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Post by chris on Sept 13, 2015 14:04:08 GMT
You have to remember that the cost for most of us of advice exceeds the difference between what we can earn on AC and what we can earn on another simpler platform. Also without knowing the exact mechanisms you use to 'buy' and 'sell' loan parts any advisor is going to struggle to give advice. Without wanting to come across as harsh, which other platform would allow you to participate in the original loan and not give you access to a secondary market? All the main platforms are going to give you one question or another around tax, and we simply do not have regulatory permission or expertise to offer tax advice. If you have any doubts it's something you will need to seek out yourself with a suitable adviser. Having spoken briefly to Andy and one of the other directors our understanding is that HMRC themselves aren't sure how to treat this matter. We're in on going discussion with them to try and obtain clarity. I'd be wary of any advice from any source until HMRC have decided upon a course of action as that advice may well change. I know of at least one other instance of a certain well known platform offering advice and claiming one thing whilst being told they're wrong by HMRC, to the extent that they're having to re-examine their fee structure and loan documentation. We've escalated the question to our lawyer and compliance officer regarding the legal mechanism used to buy and sell loan parts. Our understanding is that it's structured in the same way as FC involving redemption of the seller's loan unit and the issue of a new loan unit to the buyer. If I hear otherwise I'll let you know.
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tonyr
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Post by tonyr on Sept 13, 2015 14:48:51 GMT
Currently the first tranche of Midlands Trade #104: £36,759.67 -1.0% discount It's now down to £33,747.91, so either the sellers have changed their mind(s) or the discount is helping some people sell. That was me playing around. £4k went between 6pm Saturday and 3pm today which must be one of the quietest times for AC. So I think the discounting scheme works!
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mikes1531
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Post by mikes1531 on Sept 13, 2015 15:32:05 GMT
Looking at a purchase statement there is a distinction between the loan parts (different identifiers) .... so you are not buying the old loan part, you are buying a new loan part, at a certain price, so no capital gain. Even if we ignore the issue of whether we're dealing with new parts or not, if you buy a £100 part for £99, you wouldn't automatically have a capital gain issue. Gains and losses arise when you dispose of assets. In the case of a £100 part bought for £99, if you hold it until the borrower pays off the loan and you receive £100 then you've made a £1 gain. If you sell it in the Aftermarket for £99, then there's no gain. And if you sell it in the Aftermarket for £98, then you've made a £1 loss. If a gain or loss is made, then the issues become ones of whether it is classified as ordinary income/loss, capital gain/loss, and whether it's something that needs to be reported to HMRC. Until the sums involved become substantial -- and for most P2P/P2B investors they probably won't -- I doubt HMRC will care how/if they are included on tax returns. But that's JMHO. Usual disclaimer: I am not an expert, this is not advice, etc., etc.
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bigfoot12
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Post by bigfoot12 on Sept 13, 2015 15:38:06 GMT
Looking at a purchase statement there is a distinction between the loan parts (different identifiers) .... so you are not buying the old loan part, you are buying a new loan part, at a certain price, so no capital gain. Even if we ignore the issue of whether we're dealing with new parts or not, if you buy a £100 part for £99, you wouldn't automatically have a capital gain issue. Gains and losses arise when you dispose of assets. In the case of a £100 part bought for £99, if you hold it until the borrower pays off the loan and you receive £100 then you've made a £1 gain. If you sell it in the Aftermarket for £99, then there's no gain. And if you sell it in the Aftermarket for £98, then you've made a £1 loss. If a gain or loss is made, then the issues become ones of whether it is classified as ordinary income/loss, capital gain/loss, and whether it's something that needs to be reported to HMRC. Until the sums involved become substantial -- and for most P2P/P2B investors they probably won't -- I doubt HMRC will care how/if they are included on tax returns. But that's JMHO. Usual disclaimer: I am not an expert, this is not advice, etc., etc. Interesting, but doesn't redemption count as a disposal?
