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Peer to Peer lending and bad debts

Which of my calculations are correct?

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So the HMRC guidance states (paraphrased without losing meaning hopefully!):

If you get interest it's taxable.

If you have bad debts these can be set against the interest (so far so good)

If a previous bad debt is recovered "the amount is treated as new peer to peer income of the lender"

So my question is...

Interest £100

Bad debt £200

Recovered bad debt from last year £50

Is the taxable amount £0 (as £100 - £200 + £50 < 0), or

is it £50 as the £200 comes off the interest, but the £50 receovered is new income?

It's that wording that is throwing me, they say "new peer to peer income", not "new peer to peer interest".  Oh, and that's from https://www.gov.uk/guidance/peer-to-peer-lending#claiming-tax-relief-on-..., I can't find anything legislative.

Thanks all

 

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RLI
By lionofludesch
02nd Jul 2020 15:41

I vote £150.

You had your previous bad debt relief of £200 previously.

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By Mr_awol
02nd Jul 2020 16:37

lionofludesch wrote:

I vote £150.

You had your previous bad debt relief of £200 previously.

I'm assuming the £200 is a new bad debt, unrelated to the previous bad debt now recoverable.

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Replying to Mr_awol:
RLI
By lionofludesch
02nd Jul 2020 16:45

Mr_awol wrote:

lionofludesch wrote:

I vote £150.

You had your previous bad debt relief of £200 previously.

I'm assuming the £200 is a new bad debt, unrelated to the previous bad debt now recoverable.

Ah right. I see that now.

I didn't realise the client was a slow learner.

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Replying to lionofludesch:
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By Mr_awol
02nd Jul 2020 16:51

To be fair, most of the clients I have using P2P loan platforms do alright out of them. I think. It's sometimes unclear how much capital they have at risk.

Whether the Returns justify the risk or not, im not completely sure. I looked into it once in case I was missing a trick but decided not to proceed, so I guess that kind of answers the question (for someone with my risk profile, at least).

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By Mr_awol
02nd Jul 2020 16:43

Constantly Confused wrote:

So the HMRC guidance states (paraphrased without losing meaning hopefully!):

If you get interest it's taxable.

If you have bad debts these can be set against the interest (so far so good)

If a previous bad debt is recovered "the amount is treated as new peer to peer income of the lender"

So my question is...

Interest £100

Bad debt £200

Recovered bad debt from last year £50

Is the taxable amount £0 (as £100 - £200 + £50 < 0), or

is it £50 as the £200 comes off the interest, but the £50 receovered is new income?

It's that wording that is throwing me, they say "new peer to peer income", not "new peer to peer interest".  Oh, and that's from https://www.gov.uk/guidance/peer-to-peer-lending#claiming-tax-relief-on-..., I can't find anything legislative.

Thanks all

 

Is it all on the same platform?

If so, I say you have no taxable income this year, and a £50 loss to be carried forward which the peer to peer platform *should* keep a record of, and offset against next year's interest.

If your client uses multiple platforms then I believe they can offset the loss in the current year against other peer to peer income but I'm not sure what entries would need to go where on the Return or your software. You'd also need to remember next year if the original peer to peer platform remembers the loss, that it has in fact already been claimed.

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By Mr_awol
02nd Jul 2020 16:58

To add to the above, perhaps look at:
SAIM 12220
SAIM 12110/20/30/40

These should give you all the answers and 12220 even has a handy example in year three that the OP should find particularly useful

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