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Post by caveman38 on Mar 13, 2016 19:04:45 GMT
What other platform apart from FS should I be aware of buying remaining time of loan and paying seller accrued interest but more importantly a larger portion of income tax. I ask as I was unaware until I bumped into that fact on their site. How many people in the early stages of P2Pinvesting, building up a fund and having to populate it with SM bits. But unaware that they will be clobbered with tax on the interest you have paid to the sellers of those part loans. Sorry if this is common knowledge. What other platforms would this system be operated on besides FS.
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ben
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Post by ben on Mar 13, 2016 19:26:08 GMT
What other platform apart from FS should I be aware of buying remaining time of loan and paying seller accrued interest but more importantly a larger portion of income tax. I ask as I was unaware until I bumped into that fact on their site. How many people in the early stages of P2Pinvesting, building up a fund and having to populate it with SM bits. But unaware that they will be clobbered with tax on the interest you have paid to the sellers of those part loans. Sorry if this is common knowledge. What other platforms would this system be operated on besides FS. According to FS there secondary market is great and the vast majority of people love it so that told most of use on here that think its a bit rubbish. I generally do not use the secondary markets as I only invest what I intend to hold to end although I must admit I have used SS one a bit. Although I have looked at a few and none look as bad as the FS model a few let you sell at a premium which I always avoid but that is up to you
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ablender
Member of DD Central
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Post by ablender on Mar 13, 2016 22:05:26 GMT
I have been very vocal about this tax trap that exists on FS' SM. Their view is that they are covered since they put up a notice about this. My view is that they are still responsible. I personally do not use FS SM neither to buy nor to sell. For me FS' SM does not exist.
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Post by mrclondon on Mar 14, 2016 0:20:21 GMT
My suspicion is the issue is a bit deeper than just how FS chose to implement their SM, and impinges on the underlying FS business model. Given a proportion of their loans are on standard pawn contracts, there is NO obligation on the borrower of such loans to make any interest payment (or indeed capital payment). Such payments are, by law, optional and only required if the borrower wishes to retrieve the asset. I struggle to see for such loans how you could structure the SM differently to how it is given the interest payment is not a contractual obligation on the borrower.
To address the question raised by the OP - which other SM's does this affect ? The real answer is there is still a lot of ambiguity on how to classify p2p loans. The consensus is they are "simple debts", but the taxation treatment of interest depends on the exact mechanism each platform uses to enact the transfer during a SM sale, i.e. is the loan part transferred, or redeemed and a new loan part re-issued to the new lender. This is an evolving area of UK finance and HMRC is behind the curve in setting out comprehensive guidance.
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james
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Post by james on Mar 14, 2016 10:07:38 GMT
Also depends on things like whether the "accrued interest" is a recallable or non-recallable advance from the buyer to the seller of the prospective interest on the loan or is instead an increased capital price. If it's such an advance with the loan interest payment being used to repay the advance then presumably there's no income tax issue. Recallable or not affects ow much of the loan risk gets transferred - all but the interest or all including the interest payment risk.
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