arbster
Member of DD Central
Posts: 810 
Likes: 426
|
Post by arbster on Jul 7, 2015 20:58:02 GMT
I have questioned Money&Co. They confirm that for 2015/16 et al. Investors should declare Gross (before fees) interest. Their reply. 'We cannot provide tax advice, but our advisers have informed us that lenders should declare the gross interest before fee deductions to the HMRC. We are looking at ways of making this more tax efficient for lenders.' The key appears to be FC designating their fee as a "loan servicing fee". If other P2P platforms don't do this, I presume the status quo will be maintained, and they will be less tax efficient than platforms that make the change.
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Jul 7, 2015 21:11:03 GMT
It has missed me completely that from 2015 tax year we would be declaring the Net (of fees) income instead of the Gross (of fees) income for FC - great  . I wonder whether other platforms that charge fees have also adapted the fees structure? Zopa certainly have changed the way they charge their lender's fee so that it will be deductible as from April 2015. But their view of what to do about reporting of last year (2014/15) seems to be very different from FC's. So in a 18/Mar/15 entry in their blog they say... I take that to mean that HMRC will allow fee deductions for 2014/15, but not afterwards.
|
|
pikestaff
Member of DD Central
Posts: 2,188
Likes: 1,546
|
Post by pikestaff on Jul 10, 2015 7:45:04 GMT
I have questioned Money&Co. They confirm that for 2015/16 et al. Investors should declare Gross (before fees) interest. Their reply. 'We cannot provide tax advice, but our advisers have informed us that lenders should declare the gross interest before fee deductions to the HMRC. We are looking at ways of making this more tax efficient for lenders.' The key appears to be FC designating their fee as a "loan servicing fee". If other P2P platforms don't do this, I presume the status quo will be maintained, and they will be less tax efficient than platforms that make the change. I think FC's designation is a bit confusing. Other platforms (eg RS) have simply moved the fee from the lender to the borrower. FC appear to have done something more subtle than that, but they say it has been accepted by HMRC so all well and good. mikes1531: I don't think there is any difference between FCs and Zopa's (or RS's) positions on deductibility. They are all saying that HMRC will not accept the deduction of lender fees from 6 April 2015. But for 2014/15 you are OK, on all the platforms.
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Jul 10, 2015 20:27:28 GMT
mikes1531: I don't think there is any difference between FCs and Zopa's (or RS's) positions on deductibility. They are all saying that HMRC will not accept the deduction of lender fees from 6 April 2015. But for 2014/15 you are OK, on all the platforms. : Perhaps I'm misinterpreting the FC quote, but when I read... ... it looked like -- and still does as I re-read it -- FC are saying that for 14/15 investors need to put their total income before fees into their tax returns. They seem to be saying that the change in the way they're charging their fees makes them deductible from income w.e.f Apr.'15, whereas they weren't deductible before. Do you interpret that quote differently?
|
|
pikestaff
Member of DD Central
Posts: 2,188
Likes: 1,546
|
Post by pikestaff on Jul 11, 2015 8:46:40 GMT
mikes1531 - The FC quote that you cite appears to be from an email to arbster. I prefer to rely on the blog post www.fundingcircle.com/blog/2015/04/talking-tax/ which says: "HMRC has recently confirmed that from 6th April investors will have to pay tax on the gross interest rate before deduction of fees." It's clear from the date of the post that they mean 6th April 2015. As regards previous years I believe that HMRC has pragmatically agreed not to press the point (just as they pragmatically agreed not to press for tax to be deducted at source when this was raised as an issue, although there is going to be a consultation on this). That's why the blog post is drafted as it is.
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Jul 11, 2015 9:04:44 GMT
mikes1531 - The FC quote that you cite appears to be from an email to arbster. I prefer to rely on the blog post www.fundingcircle.com/blog/2015/04/talking-tax/ which says: "HMRC has recently confirmed that from 6th April investors will have to pay tax on the gross interest rate before deduction of fees." It's clear from the date of the post that they mean 6th April 2015. As regards previous years I believe that HMRC has pragmatically agreed not to press the point (just as they pragmatically agreed not to press for tax to be deducted at source when this was raised as an issue, although there is going to be a consultation on this). That's why the blog post is drafted as it is. : Thanks for the link to the FC blog. I don't follow FC -- I'm not a FC investor -- so I was unaware of it. I was basing my comments purely on the quote reported by arbster. My understanding is the same as yours -- that HMRC won't enforce the non-deductibility of fees before Apr.'15 -- so the quote reported by arbster would appear to be misleading.
|
|
bababill
Member of DD Central
Posts: 529
Likes: 245
|
Post by bababill on Apr 14, 2016 5:08:52 GMT
So just to confirm I have to declare the gross income and not the income less of fees? On some platforms say MarketInvoice I heard this can be up to 30%.
Also, The tax issue of buying on secondary markets i.e. buying at a premium on sites needs to be highlighted again and again. I should have known/remembered I can not deduct the seller premium fees.
On F.K. I have bought a sizeable amount at a premium. On the dashboard page and the income page vs the tax report it shows a 30% percent difference.
