mikes1531
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Post by mikes1531 on Mar 13, 2014 20:54:16 GMT
Surely AC must have a tax advisor/specialist they consult with who tells them exactly what they need to put on the statement they will be sending their lenders shortly after 5/Apr that will supply the numbers we need to insert in our tax returns. Will cashback payments appear on that statement? If so, how will they be described? And exactly what data for each of their lenders will AC be supplying to HMRC? We will be receiving a year-end statement of some sort, won't we? I like the optimism for a 5/Apr statement. Last I knew, it was penciled in for Q2 or Q3 from the tech team. Isn't there a HMRC requirement that income payers provide the relevant data to their income recipients by some deadline? Presuming there is, does anyone know when that deadline is?
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Post by mrclondon on Mar 13, 2014 21:50:01 GMT
Presuming there is, does anyone know when that deadline is? 31st January of the following year for online filing.
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pikestaff
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Post by pikestaff on Mar 13, 2014 23:27:50 GMT
This makes me annoyed. I've lent tens of thousands since Xmas and not received a single £ of cash-back on any deals. I've experienced some serious dead time on some 6-month loans by bidding in auctions rather than waiting for the secondary market. I was planning to increase my exposure to AC loans but these types of gimmicks make me view the AC staff in a much poorer light since it smacks of desperation and won't solve their problems in any sustainable way. The clear issue is that they simply don't have the retail lending base to take the underwriters out of their positions. The've done a bunch of large deals in recent months and now the underwriters are getting a serious case of indigestion. I've rung them to try to understand how they expect to be able to rotate the underwriters out of their positions quickly when they don't have a large enough capacity in their retail lending base. I don't think they know. It's frankly a bit amateur not to have thought this through as anyone with any experience in markets could predict this would happen. Instead they asked if I wanted to become an underwriter and I told them I did not want to risk ending up with £100k+ in a single deal! They need to develop a retail investor base with more mid sized investors who will put £1k to £20k in each deal asap and reduce their dependence on underwriting. Getting even a few thousand small investors who add £100 each for an extra 0.25% really isn't going to make a dent in the problem. What about something more effective like offering cashback in auctions to investors to encourage early bidding or for larger size bids (underwriting-lite)? Good post. AC have definitely tried to grow too quickly in my view. The underwriting panel has helped them a lot, compared to TC which has a very limited capacity to get bigger loans away. But, now they need to recycle the underwriters' money so that they can do it again. I suspect that the growing competition in the p2x marketplace means there is not enough money out there at the moment, especially at the end of the tax year when people are topping up their ISAs, pensions, VCTs, etc. Good news for those who have funds available...
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pikestaff
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Post by pikestaff on Mar 13, 2014 23:31:35 GMT
I like the optimism for a 5/Apr statement. Last I knew, it was penciled in for Q2 or Q3 from the tech team. Isn't there a HMRC requirement that income payers provide the relevant data to their income recipients by some deadline? Presuming there is, does anyone know when that deadline is? Where tax is deducted at source, I think the deadline is 30 June. But it does not apply to p2x (at present) because there is no tax deducted.
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pikestaff
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Post by pikestaff on Mar 13, 2014 23:40:59 GMT
I'm definitely not an accountant. FCs take on the way they do it is: "Taxation of cashback In certain circumstances Funding Circle offers cashback to investors. The cashback is considered an inducement to enter into a transaction and is received as a direct consequence of having made the loan. Cashback promotions are not normally treated as income and are not subject to income tax or deductions. " I think the argument would be that a cashback is an adjustment to the purchase price of the loan and thus would not be taxable as income but would adjust the capital gain or loss on disposal/redemption. No idea whether this is right but it seems plausible. AIUI FC's view is that any capital gain would not normally be taxable for an individual lender. See here: support.fundingcircle.com/entries/22557912-What-are-the-tax-consequences-of-lending-as-an-individual-
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andy2001
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Post by andy2001 on Mar 13, 2014 23:46:42 GMT
I'm definitely not an accountant. FCs take on the way they do it is: "Taxation of cashback In certain circumstances Funding Circle offers cashback to investors. The cashback is considered an inducement to enter into a transaction and is received as a direct consequence of having made the loan. Cashback promotions are not normally treated as income and are not subject to income tax or deductions. " I think the argument would be that a cashback is an adjustment to the purchase price of the loan and thus would not be taxable as income but would adjust the capital gain or loss on disposal/redemption. No idea whether this is right but it seems plausible. AIUI FC's view is that any capital gain would not normally be taxable for an individual lender. See here: support.fundingcircle.com/entries/22557912-What-are-the-tax-consequences-of-lending-as-an-individual-I think the Funding Circle position is that selling loans above par is not taxed as a capital gain, or as income. At least for individual lenders.
