blender
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Post by blender on Dec 6, 2016 12:30:26 GMT
Hardly. They don't even ask me to fill out a self assessment. I send them a letter each year declaring my untaxed income from p2p and they adjust next year's code on the occ pension. The lack of a tax statement is a barrier to participation that I am sure Albrate will wish to remove. Personally I would prefer that basic rate income tax was deducted from earned interest by p2p operators. I have no problem with paying what's due, even though I live, and have run a business, in a part of the country where paying tax seems to be considered as optional, or even a weakness.
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james
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Post by james on Dec 6, 2016 20:25:22 GMT
What I would like to know from Ablrate is the calculation behind last 12 months' interest earned (my apostrophe) on the dashboard because a snapshot of that at tax year end is what I report. There should be a little question mark beside those interest-earned numbers to explain what it is. That would be nice if only to cross-check. And of course instead or as well as last twelve months the numbers that are really useful to us are gross interest this tax year and "irrecoverable capital losses per HMRC definition this tax year" that can be deducted from it to get our reportable figure to HMRC. And then there's "capital recovered from loans deemed irrecoverable in previous years" that is taxable as interest income. Of course for 2016-7 there is the small problem of losses and perhaps Ablrate will try to do the whole reporting update in one go.
Yes, it's clear that per HMRC definitions the container loans are "irrecoverable without legal action" and the capital loss can be deducted from interest income this tax year if recovery doesn't beat the end of the tax year. For reporting purposes for us ablrate it would be handy if there was an entry in the transaction history of type "Irrecoverable" that has an amount but no change in balance that we can deduce from interest reported to HMRC. And of course similar for "Recovered capital" with amount but no change in balance which we'll have to add to our interest reportable to HMRC. Then we can track this portion of our tax liabilities and reconcile with your own reports. For anyone who doesn't know, any excess above interest earned on one platform can be applied to interest on other platforms in that tax year and if there's sill excess it can be carried forward to later years.
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james
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Post by james on Dec 6, 2016 20:46:08 GMT
Thanks guys will take a look at these, especially the accrued interest figure not being reported separately. If you have any preferred way you would like us to report the tax statement, do let us know. e.g. do you want it as a report or raw csv data that is downloadable in a spreadsheet (or both!). Thanks. Letter and CSV supporting document so that anyone who is asked by HMRC can provide the numbers behind the calculations. For interest the letter to contain at least these numbers: 1. Interest received 2. Accrued interest paid on purchases 3. Accrued interest received on sales 4. Capital deemed irrecoverable (needs to reflect cost through instant returns or secondary market buy/sell though, not just par, though par beats nothing) 5. Recovery from irrecoverable loans 6. Interest to declare to HMRC = 1 + 2 - 3 - 4 + 5 7. Loss deductible from other P2P or for carry forward. If 6 is negative, set 6 to zero and include that negative number multiplied by -1 to change sign in this row. For CGT it's more fiddly but an overview: 7. Total value of disposals (so you can easily see whether you might have gone over the reporting threshold by combining this with other platforms and non-P2P) 8. Overall capital gain or loss (which requires tracking purchases and sales and their profits and isn't just for current year since purchases may be in past years, so hard) 9. CGT also requires for HMRC a report of every transaction showing its capital gain, loss or neither. Not in any way discretionary, HMRC wants it if you have to report. HMRC says what they want, ask if you need a link, or maybe someone else will beat me to providing it. However, for most people there will be no need to report CGT so it isn't really worth including the full 9 entry in every tax statement, but rather better to have a CGT report that is downloadable in addition in say CSV format. To help us to track things during the tax year it would be handy if secondary transactions and capital repayments were split like this in our transaction histories: Accrued interest paid (already present) Accrued interest received (already present) Par value of deal (bundled in with capital gain or loss) Capital gain vs par (vs par is easy to do, no need to take into account purchase prices) and premium or discount % in comment Capital loss vs par and premium or discount % in comment Or better still the actual capital gain or loss (but harder because you have to for each person go back and look at their whole capital transaction history each time to calculate it) Better for capital repayments also the capital repayment at par (present now) and better still the CGT gain or loss vs average purchase price on a different line (hard, needs looking at whole history) Capital gain or loss vs par allows calculation of the actual capital gain or loss when combined with loan details and instant returns and it's just vs par so it can be calculated easily by reference to what par was. Different "Type" for each of these numbers so they can be picked up automatically with a simple string comparison in a spreadsheet. Now we have loan IDs visible they should also be a column in the transactions so we can split out all transactions related to a particular loan. That way we'll be able to do those CGT calculations to cross-check yours and within a tax year to plan things like VCT buying to mitigate tax costs. To give some idea, what I do for loans is track my actual capital gain or loss on the loan including all secondary market transactions. This is perhaps best described as very fiddly at the moment since the numbers needed aren't well broken down. And I keep a running tax picture for the current tax year as well as a projection. Lots of work there particularly on the CGT side but the gain/loss vs par split out probably isn't too painful.