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mikes1531
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Post by mikes1531 on Sept 13, 2015 15:43:38 GMT
It's now down to £33,747.91, so either the sellers have changed their mind(s) or the discount is helping some people sell. I'm still not buying, though. Are you waiting for a bigger discount or perhaps don't like the proposition? Or need liquidity? I've not been attracted to these loans from the beginning, principally because I prefer loans with 'hard' security, especially with such a high LTV. The fact that underwriters still are trying to sell about half of these loans more than a year after they were made -- and less than a year before the first tranche is due to be repaid -- suggests that I'm not alone in my thinking. The fact that the only way to exit before the borrower repays is likely to be by offering parts at a discount does not encourage me either. I'd be tempted by big discounts, but that's probably just because I'm greedy and can't resist a 'bargain'.
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mikes1531
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Post by mikes1531 on Sept 13, 2015 15:54:53 GMT
Even if we ignore the issue of whether we're dealing with new parts or not, if you buy a £100 part for £99, you wouldn't automatically have a capital gain issue. Gains and losses arise when you dispose of assets. In the case of a £100 part bought for £99, if you hold it until the borrower pays off the loan and you receive £100 then you've made a £1 gain. If you sell it in the Aftermarket for £99, then there's no gain. And if you sell it in the Aftermarket for £98, then you've made a £1 loss. If a gain or loss is made, then the issues become ones of whether it is classified as ordinary income/loss, capital gain/loss, and whether it's something that needs to be reported to HMRC. Until the sums involved become substantial -- and for most P2P/P2B investors they probably won't -- I doubt HMRC will care how/if they are included on tax returns. But that's JMHO. Usual disclaimer: I am not an expert, this is not advice, etc., etc. Interesting, but doesn't redemption count as a disposal? I would think so. So the seller of the part at a discount ought to have made a loss at the time of the sale. Unless, of course, they bought it for an equal or larger discount! Which brings up a related issue... Say you have £500 of a loan and buy another £100 for £99. Then later you sell £100 of the loan at par. Have you sold the part you bought at a discount? Or £100 of the £500 you invested earlier at par? If there were shares and they were held by your broker, I think you could tell your broker which shares you were selling. Can AC say which part you sold? Can we tell AC which parts we're trying to sell? Or is there just a LIFO or FIFO assumption to be made?
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Post by chris on Sept 13, 2015 16:29:57 GMT
Interesting, but doesn't redemption count as a disposal? I would think so. So the seller of the part at a discount ought to have made a loss at the time of the sale. Unless, of course, they bought it for an equal or larger discount! Which brings up a related issue... Say you have £500 of a loan and buy another £100 for £99. Then later you sell £100 of the loan at par. Have you sold the part you bought at a discount? Or £100 of the £500 you invested earlier at par? If there were shares and they were held by your broker, I think you could tell your broker which shares you were selling. Can AC say which part you sold? Can we tell AC which parts we're trying to sell? Or is there just a LIFO or FIFO assumption to be made? Because of loan unit splitting / merging there isn't a straight history in that way. There's enough data stored that a reconstruction could be created if needed.
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ramblin rose
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“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
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Post by ramblin rose on Sept 13, 2015 18:26:12 GMT
If there were shares and they were held by your broker, I think you could tell your broker which shares you were selling. Can AC say which part you sold? Can we tell AC which parts we're trying to sell? Or is there just a LIFO or FIFO assumption to be made? It is my understanding that with shares the order in which they are sold is well-defined by HMRC and not your choice at all. I believe it to be LIFO unless you repurchase any within the following 30 days, in which case they were deemd to have been the ones sold earlier - this was to prevent the old 'bed and breakfast' loophole that enabled you to crystallise gains on the evening of 5th April and then repurchase first thing on the 6th. ('Bed and ISA' still possible though). What's the odds on them having an entirely different system for p2p loan parts when they do come to a conclusion? 
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mikes1531
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Post by mikes1531 on Sept 13, 2015 18:37:27 GMT
If there were shares and they were held by your broker, I think you could tell your broker which shares you were selling. Can AC say which part you sold? Can we tell AC which parts we're trying to sell? Or is there just a LIFO or FIFO assumption to be made? It is my understanding that with shares the order in which they are sold is well-defined by HMRC and not your choice at all. I believe it to be LIFO unless you repurchase any within the following 30 days, in which case they were deemd to have been the ones sold earlier - this was to prevent the old 'bed and breakfast' loophole that enabled you to crystallise gains on the evening of 5th April and then repurchase first thing on the 6th. ('Bed and ISA' still possible though). What's the odds on them having an entirely different system for p2p loan parts when they do come to a conclusion? Interesting. Would the HMRC-defined rule apply if the shares are held by you instead of your broker? If you delivered the share certificate for your choice of shares to sell, how could they claim you sold other shares instead? Likely answer: Because they're HMRC and they make the rules! As for the probability that there will be a different system for P2P/P2B loan parts, I'd rate it to be pretty high. 