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pikestaff
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Post by pikestaff on Mar 13, 2014 23:49:29 GMT
I think we are probably in agreement. Capital gain, but not taxable for individuals.
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mikes1531
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Post by mikes1531 on Mar 14, 2014 2:03:49 GMT
I think we are probably in agreement. Capital gain, but not taxable for individuals. Not even if the individual has more capital gain than their CGT annual exemption? That sounds rather overly generous to me.
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mikes1531
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Post by mikes1531 on Mar 14, 2014 2:18:02 GMT
Presuming there is, does anyone know when that deadline is? 31st January of the following year for online filing. I know I have until 31/Jan to file my return if I file online, and I know the deadline is earlier (31/Oct) if I want to file a paper return and have HMRC calculate my tax. But in order to file that return I have to be able to tell HMRC what my earnings were, and for that I have to rely on whoever paid me any income. Surely my income provider can't make me wait until 31/Jan before supplying me with the info I need to prepare my tax return. So what I asked was "Isn't there a HMRC requirement that income payers provide the relevant data to their income recipients by some deadline?"
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Post by bracknellboy on Mar 14, 2014 8:18:47 GMT
31st January of the following year for online filing. I know I have until 31/Jan to file my return if I file online, and I know the deadline is earlier (31/Oct) if I want to file a paper return and have HMRC calculate my tax. But in order to file that return I have to be able to tell HMRC what my earnings were, and for that I have to rely on whoever paid me any income. Surely my income provider can't make me wait until 31/Jan before supplying me with the info I need to prepare my tax return. So what I asked was "Isn't there a HMRC requirement that income payers provide the relevant data to their income recipients by some deadline?" Mike, I'm not sure you have the right end of the stick. the 31st January is the filing date. Where someone is deducting tax on income you recieve there is a separate deadline (.e.g. see deadline on P60s, P111Ds and tax statement provision by banks. As p2p is not deducting tax in this tax year, so none of that applies. While I think it is a bit remiss that several of hte platforms seem to have not thought to provide nicely presentable statements for purposes of tax returns, (unlike FC which has) in the case of AC I don't see it as much of an issue: the format of their transaction statements seems to be easily amenable to quickly self calculating. Its taken a matter of a few minutes to login, download transaction satement to excel, put a pretty trivial filter on it, and calculate the interest received over a user defined period. It still nonetheless annoys/irritates me that the data is not separated/presented out in a way that would make that even easier i.e. to provide a column which classifies each transaction: interst payment, deferred interest payment etc. etc. : an aspect where AC has something in common with TC (in fact, I'm beginning to recall that FC may have precisely the same issue on its transaction details).
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j
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Post by j on Mar 14, 2014 9:07:49 GMT
It still nonetheless annoys/irritates me that the data is not separated/presented out in a way that would make that even easier i.e. to provide a column which classifies each transaction: interst payment, deferred interest payment etc. etc. : an aspect where AC has something in common with TC (in fact, I'm beginning to recall that FC may have precisely the same issue on its transaction details). I do recall chris indicating there's something in the pipeline in terms of a facility that shows profit made over a specified period of time. Can't recall if it was Q2 or Q3, or even beyond. Hopefully it will also include a downloadable-type document along the lines of a tax statement as provided by FC. Frankly, the sooner both come the better as I find it cumbersome to trawl through statements every month working out how much capital & interest was earned/invested each month & calculating gross/net rates achieved to boot.
