Tax reports do not seem to show losses

*bump* (again)

I sincerely hope that "Claim it yourself if you want to" isn't going to be the final position taken by AC. Three of your direct competitors, Funding Circle, Funding Secure and Ablrate, already classify loans that have entered legal recovery procedures as "Irrecoverable" on their Tax Statements and also calculate any "Recoveries" from such loans in subsequent tax years. Why AC cannot do the same is beyond me. Life is going to become highly complex if we have to calculate manually our future-year "Recoveries" against individual loans we have elected to claim as "Irrecoverable", especially if AC decides belatedly to fall into line in future years.

Take #86 (Scottish Property Investment) as an extreme example. Administrators were appointed on 6th May 2016, the secured assets have already been sold (for substantially less than the loan sum), you're not predicting any further sums are likely to be recovered and the borrower is now a convicted felon residing at Her Majesty's pleasure. Yet loan #86 still isn't to be classified as "Irrecoverable" on the AC 2016/17 Tax Statement??!

That's all I ask. Put the information in a separate statement or report if you prefer to keep it out of the tax statement ("Loans in Legal Recovery Statement" perhaps?) but it should show our holding in each loan that was deemed to have entered legal recovery procedures in the tax year, plus sums recovered in the year on loans that entered legal recovery procedures in the previous tax year(s).

Andrew, although SAIM 12050 uses the word "may" in connection with claims on loans in a recovery process, the underlying legislation does not.  Extracts below are from the new sections of ITA 2007 as inserted by s32 FA 2016:

412A Relief for irrecoverable peer-to-peer loans
(1) A person (“L”) is entitled to relief under this section if ...
(d) any outstanding amount of the principal of the loan has, on or
after 6 April 2015, become irrecoverable.

(3) The relief is given by deducting the outstanding amount in calculating
L’s net income for the tax year in which the amount became
irrecoverable (see Step 2 of the calculation in section 23).

(8) In this section “irrecoverable” means irrecoverable other than by legal
proceedings or by the exercise of any right granted by way of security
for the loan.

Sub-s. (8) provides the extended definition of "irrecoverable".  It is not optional.  The extended definition must be used.

Sub-s. (3) makes no provision for claiming only part of the amount deemed to be irrecoverable (such as, for example, limiting the claim to amounts that have been written off by the platform or that would have been eligible for a capital loss claim under the old rules).

Although it may be argued that no claim is mandatory, and therefore it should be permissible to claim in part, there are two problems with this approach:

(i) you cannot pretend that a claim arising in one year, by virtue of the extended definition, belongs in another year (which would be the effect of claiming later than the law provides); and

(ii) any amount that a lender voluntarily chooses not to claim when it arises is permanently lost.  This is because the rules on sideways relief (s412B) and carry-forward relief (s412C) operate so as to deny relief for any amount that the lender could have claimed under a previous heading:

412B Claims for additional relief: sideways relief
... (2) The claim is for the outstanding amount ... not capable of being
deducted under section 412A ...

412C Claims for additional relief: carry-forward relief
... (2) The claim is for the outstanding amount ... not capable of being
deducted under sections 412A and 412B...
[emphases added]

If you are being told differently I would like to know by whom, and I would like to know whether they have specifically considered the point on sideways relief and carry-forward relief. 

I would be content to go along with your approach if it is endorsed by HMRC's central policy unit, but much less comfortable if it is coming from a mere adviser or from your local inspector.

That's what I think the law says, even if it's likely there is more cash to come.

Whether this is intended is another matter.  I would be content to go along with the "optional" approach described by Andrew if it has been endorsed by HMRC centrally.

In Zopa loans default after 4 months and are claimable against tax at that point. Recoveries are then calculated and deducted from the defaults in the next tax statement, simple.  Couldn't HMRC give a simple general definition of say 4 months (or some other period) non payment as the point at which all loans are 'deemed irrecoverable', rather than the extremely subjective way it needs to be done now. It would be easy for platforms to determine and it would also be easy to calculate recoveries for the next reporting period. There would be edge cases, ie, where small amounts are being paid regularly, that might need individual consideration, but it would be better than anarchy.