|
|
Post by dan1 on Apr 10, 2017 20:41:40 GMT
Yes, but reading that document important to note that the ability to carry forward losses is limited: I don't understand that. On my Zopa account does that mean I have to offset "Loan principal deemed irrecoverable in the year" from my Zopa income or even my P2P income for the 2016/17 tax year or can I choose to carry it forward to use in another year (up to 4 years)? Also in general are recommend a friend bonuses included as taxable income? As on my Zopa account it includes "Bonus: Tell a friend" bonuses as "Gross earnings to declare to HMRC". I thought recommend a friend bonuses weren't included as taxable income. Is Zopa different from other platforms in this regards? With regard to refer a friend bonuses - the following (very useful) guidance is copied from the Lending Works annual Lender Statement: How are cashback/promotion credits treated for tax purposes?
We’re often asked this, and the answer depends on both the nature of the payment and your personal circumstances (for example if you are investing through a company or in the course of your business), but we’ve provided a general summary below: “Refer a Friend” bonuses
Any payments received by an existing customer “referring” a friend or relative could be liable to income tax and should be declared as income to HMRC. However, any payments received by a new customer as an inducement to join Lending Works would generally not be liable to income tax and therefore wouldn’t need to be declared as income to HMRC. Further guidance from HMRC on miscellaneous income can be found here. Promotion/incentive and “other” account credits
Promotion/incentive and “other” account credits generally relate to one-off cashback promotions or adjustments to your account and are generally not liable to income tax. Therefore, these payments wouldn’t need to be declared as income to HMRC. Further guidance from HMRC on “cash-backs” can be found here. Hope this helps
|
|
gt94sss2
Member of DD Central
Posts: 281 
Likes: 137
|
Post by gt94sss2 on Apr 10, 2017 22:50:41 GMT
Yes, but reading that document important to note that the ability to carry forward losses is limited: I don't understand that. On my Zopa account does that mean I have to offset "Loan principal deemed irrecoverable in the year" from my Zopa income or even my P2P income for the 2016/17 tax year or can I choose to carry it forward to use in another year (up to 4 years)? The HMRC guidance means that (assuming you do want to claim P2P losses) you need to do so in the year they occur if you have other P2P income in that year. If not, you need to do it in the first possible tax year you have eligible interest in which to offset against the loss (up to 4 years) You can't choose to carry it forward and apply it to another tax year of your own choice (up to 4 years) - i.e. a loss now can't be counted in 2019/20 just because you expect to be a higher rate tax payer then if you have had net P2P interest between then and now.
|
|
ashe
Posts: 53
Likes: 36
|
Post by ashe on Apr 17, 2017 22:54:56 GMT
There's discussion on the previous page about whether the £10K untaxed income specified for needing to do a self-assessment includes savings income, and there is mention of a sentence on www.gov.uk/check-if-you-need-a-tax-return saying about not needing to based on just saving interest under £10,000 but over £2500. I can't find any mention of that on there now though - this is what it says: In my case, I don't know yet if I earnt over £2,500 (if including bank interest), but it would most definitely be covered for me by the £5,000 starting rate for savings at 0%. |
|
pikestaff
Member of DD Central
Posts: 2,187
Likes: 1,546
|
Post by pikestaff on Apr 18, 2017 7:37:56 GMT
There's discussion on the previous page about whether the £10K untaxed income specified for needing to do a self-assessment includes savings income, and there is mention of a sentence on www.gov.uk/check-if-you-need-a-tax-return saying about not needing to based on just saving interest under £10,000 but over £2500. I can't find any mention of that on there now though - this is what it says: In my case, I don't know yet if I earnt over £2,500 (if including bank interest), but it would most definitely be covered for me by the £5,000 starting rate for savings at 0%. I think the confusion arises because there are two relevant paths from that page. Clicking on the link in "You can also see a list of who must send a tax return" takes you to a bullet point list which includes: - "...you got £2,500 or more in untaxed income, for example from tips or renting out a property - contact the helpline if it was less than £2,500
- your income from savings or investments was £10,000 or more before tax
- your income from dividends from shares was £10,000 or more before tax"
It would be easy to misunderstand this and think that if your savings or investment income is less than £10k you don't need a tax return (assuming none of the other bullets apply). But that would be a mistake. Each test is separate, so if your untaxed income (including savings or investment income) is more than £2,500 a tax return is required. That is made clear in your slightly longer extract, which is seen only if you go through the detailed check starting with the "start now" button. Actually your extract means something different again - if I had savings or investment income totalling £12k, of which £9.9k had tax deducted and £2.1k did not, the short verson of the test would say a tax return is required but the long version of the test would say it is not. I've no idea which of these is correct.