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Post by bracknellboy on Mar 14, 2014 9:33:51 GMT
Hopefully it will also include a downloadable-type document along the lines of a tax statement as provided by FC. Frankly, the sooner both come the better as I find it cumbersome to trawl through statements every month working out how much capital & interest was earned/invested each month & calculating gross/net rates achieved to boot. Apologies if I'm teaching Grandmother etc etc. but from my quick perusal it seemed to be pretty easy and quick to do. On my account so far, all interest payments appear to have the text "Interest Repayment" or "deferred interest" in the transaction 'narrative'. Therefore download the transaction statement to excel. Select the top row and select Data->Filter->Auto Filter. Select the pull down on 'narrative' and select 'Custom'. Put on two filters "contains" "Interest Repayment" OR "contains" "deferred interest". Apply. Then do a Sum on the Amount column. Job done. Took longer to write that than it did to actually do it.
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merlin
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Post by merlin on Mar 14, 2014 9:50:45 GMT
Hopefully it will also include a downloadable-type document along the lines of a tax statement as provided by FC. Frankly, the sooner both come the better as I find it cumbersome to trawl through statements every month working out how much capital & interest was earned/invested each month & calculating gross/net rates achieved to boot. Apologies if I'm teaching Grandmother etc etc. but from my quick perusal it seemed to be pretty easy and quick to do. On my account so far, all interest payments appear to have the text "Interest Repayment" or "deferred interest" in the transaction 'narrative'. Therefore download the transaction statement to excel. Select the top row and select Data->Filter->Auto Filter. Select the pull down on 'narrative' and select 'Custom'. Put on two filters "contains" "Interest Repayment" OR "contains" "deferred interest". Apply. Then do a Sum on the Amount column. Job done. Took longer to write that than it did to actually do it. I accept that it is easy to do but the end result does not look like a sufficiently authoritative document to satisfy my account who will insist on rechecking all the detail and charge me for doing it. Last year when I produced the FC statement he did not even blink and his only comment was "isn't it a bit risky" which I suppose is normal for accountants who are conservative at the best of times. So I for one would love to be able to printout a document in glorious Technicolor with Assets logo emblazoned on the top which looks the part for the account and the Revenue.
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pikestaff
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Post by pikestaff on Mar 14, 2014 13:54:06 GMT
I think we are probably in agreement. Capital gain, but not taxable for individuals. Not even if the individual has more capital gain than their CGT annual exemption? That sounds rather overly generous to me. I think cashback is an adjustment to the cost of the loans acquired. Per FC's website, their loans are "simple debts", which are outside the scope of CGT (see their tax FAQ and the link there to HMRC guidance). I think this is the reason why FC say there is no tax on cashback. The question of whether loans are simple debts or "debts on a security" is not entirely straightforward, but I think that if there is no secondary market on which loans can be sold at a profit one can be reasonably sure they are simple debts. I believe the following extract from FC's tax FAQ is significant here: "Profits and losses arising on the disposal of loans where you are not the original investor would normally be taxable under the capital gains tax regime. However, due to the way that that “sales” are structured at Funding Circle, all loans, including replacement loans, are effectively treated as original loans for capital gains tax purposes [my emphasis] . This means capital gains tax should not be payable on loan parts sold at a premium, and loss relief should not be available for loan parts sold at a discount."This implies, in my view, that "sales" on FC are cunningly structured so that they are not sales at all. Instead, the loan from the "seller" is repaid, funded by a brand new replacement loan from the "buyer" to the "seller". This is of course automated so that it is invisible to all parties. Not only does this avoid the tax problem mentioned in the quote, it also helps to underpin the tax status of the loans as "simple debts". I do not know whether sales on AC are structured in this way. But even if they are not, their loans should (I think) be simple debts for as long as it is impossible to sell them at a premium. And hence, I think cashback on AC should (at least for now) be tax free. E&OE, DYOR etc...
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Post by mrclondon on Mar 14, 2014 14:23:05 GMT
This implies, in my view, that "sales" on FC are cunningly structured so that they are not sales at all. Instead, the loan from the "seller" is repaid, funded by a brand new replacement loan from the "buyer" to the "seller". This is of course automated so that it is invisible to all parties. Not only does this avoid the tax problem mentioned in the quote, it also helps to underpin the tax status of the loans as "simple debts". I do not know whether sales on AC are structured in this way. But even if they are not, their loans should (I think) be simple debts for as long as it is impossible to sell them at a premium. And hence, I think cashback on AC should (at least for now) be tax free. E&OE, DYOR etc... IIRC chris posted some weeks ago that there were external (to AC) reasons why loan parts sold on the after market are given a new id during the transaction.
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