pikestaff
Member of DD Central
Posts: 2,178 
Likes: 1,528
|
Post by pikestaff on Apr 7, 2016 6:48:40 GMT
For 2016/17 onwards, I agree that lenders are unlikely to get into trouble with HMRC if they rely on the platforms' reporting (which UK platforms will have to provide if the loss relief is to be automatic).
For 2015/16, I do not think that the platforms are under any obligation to report losses on a basis consistent with either the new or the old law so we may be on our own.
|
|
duck
Member of DD Central
Posts: 2,803
Likes: 6,650
|
Post by duck on Apr 7, 2016 7:52:12 GMT
For 2015/16, I do not think that the platforms are under any obligation to report losses on a basis consistent with either the new or the old law so we may be on our own. That is my understanding as well, life should be much easier next year. In the meantime I think it would be remiss not to look at loans that might be eligible for relief. I certainly have several with UK platforms that I have written off on my spreadsheets. Whilst the tax 'saving' might be small in the bigger scheme HMRC have presented an opportunity so it should be used if possible. I am yet to revisit the relevant AC loans has anybody else?
|
|
|
|
Post by propman on Apr 7, 2016 7:55:54 GMT
It would be good to get feedback as to what amendments forum members are expecting to make to any bad debt numbers produced by the platforms. Personally I will claim a bad debt where first Court proceedings were commenced in 2015/6 on the grounds that the statement prior sometimes results in a repayment and is not recovered from Court action (merely the threat of it).
- PM
|
|
pikestaff
Member of DD Central
Posts: 2,178
Likes: 1,528
|
Post by pikestaff on Apr 7, 2016 8:53:04 GMT
duck - I've just added further comment on the AC thread p2pindependentforum.com/post/106738/thread. propman - I agree the threat of legal action is not the same as legal action itself. If a loan is recoverable by threatening legal action, I don't think it meets the definition of "irrecoverable other than by legal proceedings or by the exercise of any right granted by way of security for the loan." If the threat proves insufficient and legal action goes ahead, it should be OK to claim at that point.
|
|
duck
Member of DD Central
Posts: 2,803
Likes: 6,650
|
Post by duck on Apr 7, 2016 9:57:07 GMT
|
|
|
|
Post by mrclondon on Apr 7, 2016 12:45:09 GMT
I am also concerned if, say, I decide that a 2015/16 loan of £500 should be 100% written off then later, in the 2016/17 year, AC write it off. I could just adjust my return for 2016/17 but the issue will be that I think the platform send a report each year to HMRC. So my reported interest-writeoff will be different to what AC report. What a mess. "What a mess." Yes, couldn't agree more.
However I think most of us attempting to slog through the mess are lending through multiple platforms, and will be reporting on our tax forms a consolidation of interests and reliefs (combined) from multiple platforms.
Whilst HMRC's computing power and data mining is pretty awesome, its quite likely the consolidation of incoming data from multiple platforms will not be that far adrift from your own consolidation. (i.e. things will hopefully average out to some extent)
I know someone who was subject to a tax investigation, and his comment was that where he explained his rationale for doing what he did and provided supporting figures, HMRC was sympathetic even if he was in the wrong technically. In such circumstances the penalty is simply paying interest on the underpaid tax.
(The concern of course, is that you don't want to give HMRC grounds to open an investigation, as they are horribly time consuming and stressful if you don't have perfect records)
|
|
pip
Posts: 542
Likes: 725
|
Post by pip on Apr 7, 2016 13:43:18 GMT
Guy's still no idea why an investor should be making a decision on what does and doesn't qualify for bad debt relief. The HMRC guidance makes it pretty clear that it is a decision for the platform. If there is a difference between the decision made by the platform and what the investor would do, tough luck investor, it's the platforms call.
I think putting anything in your tax return that is not aligned to the tax statements is wrong, will cause red flags to be raised and cause problems in future years.
|
|
james
Posts: 2,205
Likes: 955
|
Post by james on Apr 7, 2016 14:01:23 GMT
Guy's still no idea why an investor should be making a decision on what does and doesn't qualify for bad debt relief. The HMRC guidance makes it pretty clear that it is a decision for the platform. If there is a difference between the decision made by the platform and what the investor would do, tough luck investor, it's the platforms call. I think putting anything in your tax return that is not aligned to the tax statements is wrong, will cause red flags to be raised and cause problems in future years. " Whether a loan has become irrecoverable should be judged on a case by case basis, however as the loan will be managed by a platform, the platform would usually be in a position to determine when a loan has become irrecoverable. The platform would then inform the lender that the loan had become irrecoverable.