|
|
keystone
Member of DD Central
Posts: 719
Likes: 593
|
Post by keystone on Apr 18, 2017 9:46:33 GMT
I don't understand that. On my Zopa account does that mean I have to offset "Loan principal deemed irrecoverable in the year" from my Zopa income or even my P2P income for the 2016/17 tax year or can I choose to carry it forward to use in another year (up to 4 years)? The HMRC guidance means that (assuming you do want to claim P2P losses) you need to do so in the year they occur if you have other P2P income in that year. If not, you need to do it in the first possible tax year you have eligible interest in which to offset against the loss (up to 4 years) You can't choose to carry it forward and apply it to another tax year of your own choice (up to 4 years) - i.e. a loss now can't be counted in 2019/20 just because you expect to be a higher rate tax payer then if you have had net P2P interest between then and now. Example £8000 Income £500 Savings Income £500 P2P Income £100 P2P loss Tax due on £9000 =0 Tax due on £8900 =0 It's not so much about higher rate tax. The issue is with or without the loans deemed irrecoverable there is no tax due because total income would all fall below the available allowances. Next year there maybe some tax due so it,so it would be helpful if the losses incurred this year could be carried forward to next year otherwise they appear to be wasted. Surely, if no tax is due then they should be able to be carried forward and not offset against current years income?
|
|
gt94sss2
Member of DD Central
Posts: 281
Likes: 137
|
Post by gt94sss2 on Apr 18, 2017 14:19:53 GMT
The HMRC guidance means that (assuming you do want to claim P2P losses) you need to do so in the year they occur if you have other P2P income in that year. If not, you need to do it in the first possible tax year you have eligible interest in which to offset against the loss (up to 4 years) You can't choose to carry it forward and apply it to another tax year of your own choice (up to 4 years) - i.e. a loss now can't be counted in 2019/20 just because you expect to be a higher rate tax payer then if you have had net P2P interest between then and now. Example £8000 Income £500 Savings Income £500 P2P Income £100 P2P loss Tax due on £9000 =0 Tax due on £8900 =0 It's not so much about higher rate tax. The issue is with or without the loans deemed irrecoverable there is no tax due because total income would all fall below the available allowances. Next year there maybe some tax due so it,so it would be helpful if the losses incurred this year could be carried forward to next year otherwise they appear to be wasted. Surely, if no tax is due then they should be able to be carried forward and not offset against current years income? P2P tax relief can only be set off against P2P income. In the example above, you would need to set off the £100 loss against the £500 of P2P interest earned in-year (if you planned to claim it). It won't save you any tax as you are within your personal allowances but it is technically a reduction in your taxable income. You can't carry the loss forward to offset against a future year in these circumstances unlike say CGT losses (the only way this would have been possible is if your P2P income was < than the P2P loss incurred)
|
|
duck
Member of DD Central
Posts: 2,880
Likes: 6,965
|
Post by duck on Apr 18, 2017 15:48:31 GMT
Just thinking 'laterally' if P2P losses take you below your tax allowance would it not be sensible disregard any eligible loans that take you below your allowance?
Very simple example, Tax allowance £17K
P2P income 17K with allowable £2K capital losses. If you deduct 2K and declare income of £15K you gain nothing because you are below your allowance.
Recovery is made of the £2K in the following tax year ..... this is declarable on the following years return as income. This means that if you generate the same £17K in year 2 your total income will be 19K so you will be taxed on the 2K capital. If you didn't claim the 2K in Yr1 it is only the interest paid (if any) that is taxable.
