The state of play with property lending on FS

As I said initially I view the 30 day limit as providing some safeguard to people who do not understand the tax implications (and do not read this forum) ... you are right mikes1531 the discount should cover the tax implications for basic rate payers and higher rate tax payers should be very aware of what they are doing, but we understand the system.  Others may see a discount as a 'bargain' only to discover the error of their ways at a later date resulting in bad press for FS. With the 30 days in place it would be unusual for an actual loss (after tax) to show up but you do need to understand the difference between -1% and -0.5% with respect to the days held.  Basically the 30 days provides a bit of a buffer and if the buffer is removed the uninformed have further potential to return a loss.

With the current 30 days some tax should be paid by the purchaser even if the original owner sheds the tax liability. If a loan part was sold 1 day before it redeemed the tax due by anybody would be almost zero.  If you add in a friendly non tax payer account you could (if so minded) completely de-risk and pay no tax.  There would also be no need to avoid those very risky loans that we like to avoid. Taking this train of thought one step further and taking in the inevitable defaults, artificially generating a loss is not out of the question which can of course be offset against tax.  Then of course there are business accounts and selling at a premium .....

I hope that explains enough my train of thought and I have to say I do not advocate thinking/acting along the lines of what I have written in the previous paragraph!  With the 30 days in place the incentive to go down that route is IMHO kept at bay even if it is not totally eliminated. 

I don't disagree with what you have written mikes1531 but what I was intimating was that you could artificially increase the earnings of one account to the detriment of another over which you have control.

As you have identified selling to a non tax payer or Company results in no tax payment which is in my eyes a potential level of playing the game too far.

Just giving one example, if you were to sell loan parts at a premium to a company the money could exit the Company at a lower cost than paying CT (and possibly dividend tax) with the Company potentially being able to claim loss relief to offset some of the loss it has made on the transaction. Yes the Company is the looser but the individual gains a larger amount.

This is obviously a very murky area that I'm not at all comfortable typing about, I came across it when I missed out a '-' sign on my spreadsheet that calculates buying and selling margins and noticed that the section of the spreadsheet that deals with my Company account produced some 'interesting' figures with respect to taxation.

With the biggest premium being 4% (often 3% in practise as need min % gain remaining), then £4 on every £100 sold, would take quite a massive difference in business and personal funds

£104k would only release £4k

30%+ taxable returns buying from 3rd party on SM available to companies might be more appealing

Reducing the time until renewal to <30 days would have a dramatic effect on the effective buyer rate.
For example, 3 days ago loan 1649013119 was available at 2% discount on the SM. The loan renewal is now happening tomorrow. If my calculations are correct any lender who bought with 31 days left, has got an effective rate of approx. 182.5%. Not bad.

Getting a total of 2% (the discount on the SM for the buyer) interest in 4 days, because the borrower paid back early, equals an annual rate of 182.5%. Not bad at all!

Also that's a annual return if you could continue to repeat it constantly for a year, ie you haven't nearly doubled your money, as might sound