Funding Circle Servicing Fee

Funding Circle Servicing Fee

Didn't find your answer?

I am preparing the SA return for a client who has earned interest income from Funding Circle.  My question is - what is the status of the "Funding Circle servicing fee" as shown on their annual tax statement, which is around 10% of the gross interest earned, is it deductible against this income?  I have been faced with the same question for the last couple of years and am really surprised that there is still no definitive guidance on this.  The tax page on the FC website is silent, there have been no references at all to this in Taxation nor relevant questions on this forum.

The reason I am wondering if this fee should be deducted in arriving at taxable income is that the fee is unavoidable, ie the interest could not be earned without paying the fee.  So it isn't like a bank charge for operating a current account, nor a penalty of interest from (say) an early withdrawal from a fixed term account.

If the level of investment and activity into FC were enough to raise it to the status of a trade then no doubt this fee would be deductible against that trade, but that isn't the case here

Obviously the tax legislation is framed in terms of gross interest (on a passive investment) and in many ways there should be no doubt about what income should go onto an SA return.  However new types of income don't always sit neatly into existing rules and I feel that this is a case in point - I have no issue with reporting the interest as DIII (giving my age away...) but to not have a deduction for the servicing fee does not seem reasonable.

Am I alone in these thoughts?

Replies (2)

Please login or register to join the discussion.

By The Grammar Police
22nd Nov 2014 20:50

I think you are

It's akin to having a current account which charges a monthly fee for the account and pays you interest. The bank charges aren't available for offset against the interest received, but the interest is still taxable.

Thanks (0)
avatar
By User deleted
22nd Nov 2014 23:14

10% of gross interest sounds more like a commission than a charge to me

Thanks (0)