If the platform does not undertake this action, then the lender may still determine that the loan has become irrecoverable." If you read the actual law you'll find that the tax payer isn't required to use the numbers from the platform. Platforms will usually be in the best position to determine this but they may not do it and some of us are invested in platforms that are not within HMRCs jurisdiction. I don't know about you but I think that I know UK tax law and what I have to report better than an FCA provisionally regulated 36H platform based in Estonia that doesn't even discuss things with HMRC when asked to. Besides that, there is a general principle of tax that it is the tax payer who is responsible for getting things right, not whoever is providing them with data. I know of at least two UK based platforms that have provided or are providing inaccurate statements to use for tax purposes: MoneyThing: email today mentioning an issue with a particular loan and that interest on 5th April wasn't included. Both now corrected. Ablrate: a range of errors of various types and also some payments whose status is uncertain, so the total given for interest will often be wrong. Will be fixed in the fullness of time. If a platform is doing the work and I trust that it is getting it right then I'm going to use the platform numbers because that's by far the easiest approach to take. It's only where it's not being done or where I believe there are issues that I'd want to do it myself. Even then, "want" is overstating my desire to do it, it's just a time cost I reluctantly accept because I want my tax returns to be as close to perfectly accurate as I can sensibly make them. While I could report based on what the platforms say I prefer to get it as near to right as I can. Even if that means disagreeing with what the platform reports to HMRC.
|
|
james
Posts: 2,205
Likes: 955
|
Post by james on Apr 7, 2016 14:09:15 GMT
I am also concerned if, say, I decide that a 2015/16 loan of £500 should be 100% written off then later, in the 2016/17 year, the platform decides to write it off. I could just adjust my return for 2016/17 but the issue will be that I think the platform send a report each year to HMRC. So my reported interest-writeoff will be different to what the platform report. What a mess. Yes, mess is a good word. However we're all to some extent over-thinking this because all we actually have to do is give decently accurate numbers that have been worked out on a reasonably justifiable basis. But there are a lot of detail-oriented perfectionists who post here who want to nail things down as precisely as possible...  HMRC's systems will presumably eventually be set up to notice discrepancies in this area but we can at least hope that by the time they do that at least the UK platforms will be making perfect reports to both us and HMRC.
|
|
|
|
Post by mrclondon on Apr 7, 2016 14:12:22 GMT
Guy's still no idea why an investor should be making a decision on what does and doesn't qualify for bad debt relief. The HMRC guidance makes it pretty clear that it is a decision for the platform. If there is a difference between the decision made by the platform and what the investor would do, tough luck investor, it's the platforms call. I think putting anything in your tax return that is not aligned to the tax statements is wrong, will cause red flags to be raised and cause problems in future years. The tax statements issued by the platforms for 2015-16 will normally be reporting losses that qualify for capital gains tax loss relief. This thread is primarily discussing reporting losses that qualify for income tax loss relief. The rules are different, and one (unlikely) scenario is HMRC's computers could be programmed to look more closely at those taxpayers who are simply claiming CGT losses as income tax losses given the 2 will not normally be the same.
I am as yet not aware of any platform that is providing data on the tax statement (or indeed anywhere else) for which loans can be treated as losses for offsetting against 2015-16 income tax. FK has come closest with a general email on the topic but that email should be assumed to contain major errors in the interpretation of the rules and should not be relied upon IMO without first seeking advice from a tax expert.
|
|
pip
Posts: 542
Likes: 725
|
Post by pip on Apr 7, 2016 14:52:28 GMT
Guy's still no idea why an investor should be making a decision on what does and doesn't qualify for bad debt relief. The HMRC guidance makes it pretty clear that it is a decision for the platform. If there is a difference between the decision made by the platform and what the investor would do, tough luck investor, it's the platforms call. I think putting anything in your tax return that is not aligned to the tax statements is wrong, will cause red flags to be raised and cause problems in future years. " Whether a loan has become irrecoverable should be judged on a case by case basis, however as the loan will be managed by a platform, the platform would usually be in a position to determine when a loan has become irrecoverable. The platform would then inform the lender that the loan had become irrecoverable.
If the platform does not undertake this action, then the lender may still determine that the loan has become irrecoverable." If you read the actual law you'll find that the tax payer isn't required to use the numbers from the platform. Platforms will usually be in the best position to determine this but they may not do it and some of us are invested in platforms that are not within HMRCs jurisdiction. I don't know about you but I think that I know UK tax law and what I have to report better than an FCA provisionally regulated 36H platform based in Estonia that doesn't even discuss things with HMRC when asked to. Besides that, there is a general principle of tax that it is the tax payer who is responsible for getting things right, not whoever is providing them with data. I know of at least two UK based platforms that have provided or are providing inaccurate statements to use for tax purposes: MoneyThing: email today mentioning an issue with a particular loan and that interest on 5th April wasn't included. Both now corrected. Ablrate: a range of errors of various types and also some payments whose status is uncertain, so the total given for interest will often be wrong. Will be fixed in the fullness of time. If a platform is doing the work and I trust that it is getting it right then I'm going to use the platform numbers because that's by far the easiest approach to take. It's only where it's not being done or where I believe there are issues that I'd want to do it myself. Even then, "want" is overstating my desire to do it, it's just a time cost I reluctantly accept because I want my tax returns to be as close to perfectly accurate as I can sensibly make them. While I could report based on what the platforms say I prefer to get it as near to right as I can. Even if that means disagreeing with what the platform reports to HMRC. There are two different issues: 1) The platform has not reviewed the loanbook for loans which meet HMRC's criteria for offsetting against income tax. In which case i guess a consumer can make some judgement about what can be offset (horrible do HMRC really expect the average punters to be able to do this objectively and consistently?) 2) If the platform has reviewed it's loanbook for loans which meet HMRC's criteria for offsetting against income tax, but the investor disagrees with the decision. In this case i can't see any justification for an investor going against the platforms decision.
