountant b) I rarely know what I'm talking about. Edit: My post crossed with the prior one, which contradicts part of mine. Which in turn reinforces my point b). |
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bigfoot12
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Post by bigfoot12 on Mar 4, 2015 20:48:15 GMT
bigfoot12: 'how long can we carry forward'. If you mean loss of capital to offset against interest in the brave new promised land, I guess its a case of wait for the legislation/new tax rules. If you mean in the general case of how long can one carry forward capital loss for cgt purposes, my recollection, and it is only a recollection, is that it is indefinite (though probably end stopped at ones demise). disclaimer: a) I am not an accountant b) I rarely know what I'm talking about. Edit: My post crossed with the prior one, which contradicts part of mine. Which in turn reinforces my point b). Sorry I meant in general - 'old rules'. The HMRC states that you have to register a loss within 4 years, but I think you can then carry it forward, which I think is where some confusion comes from.
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