Limited company for p2p investment

Yes, as required under IFRS9, and Yes, although in practice an assessment is made at each year-end across the entire live loan book and any change in the aggregate impairment allowance goes to the P&L. So a £1000 loan that repays in full in the year releases the impairment allowance made for it, but a new impairment allowance would be assessed and reserved if that capital had been re-lent in the year to another borrower.

I invest in P2P with some of the surplus funds from 2 Limited companies I have which I used for Consultancy Businesses while I drain them down each year. I also do all my own accounts but either have to pay for submission software or get an accountant to submit them as they are too complicated for HMRC standard software.

As this is an investment vehicle it will be treated as an investment company by HMRC, probably makes very little difference to you but there are differences to normal companies e.g. how expenses are handled and it is useful to know the rules.

As the income is interest you will pay corporation tax unless taken as salary and expenses, the salary will be subject to income tax and National insurance if over the limits but this can be reduced by the company putting some/all of this money into a pension scheme.

You can get some expenses free of tax, these are either billable like computer equipment, percentage of household bills (say 10%) or fixed unreceipted like office costs £216 per year and Christmas party £150 per head. If you do this my advice is to keep it simple and keep the claims small otherwise you may have HMRC on you back.

You can offset income to future years to avoid higher tax rates but this is a complex area because if you make a loss (expenses, accountant fees etc) you will need to decide the type of expense incurred as I believe administrative expenses cannot be carried forward for investment companies but management expenses can. This area is a minefield and I have had arguments with accountants who are saying most of my expenses are administrative but I managed to prove them wrong from accounting and HMRCs websites. In short there is no definitive answer and I find that most accountants take a conservative view and you will need a lot of time researching to prove them wrong (some will not like this) and get the best case for you. I find small accountants generally are not geared up for this type of business as they tend to handle trading companies.

Also making tax digital which is due to come in soon may mean additional expenses of record keeping and 4 submissions a year but this keeps changing.

One area that is good is that there is effectively no corporation tax on dividends, not so useful for UK companies but saves money on foreign companies and unit trusts.

The question is it worth it? If you have the time and can do the accounts yourself there are some advantages but I would say not as the costs (if using an accountant) and the hassle outweigh the benefits. I only do this as I have some companies with money in them that would be very expensive from the tax side to shut them down until I have drained them of most of the funds.

£5k

Some people (including me) have strong ties to other countries (my SO even stronger ties). It would not be out of the question for me to consider living there for 5 years in order to avoid capital gains if the situation warranted it (and it was likely to work).

this have been pointed out by a few people, but i did not pick up earlier until i have read alender's reply. am i allowed to use a ltd company in other type of business to invest in p2p?

I must first state I am not an accountant and all posts are my own opinion based on experience of running companies and investing the funds for those companies.

Yes you can invest in P2P. If your trading income is above 50% it will stay as a trading company but if your investment income is above 50% it becomes an investment company.

sorry 50% of what?