merlin
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Post by merlin on Jan 1, 2016 10:18:15 GMT
I have had no problem with the Secondary Market on FS. It has worked well for me but I have only sought small premiums on sales and haven't attempted to buy anything yet.
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littleoldlady
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Post by littleoldlady on Jan 1, 2016 15:11:46 GMT
I have had no problem with the Secondary Market on FS. It has worked well for me but I have only sought small premiums on sales and haven't attempted to buy anything yet. Maybe the reason that you have not had a problem yet is because you have not had to complete a tax return. When you do will you declare the interest you have earned on the loan sold? What about the premium? I don't know whether or not you should - that is the problem. There are different opinions voiced on this forum but that is all they are - just opinions. The SM could and should have been structured in a different way which would have avoided both the tax and premium problems.
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ben
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Post by ben on Jan 1, 2016 15:39:23 GMT
a nice simple one like MT would have solved all this problem
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SteveT
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Post by SteveT on Jan 1, 2016 15:48:20 GMT
a nice simple one like MT would have solved all this problem I'm a big fan of the MT / SS approach to their Secondary Markets but the one obvious advantage of the FS approach is that there's always something available to buy (even if much of it offers very poor value). Some lenders may well be happy to buy parts at 8 - 9% yield to get their money invested quickly without devoting time to watching the SMs for scraps being listed or having to wait for new auctions. [And I'm very happy to be offering them this facility, for a trifling 1% fee]
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merlin
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Post by merlin on Jan 1, 2016 17:09:38 GMT
I have had no problem with the Secondary Market on FS. It has worked well for me but I have only sought small premiums on sales and haven't attempted to buy anything yet. Maybe the reason that you have not had a problem yet is because you have not had to complete a tax return. When you do will you declare the interest you have earned on the loan sold? What about the premium? I don't know whether or not you should - that is the problem. There are different opinions voiced on this forum but that is all they are - just opinions. The SM could and should have been structured in a different way which would have avoided both the tax and premium problems. The main reason that I don't have a problem is that I employ a tax expert to sort these sort of things out for me. Sounds arrogant I know, but if you have ever been on the receiving end of a full blown tax inspection with all the cost and aggravation that goes with it, you would understand why!
Incidentally I don't mind paying tax as I believe I am fortunate enough to be in a position where I do pay tax and lots of it. I also have the reassurance that I am paying the right amount.
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ablender
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Post by ablender on Jan 1, 2016 17:20:57 GMT
Maybe the reason that you have not had a problem yet is because you have not had to complete a tax return. When you do will you declare the interest you have earned on the loan sold? What about the premium? I don't know whether or not you should - that is the problem. There are different opinions voiced on this forum but that is all they are - just opinions. The SM could and should have been structured in a different way which would have avoided both the tax and premium problems. The main reason that I don't have a problem is that I employ a tax expert to sort these sort of things out for me. Sounds arrogant I know, but if you have ever been on the receiving end of a full blown tax inspection with all the cost and aggravation that goes with it, you would understand why!
Incidentally I don't mind paying tax as I believe I am fortunate enough to be in a position where I do pay tax and lots of it. I also have the reassurance that I am paying the right amount.
This does not solve the tax problems. Have you been following news this year. People were using experts to manage their money and tax. HMRC was not happy as they said they were not paying enough tax. These people were actually following the rules to the letter, but HMRC thinks that they were not following the spirit of the rules. I think you know the story, if not you can use google. Will your tax expert guarantee or an indemnification (legal/ financial losses) that HMRC will not have a change of heart on this and will see you as trying to evade tax? (This applies if you sell on the SM as it is today) If you buy, on the other hand, why should I have to pay for someone else's earnings? A good part of my income is from self-employed. The principle I follow is that any expense needed to generate income is deductible. Why not in this case? As I have said before I am happy to pay my taxes not someone else's.
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littleoldlady
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Post by littleoldlady on Jan 1, 2016 22:32:56 GMT
And a sure fire way of triggering an inspection would be to put a different amount of interest than FS inform them of. So when you buy a loan you had better declare the interest that somebody else has received. And if you pay a premium, even 1%, as well, you could be buying at a loss. The SM simply stinks.
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ablender
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Post by ablender on Jan 2, 2016 0:36:00 GMT
a nice simple one like MT would have solved all this problem I'm a big fan of the MT / SS approach to their Secondary Markets but the one obvious advantage of the FS approach is that there's always something available to buy (even if much of it offers very poor value). Some lenders may well be happy to buy parts at 8 - 9% yield to get their money invested quickly without devoting time to watching the SMs for scraps being listed or having to wait for new auctions. [And I'm very happy to be offering them this facility, for a trifling 1% fee] I think that there is always something to buy due to the fact that many buyers are staying away from it. As a result, the liquidity and effectiveness of the SM for both buyers and sellers is an illusion. Yes there are some people selling and some others buying, but are you sure that this is the maximum that can be achieved? Do you really consider the current situation as an advantage?
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SteveT
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Post by SteveT on Jan 2, 2016 7:49:42 GMT
I'm a big fan of the MT / SS approach to their Secondary Markets but the one obvious advantage of the FS approach is that there's always something available to buy (even if much of it offers very poor value). Some lenders may well be happy to buy parts at 8 - 9% yield to get their money invested quickly without devoting time to watching the SMs for scraps being listed or having to wait for new auctions. [And I'm very happy to be offering them this facility, for a trifling 1% fee] I think that there is always something to buy due to the fact that many buyers are staying away from it. As a result, the liquidity and effectiveness of the SM for both buyers and sellers is an illusion. Yes there are some people selling and some others buying, but are you sure that this is the maximum that can be achieved? Do you really consider the current situation as an advantage? Not an "advantage" per se (I certainly would have designed it differently) but nor is it as dysfunctional as you suggest. If you want to sell, you can sell. If you want to buy, you can buy (with your eyes open to the tax treatment, which FS ought to make clearer for less savvy buyers with a frank warning and a confirmation tick-box). If you don't wish to do either, simply ignore that part of the platform. Would you rather FS hadn't launched a SM, meaning you still had no route to sell before term? There'd also then be no scope for a FS IFISA to be launched (IFISA rules require an option to sell loans and transfer to another provider).
