webwiz
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Post by webwiz on Jul 27, 2015 20:56:12 GMT
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bigfoot12
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Post by bigfoot12 on Jul 27, 2015 21:00:53 GMT
There is a HMRC consultation going on about this now. This thread has more details. |
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Post by bracknellboy on Jul 27, 2015 21:29:36 GMT
I certaintly have no expertise on this, other than a participant in p2p and a consumer of information that has been presented over the last few years. My observations are: - The relevant legislation appears to be clear: there is a responsibility on the borrower if they are a company (i.e. not consumer borrowring) to deduct tax agt source @ witholding tax rate (P ikestaff covers well on another post)- None of the significant platforms (that I'm with or talked about on here) have this arrangement - Although the onus is on the borrower rather than the broking platform, you would expect the major platforms to be on top of this if it was a practical requirement. - The larger platforms certainly should have enough back room suits to be on top of it - The only platform that got spooked by the actions of one particular borrower (i.e. contrary to its prior entiere practise) was AC when a particular large borrower insisted on paying net of;AC subsequently stated they had received 'guidance' from HMRC that regardless of the wording of current legislation witholding tax shoukd not be applied. - Having said that - and presumably having set other precedents - it would be 'difficult' for HMRC to insist on differently: and the announced changes with regard to application of deduction at source on other 'standard' retail interest bearing assets (savings accounts) would make it borderline bonkers for them to even want to retrospectively apply, let alone be successful. - Any platform which is assuming that deduction is a requirement would appear to be significantly out of step with current HMRC practise / guidelines; and given that I expect that the significant p2p players do actually have some constructive 'industry' dialogue with each other, it would concern me quite a bit if one was so out of kilter with the rest. p.s. is it just me that finds that my grammar/spelling goes down the plug hole when on a mobile device ? What auto complete am I not noticing ....
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Post by hugoarchover on Jul 29, 2015 14:21:02 GMT
I certaintly have no expertise on this, other than a participant in p2p and a consumer of information that has been presented over the last few years. My observations are: - The relevant legislation appears to be clear: there is a responsibility on the borrower if they are a company (i.e. not consumer borrowring) to deduct tax agt source @ witholding tax rate (P ikestaff covers well on another post)- None of the significant platforms (that I'm with or talked about on here) have this arrangement - Although the onus is on the borrower rather than the broking platform, you would expect the major platforms to be on top of this if it was a practical requirement. - The larger platforms certainly should have enough back room suits to be on top of it - The only platform that got spooked by the actions of one particular borrower (i.e. contrary to its prior entiere practise) was AC when a particular large borrower insisted on paying net of;AC subsequently stated they had received 'guidance' from HMRC that regardless of the wording of current legislation witholding tax shoukd not be applied. - Having said that - and presumably having set other precedents - it would be 'difficult' for HMRC to insist on differently: and the announced changes with regard to application of deduction at source on other 'standard' retail interest bearing assets (savings accounts) would make it borderline bonkers for them to even want to retrospectively apply, let alone be successful. - Any platform which is assuming that deduction is a requirement would appear to be significantly out of step with current HMRC practise / guidelines; and given that I expect that the significant p2p players do actually have some constructive 'industry' dialogue with each other, it would concern me quite a bit if one was so out of kilter with the rest. p.s. is it just me that finds that my grammar/spelling goes down the plug hole when on a mobile device ? What auto complete am I not noticing .... Lots of interesting points you make @braknellboy and maybe I can shed some more light on this subject. • HMRC is made up of regional offices. AC received ‘general’ advice from their local office, though other offices have advised differently. • No precedent has been set by HMRC - their practice/guidelines remain very clear that Withholding Tax is due. Large accounting practices like PWC, Baker Tilly and others are advising that Withholding Tax should be followed • It is not the platforms that will be chased for Withholding Tax but the Borrowers themselves. As a conservative platform we do not believe in putting our Borrowers at any potential risk of prosecution. • Borrowers who have made CT61 returns with personal investor Withholding Tax have been accepted • As for being the only platform? Take you pick of some of the reasons we’ve heard why others are not doing it: significant cost issue to retrospectively build the tech to handle payments; reputational risk; exposure to Borrower action; negative industry press coverage that drives away new Borrowers; not their problem, it’s the Borrowers headache; and the list goes on. • You can either follow the herd, or follow the law. ArchOver chooses to follow the current legislation.