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james
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Post by james on Dec 6, 2016 20:56:52 GMT
I think the tax report provided by Funding Circle is excellent; a shame about the loans offered. No need to reinvent the wheel but of course there are differences. I'd be really handy to be able to see an example of that so I and others not familiar with FC's reporting could consider whether it's really good or might benefit from tweaks. Things like how capital gains or losses are reported for capital repayments by a borrower might not be there say if they have no amortising loans.
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blender
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Post by blender on Dec 6, 2016 23:24:13 GMT
I think the tax report provided by Funding Circle is excellent; a shame about the loans offered. No need to reinvent the wheel but of course there are differences. I'd be really handy to be able to see an example of that so I and others not familiar with FC's reporting could consider whether it's really good or might benefit from tweaks. Things like how capital gains or losses are reported for capital repayments by a borrower might not be there say if they have no amortising loans. I believe that SteveT is already helping with that on the previous page. One thing about the FC report is that the period is not a fiscal year but start and end dates are set by the lender's request for a statement. Presumably this covers lending by businesses, where the reporting period does not match the fiscal year, and of course may not be a year in duration.
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david42
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Post by david42 on Dec 6, 2016 23:26:17 GMT
Example of a Funding Circle tax statement. They ignore capital gains, even though they say profits and losses on secondary market trades at a premium or discount are capital gains.
Tax Statement – April 6 2015 - April 5 2016
The information provided assumes that you are a UK tax resident individual and wish to take advantage of the new bad debt relief available on loans defaulted since 6 April 2015. If you have previously been able to take advantage of capital loss relief under TCGA 1992 (which is only available if you do not claim bad debt relief and is not available in respect of loans that become irrecoverable on or after 6 April 2016) and wish to do so for this tax year, please speak to your tax advisor and contact us separately for the relevant information.
Investment Income Total interest paid by borrower: £368.66 Funding Circle servicing fee: -£25.77 Income payments made to you: £342.89
Bad Debt Principal Defaulted and not recovered in period: -£583.85 Discounts on acquisitions of above bad debts on secondary market: £0.00 Total eligible bad debt in period: -£583.85
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james
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Post by james on Dec 6, 2016 23:40:44 GMT
Thanks. very similar to the Zopa version except with the observation about cost not necessarily being at par.
Bad idea for Ablrate to mention their lender fees since those are paid by borrower rather than lender, so no need to deduct them from interest paid by the borrower on lender tax reports. Would be different if Ablrate had a lender fee deducted from that interest, but they don't.
Here's how the Zopa one looks:
1. P2P loan interest received in the year 2. Capital recovered from bad debt that qualified for tax relief 3. Gross income from loans (1 + 2)
4. Bonus: tell a friend 5. Bonus: early adopter
6. Gross earnings to declare to HMRC = 3 + 4 + 5
7. Loan principal deemed irrecoverable in the year
The gross earnings to declare to HMRC in this case isn't quite right since it doesn't deduct the irrecoverable amount from it.
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littleoldlady
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Post by littleoldlady on Dec 8, 2016 8:39:35 GMT
Thanks guys will take a look at these, especially the accrued interest figure not being reported separately. If you have any preferred way you would like us to report the tax statement, do let us know. e.g. do you want it as a report or raw csv data that is downloadable in a spreadsheet (or both!). Regards Ablrate The main point is that you tell us what you are reporting to HMRC. Many of us with relatively simple affairs will just report the same figure ourselves without needing to know how it is calculated.
