HMRC proposes criteria for bad debt relief on P2P lending

HMRC has published a technical note outlining the proposed criteria for a new relief to allow individuals making peer-to-peer (P2P) loans to offset losses from loans which go bad against other P2P income

The relief, which is part of a package of measures announced at Autumn Statement 2014 to support P2P and crowdfunding platforms, will mean that if a P2P loan is not repaid, then the loss that the lender suffers on that loan will be set against the income that they receive on other P2P loans before that income is taxed.

Under this policy, P2P losses would only be able to be set against other P2P income.

The amount that is proposed to be available as relief for the lender is the lower of the amount of the loan still outstanding from the borrower; and the amount that the lender paid for the loan, less any repayments already received.

Subsequent recoveries will be treated as P2P income of the lender in the period in which it is received.

HMRC says it is working with UK P2P platforms on the definition of a bad debt.

Draft legislation will be published later in 2015 and subject to consultation.

Although legislation is expected to be included in Finance Bill 2016, it is proposed that P2P lenders who suffer bad debts on P2P loans between 6 April 2015 and 5 April 2016 that meet the conditions for relief, will be able to claim relief in their 2015 tax returns.

More details are available here

Diane Tan |Content manager - current awareness, CCH

Diane Tan is content manager, current awareness at CCH, Wolters Kluwer UK

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