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littleoldlady
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Post by littleoldlady on Jan 2, 2016 8:43:44 GMT
If you don't wish to do either, simply ignore that part of the platform (1)
Would you rather FS hadn't launched a SM, (2) meaning you still had no route to sell before term? There'd also then be no scope for a FS IFISA to be launched (IFISA rules require an option to sell loans and transfer to another provider). 1) That's just what we are doing, but we would prefer a SM which we could use. 2) No, I welcomed the SM when it was launched. However FS are being very resistant to changing it. They would have to eat some humble pie so no surprise. Our best chance of getting it improved (which I gather you would also like) is to protest on this forum. Supportive comments do not help that process.
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ben
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Post by ben on Jan 2, 2016 9:20:17 GMT
If you don't wish to do either, simply ignore that part of the platform (1)
Would you rather FS hadn't launched a SM, (2) meaning you still had no route to sell before term? There'd also then be no scope for a FS IFISA to be launched (IFISA rules require an option to sell loans and transfer to another provider). 1) That's just what we are doing, but we would prefer a SM which we could use. 2) No, I welcomed the SM when it was launched. However FS are being very resistant to changing it. They would have to eat some humble pie so no surprise. Our best chance of getting it improved (which I gather you would also like) is to protest on this forum. Supportive comments do not help that process. They are either being stubbon and not willing to eat humble pie or it works for the big investors, ie tax wise works to their advantage
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SteveT
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Post by SteveT on Jan 2, 2016 9:40:41 GMT
1) That's just what we are doing, but we would prefer a SM which we could use. 2) No, I welcomed the SM when it was launched. However FS are being very resistant to changing it. They would have to eat some humble pie so no surprise. Our best chance of getting it improved (which I gather you would also like) is to protest on this forum. Supportive comments do not help that process. I assume you mean "use for buying", since there's no reason not to use it for selling (quite the reverse!), but my original point was that if the FS SM only permitted sales at par then there'd normally be precious little available to buy, just as on SS and MT. Definite swings & roundabouts! I'm not really bothered whether FS change it (aside from adding a clearer warning about the tax treatment) although some finer adjustment for setting premiums would be welcome. Currently it provides a way of boosting average returns on FS, which is always welcome, but I remain surprised FS took the approach they did. I gain no benefit from the tax position since my lending is via a company account. No-one seems particularly concerned that the FC SM also supports premiums and discounts, nor ReBS, nor FK ... The fact that FS loans roll up interest to term certainly magnifies the SM buying risk but we're all adults here; Caveat Emptor should apply right across P2P lending.
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duck
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Post by duck on Jan 2, 2016 10:01:05 GMT
Taking an obviously minority position I agree with SteveT in that the secondary market is not as dysfunctional as it is being portrayed.
Yes I want to pay the correct tax, I do not want to overpay or underpay and I take a lot of effort to get it correct.
Having spent probably too much time on the HMRC website I'm content that I can distinguish the difference between a capital gain and an interest payment and the difference in their treatment. Since I invest as both an individual and as a business on a lot of platforms (not FS - individual only) the treatment of accrued interest has also been of 'interest' to me. Timing is important here.
IMHO get these things correct in your mindset and the secondary market makes sense.
That said, being a pragmatic person by nature and nurture I have set up my spread sheets to cover several scenarios so that I can ensure that trades that I make are financially 'sensible'. Come year end I will tie my figures in with the FS declaration to ensure that the declared figures are correct.
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Post by solicitorious on Jan 2, 2016 12:32:46 GMT
Having spent probably too much time on the HMRC website I'm content that I can distinguish the difference between a capital gain and an interest payment and the difference in their treatment.
Do you think the accrued but unpaid interest realized via SM sales needs to be declared as capital gains to HMRC? Note that everyone has an annual £11,100 CG allowance.
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duck
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Post by duck on Jan 2, 2016 15:05:55 GMT
Having spent probably too much time on the HMRC website I'm content that I can distinguish the difference between a capital gain and an interest payment and the difference in their treatment.
Do you think the accrued but unpaid interest realized via SM sales needs to be declared as capital gains to HMRC? Note that everyone has an annual £11,100 CG allowance. Interesting question. I am influenced by having business P2P & P2B investments and have always worked on an accrual basis for these investments due to the different treatment of bad debt. I questioned my accountants on their view on taking this approach for my personal investments and their view was that for personal investments you should work on interest actually paid. The reasoning being that with loans where interest is paid at term there is no way of guaranteeing that any interest will be paid (at term) and with no offsetting mechanism available you are putting yourself in a position where you are/potentially are over declaring income.
Whilst there is currently no way of offsetting losses against income tax I have recorded capital losses and these have been entered against Capital Gains Tax for the last 5 or 6 years. Carrying this logic through the capital gain made on the aftermarket should be entered against Capital Gains Tax.
As you note solicitorious the personal CGT 'allowance' is £11,100 ...... so unless other capital gains are made it would be very difficult to go over the allowance in a tax year simply buying and selling loans.
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