Investboy
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Trying to recover from P2P revolution
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Post by Investboy on Nov 25, 2015 17:32:08 GMT
I may have found potential bug.
Bought a 225.00 part in 2804795379 (Hampshire Land). But I already had investment there. My current holding did not increase by purchased amount nor I have another entry in Active Investments
Purchased few other parts, all new to me, and they appeared fine
Also I can see this purchase in my transactions - last in the list.
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ianb
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Post by ianb on Nov 25, 2015 17:46:06 GMT
I think this secondary market is great, as i am not always around at time of auction so i've spent all my loose change filling up on loans i'd missed out on. One possible bug is that when you specify how much you want to buy, the dropdown does not limit you to the cash you have available. I didnt actually try and go over what i had, as it may have screwed up my account, though maybe theres an error message popped up. But it would be safer if the dropdown limited you like it does on new investments. Well done FS.  |
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arbster
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Post by arbster on Nov 25, 2015 17:48:08 GMT
I think this secondary market is great, as i am not always around at time of auction so i've spent all my loose change filling up on loans i'd missed out on. IMO it would be more excellent if there weren't the possibility to charge premia on loan parts. This just incentivises people to invest the maximum and sell back at a premium on the SM, exacerbating the problem of people being unable to invest in the loans when they're first launched. Similarly, there is no clear illustration for the buyer as to the effective rate they're paying when that premium is taken into account.
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ablender
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Post by ablender on Nov 25, 2015 18:38:46 GMT
Let me clarify the position regarding taxation. Firstly, to be clear, liability and payment of tax is up to the individual, depending upon their individual circumstances. All we can do is provide an annual statement confirming the interest that you have earned during a tax year. When selling a loan on the secondary market - the amount you receive for the loan is a pure sale and is therefore not taxable. Although the amount includes the nominal accrued interest - this is not "interest earned" and therefore is not listed on the earned tax report. When any loan completes (whether purchased at the start of the loan or through the secondary market) the investor receives interest. When you download the tax figures for the year from our site the interest earned will reflect only the interest earned when a loan is completed. Because of the above anyone selling at par (0%) actually gains a small (tax) advantage. Hopefully this helps to clarify the position. FundingSecure FS, is this your interpretation of HMRC rules or official from HMRC? To me this sounds like a method for tax avoidance or something like that.
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stevio
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Post by stevio on Nov 25, 2015 18:42:10 GMT
So the unsuspected purchaser gets hit with a full tax bill for the full 6months of interest even if the actual interest earned would only be from the last 30days ? Hmm don't like the sound of that ! 'fraid so. Essentially ALL parts should be trading at a DISCOUNT to reflect the tax due on the accrued interest. (I'll have a play with a spreadsheet later to see if I can deduce what fair value is for the various tax bands and how far through the loan the transaction occurs. ) Predictably most parts are being listed at a premium even though the 12%/13% yield is barely enough to compensate for capital losses. The one part I listed at par got snapped up in seconds. I've listed a few others at various premiums to see what the tolerance level is, and will drop them to par in due course. Ultimately I think the FCA will have to provide guidance on the operation of secondary markets to avoid SM purchasers being ripped off - a 5% premium on a loan lasting 31 (more) days yielding 1% per month or a guaranteed 4% loss (even before the tax on accrued interest) is just asking for regulatatory intervention. So this is due to FS not paying monthly interest but at the end of the term (6 months) The seller then realizes a capital gain and liable for capital gains tax rather than an income tax, as they never received income (interest), just bought and sold an asset. I think FS did not account for capital gains tax in their statement above "Because of the above anyone selling at par (0%) actually gains a small (tax) advantage". I DON'T think they receive a tax advantage, they pay capital gains tax rather than income tax on the accrued interest. However, surely the buyer is only liable for income tax on the interest paid over the remaining term, as they have bought the asset at a specific price and have only accrued income (interest) from the asset in the remaining term. I don't think FS is correct when they state "When any loan completes (whether purchased at the start of the loan or through the secondary market) the investor receives interest.
When you download the tax figures for the year from our site the interest earned will reflect only the interest earned when a loan is completed."
The interest statement should only include interest the buyer actually accrues, not interest that has already been paid for in the price of the asset As FS was founded by an accountant, you would hope they would be able to provide accurate advice on this
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webwiz
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Post by webwiz on Nov 25, 2015 18:47:06 GMT
Well I personally will subtract the interest that I have bought on the SM from the total reported by FS when I complete my tax return. If HMRC pick up the discrepancy I will argue the point.