.... or am I confused?
|
|
pikestaff
Member of DD Central
Posts: 2,187
Likes: 1,546
|
Post by pikestaff on Apr 18, 2017 19:25:56 GMT
Just thinking 'laterally' if P2P losses take you below your tax allowance would it not be sensible disregard any eligible loans that take you below your allowance? Very simple example, Tax allowance £17K P2P income 17K with allowable £2K capital losses. If you deduct 2K and declare income of £15K you gain nothing because you are below your allowance. Recovery is made of the £2K in the following tax year ..... this is declarable on the following years return as income. This means that if you generate the same £17K in year 2 your total income will be 19K so you will be taxed on the 2K capital. If you didn't claim the 2K in Yr1 it is only the interest paid (if any) that is taxable. .... or am I confused? You are not confused about the tax consequences. There's a similar issue at the 20%/40% threshold. In principle this can't be got round because (as noted in an earlier post p2pindependentforum.com/post/181683/thread) the law requires claims to be made as soon as possible. In practice there are going to be some judgement calls.
|
|
gt94sss2
Member of DD Central
Posts: 281
Likes: 137
|
Post by gt94sss2 on Apr 18, 2017 20:44:52 GMT
Just thinking 'laterally' if P2P losses take you below your tax allowance would it not be sensible disregard any eligible loans that take you below your allowance? Very simple example, Tax allowance £17K P2P income 17K with allowable £2K capital losses. If you deduct 2K and declare income of £15K you gain nothing because you are below your allowance. Recovery is made of the £2K in the following tax year ..... this is declarable on the following years return as income. This means that if you generate the same £17K in year 2 your total income will be 19K so you will be taxed on the 2K capital. If you didn't claim the 2K in Yr1 it is only the interest paid (if any) that is taxable. .... or am I confused? You are not confused about the tax consequences. There's a similar issue at the 20%/40% threshold. In principle this can't be got round because (as noted in an earlier post p2pindependentforum.com/post/181683/thread) the law requires claims to be made as soon as possible. In practice there are going to be some judgement calls. I guess people could decide to amend a historic tax return after one has an idea what the following years P2P years income will be - I seem to recall the deadlines for doing so without penalty are relatively generous - but for most, I suspect this won't be worth it.
|
|
duck
Member of DD Central
Posts: 2,880
Likes: 6,965
|
Post by duck on Apr 19, 2017 4:49:40 GMT
You are not confused about the tax consequences. There's a similar issue at the 20%/40% threshold. In principle this can't be got round because (as noted in an earlier post p2pindependentforum.com/post/181683/thread) the law requires claims to be made as soon as possible. In practice there are going to be some judgement calls. Thanks for the responses pikestaff and gt94sss2Glad to know my 'reasoning' was sound, I thought it worth highlighting for others who may 'blindly' claim losses only to store issues up for this and future Tax Years. Analysis of my loans that are eligible for relief show a fair number that will repay either fully or partially when the asset(s) are sold, there are only a few where I am certain my money is lost. If recovery of all (or most) of these loans fall in the current tax year (17/18) this will be a large return of Capital which will have to be treated as Income ...... not something that I want to envisage! (I accept that there may be further 'new losses' that can be offset but that IMHO is a dangerous assumption). So I have a feeling that the 'judgment call' needs to be expanded to the likelihood of recovery and the implications of recovery before making any claims. Basically weighing up improved cash flow now as opposed to a potentially higher tax bill in the future. Since I use accountants for my tax return (I have to deal with business taxes as well) I will be passing the judgement calls to them, however understanding the implications of the figures that I put together before I have my annual sit down with them is always very useful.
|
|
pikestaff
Member of DD Central
Posts: 2,187
Likes: 1,546
|
Post by pikestaff on Apr 19, 2017 8:11:59 GMT
... So I have a feeling that the 'judgment call' needs to be expanded to the likelihood of recovery and the implications of recovery before making any claims. Basically weighing up improved cash flow now as opposed to a potentially higher tax bill in the future... Perhaps. The law can be read as requiring 100% write-off when the trigger event (eg administration) occurs, followed by the recognition of recoveries as they arise. This would be consistent with the examples in HMRC's guidance and, reportedly, with the approach being taken by FS. However, it is not absolutely clear and I think the argument for this interpretation is stronger if the recovery comes from a guarantor than if the recovery comes from the borrower itself. (I'm thinking of loans to companies here.) In the latter case you could argue that the recovery is evidence of what would have been recoverable if the security had NOT been exercised, and hence no claim for this amount should be made under sub-s. 412(8). The issues with this approach are: (1) it requires estimation, which is unlikely to appeal to the platforms, and (2) it is open ended because you could keep going back and reopening prior years’ computations. My only relevant platforms are TC and AC who have yet to report and I do not know how they intend to deal with the issue.
