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Post by pariah on Jul 26, 2017 12:53:25 GMT
Hiya there,
I'm hoping someone can confirm if there is a definition of what constitutes a bad debt with regards to a P2P loan? Have the FCA provided a precise guideline for P2P lenders?
e.g. if a company is insolvent but a P2P firm believe there is value in personal guarantees can the P2P lender state it is not a bad debt?
Thanks in advance!
(Apologies if the answer is already on this forum. Perhaps you could kindly guide to it.)
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stub8535
Member of DD Central
personal opinions only. Not qualified to advise on investment products.
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Post by stub8535 on Jul 26, 2017 13:06:02 GMT
No lsid fown guidlines hence cwrtain companies get away with under reporting bad debt.
Personal guarantees can be worthless if the borrower is dishonourable in how they use their assets. There is evidence that borrowers have issued pg on multiple loans with multiple lenders against same collateral.
For an HMRC definition I think Ilmorro posted a link a while back. Good luck with the interpretation
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SteveT
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Post by SteveT on Jul 26, 2017 13:07:43 GMT
No standard definition, within the world of P2P at least. Platforms have wildly differing policies. FC, for example, default loans as soon as they hit a significant problem and immediately declare them a Bad Debt, even if thought likely to repay in full eventually. At the other end of the spectrum, I've a loan on AC where the borrower is now in jail for fraud, the secured assets already have been auctioned off (for a sum far below the valuation) and it's thought the borrower has no other assets or income, yet the remaining unpaid balance on the loan is still not declared a Bad Debt.
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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
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Post by ilmoro on Jul 26, 2017 14:40:26 GMT
Here are the HMRC guidelines for what can be claimed www.gov.uk/government/uploads/system/uploads/attachment_data/file/597959/Income_tax_relief_for_irrecoverable_peer_to_peer_loans_FINAL_GUIDANCE__2_.pdfThere are two seperate criteria either of which can potentially qualify the loan as bad debt and eligible for relief. Note intial criteria apply as to whether the loan is P2P and whether the lender is eligible to claim relief before bad debt is determined. 1. A loan becomes irrecovable if there is no reasonable prospect of recovery based on funds avaliable or that could become available to the borrower. Normally the platform would determine this, though a lender can if they are able to demonstrate the criteria are fulfilled 2. A lender can treat a loan as irrecoverable (even if there is prospect of some recovery) if the loan recovery is dependent on security or legal means providing it would be irrecoverable if these avenues didnt exist. Subsequent recoveries would be taxable in ful I can see circumstances where recourse to a PG may not mean a loan was treatable as bad debt but Im not qualified to offer advice. The question would seem to be whether the PG would be counted as being from the borrower if that is a company, whether it has to be pursued legally and whether the loan was secured. |
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Post by albermarle on Jul 28, 2017 16:27:47 GMT
I have the impression/experience that where platforms have been undereporting/obscuring bad debts and very late payments, that they have had to become more upfront/honest as part of getting FCA approval. Although the FCA do not seem to make public any specific guidelines on the issue , it seems that they might be using the guidelines suggested by one of the industry bodies . P2P finance association p2pfa.info/wp-content/uploads/2015/09/Operating-Principals-vfinal.pdfA platform I use has started reporting bad debt in this way just before they got full FCA approval , even though they are not a member of that association. |
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