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webwiz
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Post by webwiz on Nov 25, 2015 18:49:31 GMT
One possible bug is that when you specify how much you want to buy, the dropdown does not limit you to the cash you have available. I didnt actually try and go over what i had, as it may have screwed up my account, though maybe theres an error message popped up. But it would be safer if the dropdown limited you like it does on new investments. Well done FS. I tried it and the system works OK and prevents the purchase but I agree it would be better if it notified you earlier in the process.
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webwiz
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Post by webwiz on Nov 25, 2015 18:51:14 GMT
I may have found potential bug. Bought a 225.00 part in 2804795379 (Hampshire Land). But I already had investment there. My current holding did not increase by purchased amount nor I have another entry in Active Investments Purchased few other parts, all new to me, and they appeared fine Also I can see this purchase in my transactions - last in the list. Are you sure your purchased part is not listed separately?
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stevio
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Post by stevio on Nov 25, 2015 18:55:55 GMT
Can I confirm that when listing a loan for sale, the interest still accrues until the loan is sold and does not cease to accrue when a part is put up for sale (like SS)?
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ablender
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Post by ablender on Nov 25, 2015 19:00:00 GMT
Can I confirm that when listing a loan for sale, the interest still accrues until the loan is sold and does not cease to accrue when a part is put up for sale (like SS)? Does the interest stop accruing in SS?
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stevio
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Post by stevio on Nov 25, 2015 19:03:53 GMT
Can I confirm that when listing a loan for sale, the interest still accrues until the loan is sold and does not cease to accrue when a part is put up for sale (like SS)? Does the interest stop accruing in SS? I believe so, you only get interest up to the date of sale. This is not a problem with SS as everything sells pretty much immediately and at least the same day. Also why some will wait till just after midnight to give the maximum chance of sale in the same day and no loss of interest. Correct me if wrong savingstream But here on FS, if it doesn't continue to accrue, then it could be an issue as it could be some time till sold I think with ablrate , where you can also add a premium, the interest continues to accrue even when you place the loan for sale and accrues till sold, correct me if wrong ablrateandy . Also ablrateandy it would be interesting to know how Ablrate account for interest from sales on the secondary market?
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Post by mrclondon on Nov 25, 2015 19:21:52 GMT
Well I personally will subtract the interest that I have bought on the SM from the total reported by FS when I complete my tax return. If HMRC pick up the discrepancy I will argue the point. Does the SM transaction history of the purchase provide you with the documentary evidence you'd need of how the purchase price is broken down into capital + accrued interest + premium/discount ? The sale transaction doesn't - it is just one lump sum.
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Post by ablrateandy on Nov 25, 2015 19:27:43 GMT
Does the interest stop accruing in SS? I believe so, you only get interest up to the date of sale. This is not a problem with SS as everything sells pretty much immediately and at least the same day. Also why some will wait till just after midnight to give the maximum chance of sale in the same day and no loss of interest. Correct me if wrong savingstream But here on FS, if it doesn't continue to accrue, then it could be an issue as it could be some time till sold I think with ablrate , where you can also add a premium, the interest continues to accrue even when you place the loan for sale and accrues till sold, correct me if wrong ablrateandy . Also ablrateandy it would be interesting to know how Ablrate account for interest from sales on the secondary market? Interest accrues on our site until it is sold, so you can leave loan parts for sale forever with no loss of interest if they don't sell. At the moment if you sell something it splits the transaction into principal and accrued interest in your statement but if you are the buyer it does not. At some point it will though. Given the delicate nature of this, I think that our intention will be to allow people to break down their interest and accrued interest received or paid into separate amounts.
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madpierre
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Post by madpierre on Nov 25, 2015 19:35:42 GMT
A secondary market is a fine idea for those who need to liquidate their holdings in a hurry, not for use as a vehicle to further increase profit from fixed interest rate loans. Premiums have no place here in my view.
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webwiz
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Post by webwiz on Nov 25, 2015 19:43:26 GMT
Well I personally will subtract the interest that I have bought on the SM from the total reported by FS when I complete my tax return. If HMRC pick up the discrepancy I will argue the point. Does the SM transaction history of the purchase provide you with the documentary evidence you'd need of how the purchase price is broken down into capital + accrued interest + premium/discount ? The sale transaction doesn't - it is just one lump sum. Good point. If FS don't change their system anyone planning to do this should make a note of the amount of interest they are buying at the point of sale when it is displayed. I have only bought a couple of parts at a 1% premium so I can easily calculate it for those.
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