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Post by meledor on Jul 29, 2015 14:45:03 GMT
I am not familiar with Archover but I assume all your borrowers are companies and your all lenders individuals? If so that would simplify matters considerably. Other platforms may not have the benefit of such simplicity. The requirement to deduct interest tax at source in certain circumstances does not sit well with P2P and as such they are pretty much unenforceable as has been acknowledged by HMRC. For instance the borrowers do not have the information about the lenders to know whether tax should be deducted or not.
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pikestaff
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Post by pikestaff on Jul 29, 2015 15:02:32 GMT
The letter of the law is reasonably clear. As I posted before p2pindependentforum.com/post/54209/thread, corporate borrowers have an obligation to deduct WHT on interest payments to individuals. Moreover, intermediaries (ie the platforms) have an obligation to deduct if they do not. It is equally clear that (for whatever reason, most likely the practical issues) the law is not being widely enforced, and that at least some platforms have got a nod and a wink from HMRC that they won't do anything about it pending the outcome of the consultation. Those platforms are wisely keeping their heads down for the time being. It would, as bracknellboy says, be bordeline bonkers for HMRC to start enforcing now. But the more noise that is made about it the greater the risk that someone will tell them that they must. I suggest we keep our heads down too, but DO please respond to the consultation if you don't want WHT deducted in future. The link to the consultation has been posted before but here it is again: www.gov.uk/government/consultations/deduction-of-income-tax-from-interest-peer-to-peer-lending. The consultation closes at "12:00am" on 18 September 2015, so I would suggest you get responses in by midnight the previous day. At the risk of starting a completely different discussion, see here: www.npl.co.uk/reference/faqs/is-midnight-12-am-or-12-pm-faq-time and here: www.simplecodeworks.com/IQ/midnight.html for contrasting views on the meaning of 12:00am. My personal view is the latter is technically correct but borderline bonkers, and completely detached from the real world. Sound familiar? |
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gb007
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Post by gb007 on Jul 29, 2015 18:25:20 GMT
To quote Funding Circle: hugoarchover Perhaps you should speak to the p2pfa?  |
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james
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Post by james on Jul 29, 2015 20:28:58 GMT
It seems self-evident that noon can't possibly be either before or after the time that the meridian is crossed, since it is the time that the meridian is crossed and a time can't be before or after itself. It's simply 12:00 no AM or PM or 12:00 noon. Midnight is both 12:00 AM and 12:00 PM since both are correct - it's twelve hours before one meridian crossing and twelve hours after another. So I agree with you that it's wise to get a reply in by the midnight that separates the 17th and 8th, since that's the time that 12:00 AM refers to in the 18th context, the time twelve hours before noon on the 18th.
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pikestaff
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Post by pikestaff on Jul 30, 2015 6:53:39 GMT
It seems self-evident that noon can't possibly be either before or after the time that the meridian is crossed, since it is the time that the meridian is crossed and a time can't be before or after itself. It's simply 12:00 no AM or PM or 12:00 noon. Midnight is both 12:00 AM and 12:00 PM since both are correct - it's twelve hours before one meridian crossing and twelve hours after another. So I agree with you that it's wise to get a reply in by the midnight that separates the 17th and 8th, since that's the time that 12:00 AM refers to in the 18th context, the time twelve hours before noon on the 18th. You are right of course, and I've just spotted the point where the "borderline bonkers" link goes wrong. Spoils the joke, though. 
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Post by chris on Jul 30, 2015 7:46:41 GMT
Lots of interesting points you make @braknellboy and maybe I can shed some more light on this subject. • HMRC is made up of regional offices. AC received ‘general’ advice from their local office, though other offices have advised differently. To offer up some clarification on this, the meeting with HMRC was in London, rather than Manchester, and was a follow on meeting with the same staff that met with several other platforms, including several P2PFA members, as part of a group consultation. So I do not believe this was advice from the local office and my understanding is that it is the same team that are now responsible for the consultation. I have also been told that we will need to withhold tax at some point in the not too distant future, presumably the new tax year, the specifics of which are now being worked out with HMRC. As we have a solution coded I've not concerned myself with this as yet. All that said I wasn't present at any of the meetings so I could be mistaken. Edit: I would also add that by the letter of the law hugoarchover is correct that platforms should be withholding tax, and we would be too were it not for having written confirmation from HMRC that we do not need to, at least for the time being.
