wapping35
Member of DD Central
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Post by wapping35 on Apr 15, 2016 20:57:29 GMT
Zopa need to split the recoveries from bad debt figure between capital recoveries from bad debts pre 15/16 and capital recoveries from debts on or after 15/16. The former are non taxable since no relief was given for the bad debt, the latter presumably reduce the claim for bad debt/reduction in gross interest in the tax year. Now there's a good idea lets hope zopa is listening or even see it as a priority ;-) I received an email today from Z and I understand they are working on changing the tax statements to reflect this... p..s. They indicated they could not confirm a time line on the amendment (yet)...
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james
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Post by james on Apr 15, 2016 21:47:47 GMT
Thanks.
Now if Zopa are being nice on the tax reporting side they might say in more tax FAQ entries and perhaps do something about the potential CGT issues. For example:
1. Money can be invested in loans by secondary purchase. Are such loans "simple debts" that are not "chargeable assets", including for loans made to companies? Since initial investments can be made in such loans it's unlikely that most investors are even aware that they are buying on a secondary market and might have liability or reporting requirements.
2. Loans sold secondarily can have a discount to give the buyer the current interest rate. Zopa appears at present not to report this capital loss anywhere. It's moot for a simple debt that is not a chargeable asset but some sales may for example be of loans previously secondarily purchased that are not simple debt any more even if they started out as one.
3. Similarly there are loans potentially sold at a capital gain where Zopa then takes the capital gain and the tax reporting of this needs to be considered, in particular whether Zopa's taking of the capital gain can be regarded by a fee or if it's a chargeable gain that may have to be reported to HMRC and potentially taxed even though Zopa then take the gain.
4. Beyond case 2, the buyer at the discount is now having a disposal and capital gain for each monthly payment made by the borrower and for any early settlements. Potentially similar if there were any capital premium purchases with a capital loss a each repayment or settlement.
Such joy. Not.
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Post by fuzzyiceberg on Apr 17, 2016 8:57:49 GMT
James, your points above are all very interesting and If I was, like you, buying loans in values of £100,000s and more I would be concerned about it. I think you need to take some tax advice and maybe get a legal opinion or two as well.
Fortunately for me, I only get loan parts from Zopa in small, mostly £10, chunks, and for we 'little people' HMRC do not give a toss about any of those things that you are rightly so worried about, and are content for a sensible approach of declaring and paying tax on any interest earned to be applied. I accept it might mean I am not claiming theoretical capital losses of, ooh, several pennies, and HMRC will have to take the risk that I might fail to report, yes, up to several pennies of theoretical capital gains. It's a great shame of course, as I am sure in a perfect world HMRC would happily devote several legions of tax inspectors to ensure all lost pennies are correctly treated. But there we are, sometimes we have to live with imperfection.
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Post by dualinvestor on Apr 17, 2016 9:55:03 GMT
There is a axiom/cliche whatever you want to call it, admittedly put about mostly by lawyers and accountants, that free advice is exactly worth what you pay for it.
If the sums involved here are large the potential for error is similarly large, Zopa (or the other platforms) may provide information in their FAQs that is their belief of the tax situation but it is not a definative statement of the law. For what it is worth, although discussion here is useful, if you are talking about transactions of six figures, in my opinion, paying for proper advice is an "investment" well worth making.
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james
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Post by james on Apr 17, 2016 22:41:40 GMT
James, your points above are all very interesting and If I was, like you, buying loans in values of £100,000s and more I would be concerned about it. I think you need to take some tax advice and maybe get a legal opinion or two as well. In the case of Zopa I no longer have much invested since I'm mostly running down the loan book and have been for years. But I do like to file correct tax returns and also think that it's useful for those of us who have been considering the potential issues to mention them. Given that I do expect to have a couple or three hundred thousand in P2P this year I regrettably do have to pay a bit of attention to CGT because I just might be affected, though not at by things at Zopa unless the unlikely situation of them pushing me over a threshold happens For me that is very unlikely since I'm not looking to sell any Zopa loans and am certain that I acquired none through secondary transactions back in the days when there was a clear distinction between primary and secondary transactions, not them comingled for initial investment. While I could seek personal tax advice I take the view that it is generally better for platforms to do it and say what that advice is so that all customers can benefit from it, partly by the platform developing the reporting needed as a result of that advice.
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Post by dualinvestor on Apr 18, 2016 7:48:46 GMT
While I could seek personal tax advice I take the view that it is generally better for platforms to do it and say what that advice is so that all customers can benefit from it, partly by the platform developing the reporting needed as a result of that advice. Whilst Zopa, or any other platform, can seek advice, get counsel's opinion or even seek guidance from HMRC if that is wrong they have no liability to you. The platforms do not give either tax or investment advice. Discuss these matter all you like, and from the number of posts you have made on this thread and others you do, but if you want reliable actionable advice go and pay for it. If your portfolio is as large as you claim it will cost a very small reduction in your rate and in return give you some certainty, and if it is wrong you can sue the people who give it to you.
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aju
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Post by aju on Apr 19, 2016 12:13:29 GMT
i notice that the 2015/16 statement has removed the statements at the bottom !!!
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pikestaff
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Post by pikestaff on Apr 20, 2016 6:29:49 GMT
I am not on Zopa and I don't intend to make a habit of posting here, but I will note that for 2015/16 the bad debt relief for income tax is not automatic. It must be claimed in a tax return and lenders have the alternative of claiming the old CGT relief if they wish. Therefore Zopa cannot give you "one number" but must report interest income (which should be cash interest) separate from losses and recoveries. For more on bad debt relief generally, see this thread p2pindependentforum.com/thread/4942/debt-relief-publication-final-guidance |
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