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bigfoot12
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Post by bigfoot12 on Sept 13, 2015 18:46:19 GMT
I thought that for the purposes of capital gains tax the purchase price is the average price of all purchases with the exception of all trades on the same day which are netted first and then as ramblin rose says and purchase within 30 days of sale. I think that this average price is a section 104 holding. As ever I am not a lawyer, account, tax expert etc and I might be out of date... I think that this is specific to securities and so wouldn't apply to most P2P loans. |
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jonah
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Post by jonah on Sept 13, 2015 18:49:59 GMT
In short.... We are all in the dark.
remember: tax doesn't have to be taxing.
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Post by andrewholgate on Sept 14, 2015 7:53:46 GMT
chris - I don't expect you to give us tax advice but it would be helpful to know whether or not a "sale" results in the creation of a new loan. duck - The change in identifier doesn't necessarily mean that it's a new loan. It could just be the system's way of tracking that the ownership has changed. For absolute clarity, when a loan unit is transferred the old unit is REPAID and a new loan unit is drawn. This creates a new reference number and the creation of a new loan unit. This is covered in Section 8 of the T&Cs. The reason for this is that if the loan isn't repaid and a new loan is drawn then it may create a financial instrument and trading of such is a heavily regulated activity. You should also note that the loan unit only entitles you to the par value, so should we allow premiums you would lose any premium paid on recovery of the loan.
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pikestaff
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Post by pikestaff on Sept 14, 2015 8:25:28 GMT
andrewholgate Thank you, that is helpful. I'm not sure all sites do it that way, but their advice may have been different! Now that you've drawn my attention to the Ts&Cs, 8.5 does not seem right: "On the effective date of the transfer, the Borrower and the Transferor shall be released from further obligations towards one another under the relevant Loan Agreement (the "Discharged Obligations") and shall be treated as if the Loan represented by the relevant Loan Units had been repaid by the Borrower in full. At the same time the Borrower and the Transferee shall be treated as if the Loan represented by the relevant Loan Units had been advanced by the Transferee to the Borrower. At that point the Borrower and the Transferee shall assume the Discharged Obligations towards one another as if the Transferee had been the original Lending Syndicate Member in respect of the relevant Loan Units, including the right to collect unpaid interest and capital."I read this to mean that all the right to all accrued but unpaid interest passes to the transferee (the "buyer"). Surely that's not so. One thing that distinguishes AC's market from some others is that the "seller" keeps the accrued interest and the associated risk.
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Post by andrewholgate on Sept 14, 2015 8:27:01 GMT
andrewholgate Thank you, that is helpful. I'm not sure all sites do it that way, but their advice may have been different! Now that you've drawn my attention to the Ts&Cs, 8.5 does not seem right: "On the effective date of the transfer, the Borrower and the Transferor shall be released from further obligations towards one another under the relevant Loan Agreement (the "Discharged Obligations") and shall be treated as if the Loan represented by the relevant Loan Units had been repaid by the Borrower in full. At the same time the Borrower and the Transferee shall be treated as if the Loan represented by the relevant Loan Units had been advanced by the Transferee to the Borrower. At that point the Borrower and the Transferee shall assume the Discharged Obligations towards one another as if the Transferee had been the original Lending Syndicate Member in respect of the relevant Loan Units, including the right to collect unpaid interest and capital."I read this to mean that all the right to all accrued but unpaid interest passes to the transferee (the "buyer"). Surely that's not so. One thing that distinguishes AC's market from some others is that the "seller" keeps the accrued interest and the associated risk. I'm in the middle of a big review of the T&Cs given recent changes. I'll take a look and clarify later.
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Post by Ton ⓉⓞⓃ on Sept 22, 2015 14:23:25 GMT
Midlands Trade Finance Provider #104 has a 1% discount again  |
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