|
|
duck
Member of DD Central
Posts: 2,880
Likes: 6,965
|
Post by duck on Apr 19, 2017 9:24:42 GMT
Cheers for the response pikestaff. The direction that I was heading in was perhaps broader (or narrower depending on how you look at it). My thinking being that if you are happy that recovery (in full or part) will be made in the future then perhaps you should consider not claiming for that loan. With FS the loans are detailed Loan A, Loan B ...... etc so if you know that a recovery will be made on Loan B but there is no chance with A & C omit the claim for B and only claim for A and C. Since the figure declared to HMRC is simply Income minus losses the amount you choose to declare as losses* is your choice. That way you will avoid the large dump of Capital into your Income when the loan repays. This of course is more difficult although far from impossible where a simple statement of losses (no loan names given) is supplied by the platform. *naturally a figure below the platforms 'allowable'
|
|
pikestaff
Member of DD Central
Posts: 2,187
Likes: 1,546
|
Post by pikestaff on Apr 19, 2017 11:19:04 GMT
Cheers for the response pikestaff . The direction that I was heading in was perhaps broader (or narrower depending on how you look at it). My thinking being that if you are happy that recovery (in full or part) will be made in the future then perhaps you should consider not claiming for that loan. With FS the loans are detailed Loan A, Loan B ...... etc so if you know that a recovery will be made on Loan B but there is no chance with A & C omit the claim for B and only claim for A and C. Since the figure declared to HMRC is simply Income minus losses the amount you choose to declare as losses* is your choice. That way you will avoid the large dump of Capital into your Income when the loan repays. This of course is more difficult although far from impossible where a simple statement of losses (no loan names given) is supplied by the platform. *naturally a figure below the platforms 'allowable' I understand what you are saying but I am not sure that it is permissible. Be that as it may, you will be reporting amounts to HMRC that differ from those reported to HMRC by FS. This won't necessarily be picked up but you need to be prepared for the possibility that it might.
|
|
duck
Member of DD Central
Posts: 2,880
Likes: 6,965
|
Post by duck on Apr 19, 2017 12:28:23 GMT
I understand what you are saying but I am not sure that it is permissible. ..... .... and neither do I but I will be bouncing it in the direction of my accountants. They 'loved' me last year when I put claims in manually against a couple of platforms so I'm sure they will appreciate more of my 'what if' questions 
|
|
pikestaff
Member of DD Central
Posts: 2,187
Likes: 1,546
|
Post by pikestaff on Apr 21, 2017 7:12:55 GMT
I understand what you are saying but I am not sure that it is permissible. ..... .... and neither do I but I will be bouncing it in the direction of my accountants. They 'loved' me last year when I put claims in manually against a couple of platforms so I'm sure they will appreciate more of my 'what if' questions On reflection I agree that what you propose is OK. The law is written in such a way that reliefs are permissive, not mandatory. However, any amount that you choose not to claim will be lost. You cannot carry it forward. SAIM 12140 on carry-forward loss claims says "This relief can only be claimed if the loss resulting from the irrecoverable loan cannot be used wholly against interest received through P2P platforms in the same year as the loan is treated as becoming irrecoverable." [emphasis added]. The underlying law also makes this clear. In practice, given the ability to revise tax returns online up to a year after the filing deadline, this should allow lenders enough hindsight to solve the problem in the vast majority of cases. Thank you for making me think about this. It's been very helpful. I will add one more thing. Lenders who are not required to submit tax returns will be given automatic "same platform" relief for the full amount of losses reported by the platforms, and will be taxed on any subsequent reversals. Some of those lenders may be in exactly the position you described earlier. If they want to avoid this, I think they will have to either (1) submit voluntary tax returns or (2) perhaps, write to HMRC disclaiming some of the relief.
|
|
