james
Posts: 2,205
Likes: 955
|
Post by james on Jul 20, 2015 19:34:58 GMT
Is Ablrate deducting basic rate income tax from the interest paid to foreign lenders before paying it, as appears to be required by current rules (para 10). I assume only required where the loan term is at least twelve months ( para 46 in the consultation) so not needed for the recent container loan? It's interesting that current rules seem to give some incentives for lenders to prefer shorter loans and perhaps platforms that specialise in short loans, like MoneyThing and its pawn-based lending where just about all loans are intended to be less than a year. |
|
pikestaff
Member of DD Central
Posts: 2,136 
Likes: 1,484
|
Post by pikestaff on Jul 21, 2015 6:33:29 GMT
Is Ablrate deducting basic rate income tax from the interest paid to foreign lenders before paying it, as appears to be required by current rules (para 10). I assume only required where the loan term is at least twelve months ( para 46 in the consultation) so not needed for the recent container loan? It's interesting that current rules seem to give some incentives for lenders to prefer shorter loans and perhaps platforms that specialise in short loans, like MoneyThing and its pawn-based lending where just about all loans are intended to be less than a year. The current position re (lack of) tax deductions puzzles me greatly. According to the consultation document, all of the platforms should already be deducting interest at source on payments by companies to individuals, or having their borrowers do so, even if they are resident in the UK. See the first bullet below (full text of para 10 of the con doc): 10. Under the existing rules, which apply generally to interest other than that paid by banks or building societies on deposits: - Where the borrower is a company who pays interest due to an individual, the borrower (or an intermediary such as the P2P platform) is required to deduct income tax at source from the interest for payment to HMRC, and pay the interest to the lender net of tax.
- Where the borrower is a company who pays interest due to another UK company, neither the borrower nor the P2P platform is required to deduct tax at source, and interest may be paid gross.
- Where the borrower is an individual (including a sole trader) who pays interest to either an individual or a company resident in the UK, neither the borrower nor the P2P platform is required to tax deduct at source and interest may be paid gross.
- However where the interest is due to a lender who is resident outside the UK, the borrower (or the P2P platform) is required to deduct income tax at source from the interest for payment to HMRC, and to pay the interest to the lender net of tax, regardless of the identity of the borrower.
There was a brief flurry of excitement when one borrower on AC decided to deduct at source and AC agreed that they were right to do so, but this was resolved following a meeting with HMRC where it was agreed that deductions would not be made. We do not know what happened at the meeting or the basis of the decision. I assumed at the time that it was a concession pending the consultation, and had expected the consultation paper to be drafted along the lines of "we have been allowing this by concession because of the acknowledged practical issues but now we are consulting on the way forward". But it isn't. It assumes the platforms are currently deducting interest at source, which they are not. I'm baffled...
|
|
james
Posts: 2,205
Likes: 955
|
Post by james on Jul 21, 2015 6:46:42 GMT
Yes, I'm also puzzled.
In theory places like MoneyThing should have a tax advantage for lenders like me who would have to claim a tax refund, due to the short duration loans used, but in practice they don't. I can only speculate that HMRC decided that there wasn't sufficient tax at stake to press the issue at that time. Looking forward I'm not keen to have a potential competitive advantage eliminated, since it could drive more innovation.
|
|
|
|
Post by ablrateandy on Jul 21, 2015 9:23:13 GMT
HI james We aren't going to pass comment on this on the board as, like most of our peers (and pikestaff !) we are slightly confused as to HMRC's approach to this, which appears to be walking in with one assumption and expecting us to side with another, neither of which appear to be representative of market practice. Suffice to say that we will be putting in a response to the document..... |
|
james
Posts: 2,205
Likes: 955
|
Post by james on Jul 21, 2015 19:56:34 GMT
Indeed. A statement of practice from each platform that says what they have really been doing might be enlightening for HMRC. Yet there do appear to have been assorted consultations so HMRC might have accepted the status quo for a while.
|
|
shimself
Member of DD Central
Posts: 2,561
Likes: 1,170
|
Post by shimself on Aug 5, 2015 10:04:01 GMT
Assetz had a major flap about this last year p2pindependentforum.com/thread/1807/withholding-taxthe upshot being they found somone high up at HMRC who said not to. I suggest you phone Andrew at Assetz The reason why not is because it imposes on the borrower the duty of keeping complete records including identity for each lender, and to track the aftermarket; it pretty much destroys p2b. Someone raised this at Archover the other day; is it zeitgeist or is someone making waves? |
|
|
|
Post by xyon100 on Aug 15, 2015 12:43:11 GMT
Seems to me that one hand says tax must be withheld from overseas lenders, the other hand says it's impossible for the borrower to keep track of each individual lender (there may be hundreds of course) and to present records and the correct amount of taxes to HMRC. So, both are right. It's completely impractical to collect taxes for HMRC.
|
|