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webwiz
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Post by webwiz on Jul 30, 2015 8:38:12 GMT
If Archover (and any other site) has been informed by its legal/accounting advisors that they should withhold tax I guess they have no alternative. People in my situation, who are not liable, will just have to reclaim the tax at the end of the year.
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Post by emoney on Jul 30, 2015 13:02:57 GMT
It needs noting that consumer peer to peer lending does not trigger the Alternative Finance withold tax, so eMoneyUnion' "real people lending to real people" lender yields are payable gross and it's for private P2P lenders to include interest received in their annual personal return. We recently submitted to HMRC our OI (other interest) return which details our lenders interest received for the 2014-15 period, businesses are not part of this HMRC return. For clarity, it's only if a Ltd Company or LLP is aparty to the 36H Peer to Peer Loan Agreement, as either borrower or lender that a trigger for the 20% withold tax payment at source occurs. Withold tax has been around for non-bank alternative lending/finance activities for many years and the HMRC CT61 link below was last updated 2010. If a platform has a waiver, then that's great news and I would suggest to put all the uncertainty to bed this is confirmed to all platform stakeholders/members ASAP. As it stands, in our opinion, 20% withold tax has been and is payable by the borrower or the platform, they are jointly responsible according to the most recent Gov't consultation document, not as per bracknellboy' "onus on the borrower" comment. www.gov.uk/government/uploads/system/uploads/attachment_data/file/383833/ct61-notes-2010.pdf |
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pikestaff
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Post by pikestaff on Jan 8, 2016 17:19:02 GMT
HMRC has today published official guidance which confirms that, regardless of what the rules require, p2p interest payments may for the time being be made without deduction of tax, if the platform is authorised by the FCA. Extract below: "The costs to the platforms of developing the necessary systems to apply the current rules in the meantime would be disproportionate to the relatively small amount of tax which would be collected. Consequently, in the period before the government makes any necessary changes to the legislation, interest payments made on P2P loans may be made without deduction of tax.
This will apply to interest payments made by:
- a UK borrower to a UK P2P platform
- a UK P2P platform whoever made to
- any intermediary to or from a UK P2P platform
In each case the P2P platform must be authorised by the Financial Conduct Authority (including interim authorisation)."It is not certain that the revised legislation, when it comes, will enable the status quo to continue. They aren't making any promises in this regard. For detail see www.gov.uk/government/publications/revenue-and-customs-brief-2-2016-deduction-of-income-tax-at-source-from-payments-of-peer-to-peer-interest/revenue-and-customs-brief-2-2016-deduction-of-income-tax-at-source-from-payments-of-peer-to-peer-interest |
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jonah
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Post by jonah on Jan 8, 2016 18:24:08 GMT
Great news (and another great hmrc spot pikestaff thanks!) given that banks will soon not deduct tax from interest, is it a reasonable assumption that this approach will continue or am I being too simplistic? |
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james
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Post by james on Jan 9, 2016 6:25:21 GMT
given that banks will soon not deduct tax from interest, is it a reasonable assumption that this approach will continue or am I being too simplistic? Since the current rules if enforced would leave some platforms with an obligation to deduct tax at source from consumer lenders for some loans but possibly not all, and other platforms without such obligation it may well be judged that it's best not to have tax deducted by any of them, since the lender does have to declare the interest to HMRC anyway. Consider the pawn-type platforms that typically have terms well below 12 months. No obligation to deduct tax there under current rules. Compare to say a 12 month personal loan where there would be an obligation, vs a 6 month personal loan where there wouldn't be one. From a simplicity perspective treating them all the same is beneficial. On the other hand it does reduce the tax-based competitive advantage of the shorter term loan platforms, so whichever way it's done it's interfering in the market via tax differences. Given the plan for deposit account interest not to be taxed at source I see little reason for P2P to be treated differently. We also know that HMRC plans to pre-populate tax forms using things like interest reported by banks so we can expect longer term that HMRC will end up satisfied with that approach to doing things, combined with nudges then strong pushes to those who it knows from reporting by interest payers must pay tax on interest. We can presumably expect requirements on payers of interest to tell people that "you have been paid more than the tax free limit so you must declare this to HMRC" and "if this plus all other interest is over the tax free limit you must declare them all to HMRC" and pay any required income tax.
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