|
|
|
|
Post by badger on Apr 8, 2016 13:15:44 GMT
It could get horribly messy if you also try to factor in recoveries
Under the 'old' system, only interest was counted as income, and taxable. Losses could not be offset, they are 'your problem' hence any subsequent recoveries would not count as income, just a reduction of your loss.
Under the 'new' system, if you've reduced your declared income by the amount of losses, then any future recoveries must be treated as income and are taxable.
From this April onwards, I might get some recoveries against losses incurred 2015-16 (which must be declared as income), and some recoveries against older losses (which are not). With some platforms, where I've got big loans and relatively low diversification (eg ReBS, AC) I can hopefully keep track of this myself. But with other platforms (eg. FC and Zopa where I've got hundreds of small loans, and a regular trickle of losses and recoveries), there's no way I can keep track of which recoveries relate to which year's losses.
|
|
oldgrumpy
Member of DD Central
Posts: 5,087
Likes: 3,233
|
Post by oldgrumpy on Apr 8, 2016 13:43:48 GMT
It could get horribly messy if you also try to factor in recoveries
Under the 'old' system, only interest was counted as income, and taxable. Losses could not be offset, they are 'your problem' hence any subsequent recoveries would not count as income, just a reduction of your loss.
Under the 'new' system, if you've reduced your declared income by the amount of losses, then any future recoveries must be treated as income and are taxable.
From this April onwards, I might get some recoveries against losses incurred 2015-16 (which must be declared as income), and some recoveries against older losses (which are not). With some platforms, where I've got big loans and relatively low diversification (eg ReBS, AC) I can hopefully keep track of this myself. But with other platforms (eg. FC and Zopa where I've got hundreds of small loans, and a regular trickle of losses and recoveries), there's no way I can keep track of which recoveries relate to which year's losses. Exactly so. Platforms need to provide us with (their) assessment of what particular losses should be claimed in 2015-2016. For subsequent years, there needs to be a separate figure given for actual recoveries on those losses, which we need to deduct in subsequent years from the new loss figures before claiming the tax relief. Any platform which cannot do this (remembering that these are the figures they give to MMRC regarding lenders' accounts) should be told to by the regulators.
|
|
james
Posts: 2,205
Likes: 955
|
Post by james on Apr 8, 2016 13:56:49 GMT
There are two different issues: 1) The platform has not reviewed the loanbook for loans which meet HMRC's criteria for offsetting against income tax. In which case i guess a consumer can make some judgement about what can be offset (horrible do HMRC really expect the average punters to be able to do this objectively and consistently?) 2) If the platform has reviewed it's loanbook for loans which meet HMRC's criteria for offsetting against income tax, but the investor disagrees with the decision. In this case i can't see any justification for an investor going against the platforms decision. I can see potential justifications for 2 if the investor has justified reasons for believing that the platform is getting things wrong but in general I agree with you on that, at least provided the platform is doing a decent job of it. There are catches, though, like foreign platforms and the difference between irrecoverable for tax purposes and writing off, say. Still, I hope and expect that at least the UK based platforms will do things decently well after a while.
|
|
|
|
Post by mrclondon on Apr 11, 2016 15:35:52 GMT
Guy's still no idea why an investor should be making a decision on what does and doesn't qualify for bad debt relief. The HMRC guidance makes it pretty clear that it is a decision for the platform. If there is a difference between the decision made by the platform and what the investor would do, tough luck investor, it's the platforms call. I think putting anything in your tax return that is not aligned to the tax statements is wrong, will cause red flags to be raised and cause problems in future years. The tax statements issued by the platforms for 2015-16 will normally be reporting losses that qualify for capital gains tax loss relief. This thread is primarily discussing reporting losses that qualify for income tax loss relief. The rules are different, and one (unlikely) scenario is HMRC's computers could be programmed to look more closely at those taxpayers who are simply claiming CGT losses as income tax losses given the 2 will not normally be the same.
I am as yet not aware of any platform that is providing data on the tax statement (or indeed anywhere else) for which loans can be treated as losses for offsetting against 2015-16 income tax. FK has come closest with a general email on the topic but that email should be assumed to contain major errors in the interpretation of the rules and should not be relied upon IMO without first seeking advice from a tax expert.
Unsurprisingly FK have today put out a clarification email changing their views some what, and advised they will provide further clarification once the Finance Bill becomes an Act.
|
|
