Peer-to-peer bad debt relief: proposed technical criteria

Even if it has, it would not be the first time something has been repeated on this forum.

As I say, it would not be the first time something has been repeated on this forum.

that was my reading as well.

The sentence that you have highlighted baz657 is one (of many) that requires considerable tightening.  When is a loan declared 'bad debt'?  Do the platforms need to make a clear definition and state a date? In extremis I would argue (based on the current wording) that bad debts incurred for example back in 2012 (when I started lending) are still a cause of my 'suffering' obviously not the intention.  The devil will be in the detail.*

I have always carefully logged my bad debts and supplied them to the Accountants each year to log against CGT (I offset my business 'bad debt' loans) but this also requires regular updating if/when recovery payments are made.  Where a relatively small number of loans are held this is not a major task but with a platform such as Bondora (where I have over 400 defaulted loans with an increasing % making payments) the task and data manipulation becomes much more time consuming.

* I note the title of the paper (and content) is "Peer to Peer....." (P2P) is it too much of an assumption that this covers "Peer to Business" (P2B) as well?

It states in the section titled "Who can benefit from the relief"

Individuals (either alone, in partnership, or as part of an unincorporated body).

The loans that will qualify for this relief are called ‘36H loans’. Section 36H loans include loans where the lender is an individual, ............... Some loans that are made to individuals may also qualify.

This could be read as an implication that the proposed measure is being directed primarily at business loans, ie P2B.

The downside would be that Bondora loans may not qualify!

My understanding is that peer to peer relates to a direct lending relationship between borrower and lender, whatever their status (individual, partnership, incorporated company). It just means that there is no intermediary at a higher level in the hierachy - hence the need to carefully specify which types of peer to peer relationship will qualify. If you lend to a platform which lends to a borrower, and the debts follow the same path then I think that not peer to peer and the relief will not apply.
Thinking of peer to peer = p2p = person to person, and excluding person to business = p2b as something different can be too limiting. For me, all combinations are still peer to peer, just different variants. I think that if the document is read with that understanding it makes sense. I am not saying that duck is wrong, just that the tax people seem to be using peer to peer in the way I understand it. What they are trying do do, essentially, is to limit this tax relief to loans made by individuals, subject to income tax, through qualifying platforms to businesses.
So they try to exclude 1) Lenders who are not individuals 2) loans to borrowers who are not businesses 3) platforms where the lender is not the legal creditor of the borrower (before novation).

On that basis it all looks good to me. And the date of loan origination does not figure, just when the loss (default presumably) is declared. Interesting that recoveries will then be subject to income tax.

I do agree, and with your first point. The 'interesting' part is more in the management, because although all losses would be allowable from 6th April (Monday!) many of the future recoveries will relate to losses which are pre-existing and have not been subject to income tax relief (though allowable for CGT relief). So going forward, will all recoveries be subject to income tax or just those which result from defaults from Monday (hopefully the latter)? How will the platforms cope with that? Will we see, for example on FC, tax statements with rather more complex format with space for two types of recovery - one subject to income tax, the other not. And CGT relief shown ongoing for old losses but not for new? We shall see.

As long as you know when you are doing it, and when not.  OP much appreciated - I had not seen it.

duck, thank you for the link.

I regard the note as an indication of HMRC's views on the matters that it covers, but I would not read anything into it about the matters that it does not cover, such as whether or not loans made before 6/4/15 will qualify.

On the question of when a loan becomes a bad debt, the note says "HMRC is working with UK P2P platforms on the definition of a bad debt - the intention is that this condition should be met when it becomes apparent it is not simply a case of late payment". So we shall just have to wait and see.

Having said that, my impression based on the rest of the note is that this will be rather sooner than would be required for a negligible value claim for a capital loss by an individual, and might (with luck) be closer to when a business might recognise a bad debt - although it is sure to be rule driven and not accounts based, because individuals do not have to prepare accounts.