Investing in P2P as a Limited Company

The short answer is that the tax will following the accounting treatment and there is no specific guidance in dealing with loan impairments beyond that loans should be written down to their recoverable value with any impairment written to profit or loss (ie the loss).  The recoverable value is subject to judgement, but should be based on reasonable assumptions and should be specific to each loan (i.e. a general impairment provision such as a 20% haircut across your whole loan book would not be allowed as it is far to general).  This allows a far more common sense approach in reaching a reasonable figure versus the very prescriptive guidance of SAIM1220 for personal taxation.  Unlike SAIM1220, the loss recognised should be the expected unrecoverable amount (eg after considering security held) rather than a full write-off of the outstanding loan balance.

Your main issue is likely a lack of history of the outcome of previous defaults/losses to come up with some reasonable assumptions.  Probably the best approach would be to assume a certain write-off of loans in default based on LTV, eg full or partial write-off of anything above 50% LTV with further adjustments if the likely outcome of recovery action is known.  The key is to be consistent in applying whatever methodology you settle on and that it is reasonable given all the evidence available.  This is obviously easier if you have historic data, but HMRC are unlikely to challenge loss values if you are able to demonstrate that you employed a reasonable, fair and consistent approach in determining the losses booked.  Another thing to take into consideration is that I'm fairly certain that any post balance sheet events are adjusting events, ie if a loan defaults after your year-end, that is taken as evidence that the loan was impaired at the balance sheet date - ie you can recognise losses on defaults that occur after your year-end (a trade debtor that goes bust after year-end is the classic example always cited as an adjusting event and see no reason why the same accounting treatment would not apply to loans or any asset). Any revision in impairment values in future periods will flow to the P&L in those periods (ie if you recover more than your original assessment, then the difference will be reversed out next period).

 

I elected to adopt the new IFRS9 accounting standard when I repurposed an existing (dormant) company for P2P lending, so I make an allowance for expected impairments across the whole loan book at the end of each company year (method described here). Any aggregate difference between expected and actual impairments in following years flows back to the P&L so it's simply a matter of timing. As nick says above, the key thing I think is to take a logical approach, document it (in the notes to your accounts) and follow it consistently.

My accountants have got used to my strange 'additions' over the years (my Ltd Co and I as an individual have been investing for over 5 years now) they even get copies of my spreadsheets 'for information', strangely they decided not to check +60K lines on my Bondora sheet!

May I ask which bank do you guys use to invest in p2p as a ltd co?

I tried tsb and was told that they are too small a bank to allow this.

HSBC but that company account was set up many years ago with the transition into P2P only taking place over the last couple of years.

My Santander business account is free