ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Apr 11, 2017 14:03:26 GMT
The HMRC have rules that govern this. If the platform declares them as defaulted then it is reclaimable against the interest. If subsequently the loan is recovered then you are liable to inc tax on the recovered amount. They do and they need to be read carefully. In my not expert non advisary opinion the fact that Lendy have classed these loans as defaulted is not the same as them being classed as having become irrevoverable which is the first criteria for claiming bad debt relief. The second point to not is that some of the defaulted loans are under the old structure where Lendy is the borrower so in order for them to become irrecoverable Lendy itself would have to not repay the capital shortfall once the recovery from the borrower had been exhausted. So we need to look at the second definition can they be treated as irrecoverable which means unrecoverable except by legal means, in which case, as several of the borrowers have receivers/administrators appointed that those loans would qualify but whether you could argue that Lendy merely classifying a loan as defaulted is sufficient, particularly when they are still negoatiating with borrowers directly rather than calling in administrators is probably a grey area (same with Lendys limbo state of LPA helping borrower without formal appointment) There is a lack of consensus on how platforms flag bad debt with FS the clearest in applying the HMRC rules but many others being the same as Lendy and not declaring bad debt until all recovery avenues are exhausted.
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Post by monicker on Apr 11, 2017 14:14:47 GMT
Thanks for your excellent post. It depends, I now remember, on whether the platform itself declares them irrecoverable. Perhaps/more like probably that is why nothing has been declared on the inc. statement. Thank you
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lofty
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Post by lofty on Apr 11, 2017 14:21:07 GMT
This does appear to be a grey area but it seems there's someone out there with confidence that these defaults can be used as a tax sink - a***********r
has spent nearly 30K split across (81
, 75
, 74
, 71
, 69
) on the 7th. I'm not sure if this is a moment of genius or madness.
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mikes1531
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Post by mikes1531 on Apr 11, 2017 14:28:30 GMT
This does appear to be a grey area but it seems there's someone out there with confidence that these defaults can be used as a tax sink - a***********r has spent nearly 30K split across (81 , 75 , 74 , 71 , 69 ) on the 7th. I'm not sure if this is a moment of genius or madness. Wouldn't you have to own the parts on 5/Apr/17 in order to claim the loss for 2016/17? Or is it possible to carry back losses from 2017/18 back into 2016/17?
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lofty
Posts: 101
Likes: 104
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Post by lofty on Apr 11, 2017 14:38:09 GMT
Good point. I'm veering towards madness.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
Posts: 11,329
Likes: 11,549
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Post by ilmoro on Apr 11, 2017 14:41:23 GMT
Thanks for your excellent post. It depends, I now remember, on whether the platform itself declares them irrecoverable. Perhaps/more like probably that is why nothing has been declared on the inc. statement. Thank you ISTM that you could make a legitimate case (based on the info in the updates) for treating as irrecovable and claiming bad debt relief on all the defaulted loans except PBL046/74/81. PBL056/64, (admin/receivers) 37/38/39/69/70/71 (recievers/indivisable security), 66/67 (recievers), 75 (possession procedings) are all in legal recovery. Again not advice and not something where I can lead by example as I dont hold any of them. Paul64 perhaps a Lendy view on the HMRC bad debts rules could be added to the support section to assist lenders in this area.
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ianj
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Post by ianj on Apr 11, 2017 14:56:37 GMT
I sent the following email to support@lendy.com last week. My anticipation was, probably quite inevitably, an act of supreme optimism, as there has been no response as yet. No need to worry though, not now we have a 'communications supremo' to ensure we're all kept informed on all the important stuff. Fully expect Paul64 will be penning a detailed response as soon as he reads the lastest comments here! |
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Post by Paul64 on Apr 11, 2017 17:05:00 GMT
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jamesc
Member of DD Central
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Post by jamesc on Apr 11, 2017 17:12:36 GMT
Which is of no help at all and totally at odds with other P2P sites ! Ok maybe not totally at odds but is different. 
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archie
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Post by archie on Apr 11, 2017 17:15:35 GMT
Tax Statements should state both capital losses and capital recoveries to reflect the official platform position of loans held within each tax year.
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ianj
Member of DD Central
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Post by ianj on Apr 11, 2017 17:38:05 GMT
No need to worry though, not now we have a 'communications supremo' to ensure we're all kept informed on all the important stuff. Fully expect Paul64 will be penning a detailed response as soon as he reads the lastest comments here! Well, at least lenders now know where they stand.................alone! We'd never have guessed that, would we? In defence (my own) I would like to point out that I never at any point suggested that any response would be helpful. April 1st is long past. 
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Post by lendinglawyer on Apr 12, 2017 0:17:16 GMT
Appreciate this isn't new, but see no harm in referencing this Technical Note from HMRC here. Page 6:
Seems that Lendy may be of the opinion that the loan isn't formally 'irrecoverable' until the security has been disposed and the final account is drawn up. On the other hand, HMRC would appear to be prepared to accept the loan being termed irrecoverable, grant up-front relief and then balance the books if / when any 'value' is returned to the lender later on. (Which may have certain attractions from a tax perspective for some.) For me then, the acid test is whether Lendy as a P2P platform, is obliged to inform HMRC of any loans that it (Lendy) has determined as being irrecoverable. I've raised a support ticket asking for confirmation either way. (Although, Paul64 , please feel free to jump in here if that information is already known to you. Ta.) If Lendy does have to report to HMRC, then I think I would wait until that missive comes loud and clear from Lendy before making any self-determined claims for relief. If HMRC were to see a claim for relief from an individual and that doesn't match information the platform provided, then things could get messy. If Lendy does not have to report to HMRC, then by all means go for it - just be aware that HMRC could still ask Lendy what the situation is and things could still get messy. I'm kind of hoping Lendy does have to report. We may or may not agree as to when Lendy could and should determine that any particular loan should be determined as irrecoverable, but at least it would be clear cut as to what can be expected if we individuals were to claim relief. (I know... not necessarily great from a tax perspective, but I value sleep over uncertainty when it comes HMRC and Tax. IR35 inspection, anyone?) I don't think they have a "duty" but I could be wrong. In the absence of that, I find it hard to believe Lendy will "out" any loans to HMRC voluntarily given the FAQ they posted above (yes it's not helpful but it basically says "by default we mean overdue by 180 days ability/prospect of repayment is irrelevant, and anyway max LTV is 70% so repayment is guaranteed right??") and also because it would be at odds with their marketing spiel that no one has lost money etc. I completely agree that taking a personal view on irrecoverabity especially given poor visibility from Lendy as to what is actually happening is probably not the best idea with HMRC. Less sleep lost by reclaiming in future if there ever are any actual losses.
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