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blender
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Post by blender on Dec 11, 2016 23:05:03 GMT
I did remain happy for a couple of days with the improvements to the site, but recent experience has caused me to dig into those 'interest earned' figures on the dashboard, which is what I have reported to HMRC, and to understand it better. The download of the transactions has been most useful. However, I find the interest earned numbers are just the monthly repayments of interest received directly from lenders and the value of the accrued interest paid to me by purchasers of loans I have sold. But there is no reduction for the value of the accrued interest which I have paid to others on purchase I have made. The figure does not reflect the interest for the time loans are held. This figure is not what I believe I should be reporting to HMRC, but since I have bought very little on the SM I will have over-reported very little for 2015-6 and will pay a few pounds extra - which is not an significant issue for me but may be for those who have bought more on the SM. What is more of an issue is that we here have recently opened another account in order to split the existing account. The purpose is to transfer the loans to an account which will have some space at basic rate tax, to take some of the excellent amounts of interest that will be generated from the new loans on Ablrate. The process involves transfers via the SM of reasonably large sums between the two accounts. I find that as a result the new account total (thanks for the facility) is down about £150 on the money put in, but of course that reflects the payments for the accrued interest which were paid from that account to the other account, and that account is consequently £150 up. When the monthly repayments are made the new account will show the amount of actual interest gained. Now of course the problem is that the 'interest earned' figure on the new account should be -£150, but it is zero, for the reason I give above. Worse that that, if we use the 'interest earned' figures on both accounts for 2016-7 we will pay income tax twice on that £150, and on the rest of the purchases to follow. That's nice for HMRC, but not right. The way I should correct this, getting rather deeper into tax accounting and Excel than I think reasonable, is to deduct all the payments for accrued interest on SM purchases on the new account. But then of course I find that the information needed, payments for accrued interest made on SM purchases, is nowhere in the transactions and it cannot be done. Fortunately I do have the counter entries and amounts in the transactions of the original account, on the sales side - but it should be at least possible to construct tax accounts without having to extract data from someone else's account. Why is it an item in the sellers transactions but not in the buyers, where it is rolled up with the purchase price? I appreciate that much of this is stated/implied in previous posts, but it is stated here as a real practical problem. The recent improvements have been great Ablrate, but what are you planning to do to resolve this issue please, particularly for those who need to submit their returns for 2015-6 and have made substantial purchases on the SM? Do you actually have the necessary transaction detail somewhere? Or do I have this wrong in some way, which I would be pleased to find.
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duck
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Post by duck on Dec 12, 2016 7:46:27 GMT
In previous years I have simply accepted overpaying a small amount of tax on the secondary market purchases simply to avoid Abl reporting one figure and me reporting a lower figure.
Personally I am wary of transferring loans between accounts via the SM.
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blender
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Post by blender on Dec 12, 2016 9:23:15 GMT
Do Ablrate report a figure to HMRC? How do we know what it is, or the basis of calculation? Does it accord with James' formula above, which looks right to me (not an expert) and is what I believe is the FC calculation? Yes, in future I will only use the SM to transfer loans the day after the monthly repayment is made, or when new loans go live.
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littleoldlady
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Post by littleoldlady on Dec 12, 2016 9:48:28 GMT
Personally I would be very reluctant to submit a different figure to that sent in by Abl, even if I thought it was wrong IMO and even if it was a bit higher.
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rick24
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Post by rick24 on Dec 12, 2016 10:06:50 GMT
Excuse the naïve question but do we know that abl send a detailed record of interest payments to each individual to HMRC?
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duck
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Post by duck on Dec 12, 2016 10:07:50 GMT
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SteveT
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Post by SteveT on Dec 12, 2016 10:18:52 GMT
When completing my SA tax return online, I'm only asked for an aggregated interest figure (across all savings accounts), not to break it down by individual account / platform. I presume HMRC can only ever compare at an aggregated level, which must include some level of "margin for inconsistency" else they'd forever be querying small discrepancies.
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