Example, dashboard (no capital losses fyi) shows net income of £800 yet tax report shows £1050. Big difference imho.
|
|
pikestaff
Member of DD Central
Posts: 2,188
Likes: 1,546
|
Post by pikestaff on Apr 14, 2016 5:34:27 GMT
So just to confirm I have to declare the gross income and not the income less of fees? On some platforms say MarketInvoice I heard this can be up to 30%. Also, The tax issue of buying on secondary markets i.e. buying at a premium on sites needs to be highlighted again and again. I should have known/remembered I can not deduct the seller premium fees. On F.K. I have bought a sizeable amount at a premium. On the dashboard page and the income page vs the tax report it shows a 30% percent difference. Example, dashboard (no capital losses fyi) shows net income of £800 yet tax report shows £1050. Big difference imho. Yes to declaring gross income before lender fees (wef 6/4/2015). Re sales/purchases, and assuming you are not a trader, yes again. Just to give the full picture: * Fees paid by the seller to the platform are not deductible against income. I'm not aware of any platforms charging fees to buyers but the same would apply. * Premiums/discounts are not taxable/deductible against income for either the seller or the purchaser. Traders would bring the latter items (but not lender fees) into their income calculation.
|
|
TitoPuente
Member of DD Central
Posts: 624
Likes: 655
|
Post by TitoPuente on Apr 14, 2016 6:47:09 GMT
So just to confirm I have to declare the gross income and not the income less of fees? On some platforms say MarketInvoice I heard this can be up to 30%. Also, The tax issue of buying on secondary markets i.e. buying at a premium on sites needs to be highlighted again and again. I should have known/remembered I can not deduct the seller premium fees. On F.K. I have bought a sizeable amount at a premium. On the dashboard page and the income page vs the tax report it shows a 30% percent difference. Example, dashboard (no capital losses fyi) shows net income of £800 yet tax report shows £1050. Big difference imho. Yes to declaring gross income before lender fees (wef 6/4/2015). Re sales/purchases, and assuming you are not a trader, yes again. Just to give the full picture: * Fees paid by the seller to the platform are not deductible against income. I'm not aware of any platforms charging fees to buyers but the same would apply. * Premiums/discounts are not taxable/deductible against income for either the seller or the purchaser. Traders would bring the latter items (but not lender fees) into their income calculation. Sorry, what is "wef 6/4/2015"? I don't agree with reporting the gross figure. Ultimately what the saver receives is the net figure so that should be taxed. That is the spirit of the law.
|
|
bigfoot12
Member of DD Central
Posts: 1,817
Likes: 816
|
Post by bigfoot12 on Apr 14, 2016 7:15:28 GMT
Yes to declaring gross income before lender fees (wef 6/4/2015). Re sales/purchases, and assuming you are not a trader, yes again. Just to give the full picture: Sorry, what is "wef 6/4/2015"? I don't agree with reporting the gross figure. Ultimately what the saver receives is the net figure so that should be taxed. That is the spirit of the law. I don't agree with much of the tax code as well. And I agree this has caught many people out. Unfortunately it is what it is, and HMRC have bigger problems than this. Fortunately since they understood the problem most platforms have ended lender fees, even FC fees are now a borrower fee.
|
|
pikestaff
Member of DD Central
Posts: 2,188
Likes: 1,546
|
Post by pikestaff on Apr 14, 2016 9:31:43 GMT
Sorry, what is "wef 6/4/2015"? I don't agree with reporting the gross figure. Ultimately what the saver receives is the net figure so that should be taxed. That is the spirit of the law. 6/4/2015. The law is the law, I'm afraid. HMRC have given the platforms plenty of time to get their act together. By concession they did not enforce the law prior to that date but thay have made it clear that they will do so thereafter, which is why platforms such as FC and RS (and I'm sure there are others) have changed how they do things.
|
|
bababill
Member of DD Central
Posts: 529
Likes: 245
|
Post by bababill on Apr 14, 2016 11:27:27 GMT
Thanks for confirmation. I am more annoyed in regards to the premiums I paid to the seller not being tax deductible. Now my returns are all messed up and everything is misleading.
I really don't know what return I am earning anymore since I pay tax on £1050 instead of £800.
Only reason I purchased so much on secondary market was to avoid cash drag. Anyone know an easy way to calculate cash drag losses instead?
;-)
|
|
stevio
Member of DD Central
Posts: 2,065
Likes: 894
|
Post by stevio on Apr 14, 2016 12:06:25 GMT
Thanks for confirmation. I am more annoyed in regards to the premiums I paid to the seller not being tax deductible. Now my returns are all messed up and everything is misleading.
I really don't know what return I am earning anymore since I pay tax on £1050 instead of £800.
Only reason I purchased so much on secondary market was to avoid cash drag. Anyone know an easy way to calculate cash drag losses instead?
;-) Which platform?
|
|
james
Posts: 2,205
Likes: 955
|
Post by james on Apr 14, 2016 12:27:28 GMT
I don't agree with reporting the gross figure. Ultimately what the saver receives is the net figure so that should be taxed. That is the spirit of the law. That is not the way the spirit of the law works for unit trusts or OEICs either, in both cases platform fees just for holding the investment are taken from gross income and/or capital and can't be deducted.
|
|
james
Posts: 2,205
Likes: 955
|
Post by james on Apr 14, 2016 13:01:31 GMT
Thanks for confirmation. I am more annoyed in regards to the premiums I paid to the seller not being tax deductible. Now my returns are all messed up and everything is misleading. ... I really don't know what return I am earning anymore since I pay tax on £1050 instead of £800.
Only reason I purchased so much on secondary market was to avoid cash drag. Anyone know an easy way to calculate cash drag losses instead?
;-) Why not use a spreadsheet to calculate your XIRR (annualised return on investment)? One of the easiest ways to do that just involves tracking all deposits and withdrawals you make plus the current balance and automatically includes all fees as part of the calculation.
|
|
.
