Inheritance Tax and Peer 2 Peer lending

ctdctd

Hi,

I'm plodding through the IHT400 and sub-forms for a simple estate for a relative - I'm the Executor.

IHT will be due.

I'm not sure what to do for 2 peer to peer lenders Ratesetter & Funding Circle. It looks like they go on the IHT416 form - Debts due to Estate, but at what value?

These lenders manage multiple personal and business loans of £10 upwards over 3-5 years. Interest is fixed but outstanding capital could be repaid at any time at the borrowers choice.

I could enter:-
Current capital outstanding + cash value as given by loan managers at time of death.
Estimated value if accounts are liquidated after probate
Estimated value of final loan repayment totals

Any suggestions as to the best option?

getmore4less

I would phone HNRC for some guidence on how to value them

they probably need a current value for the capital value IHT and future income get taxed as part of administration.

If you dig around the HMRC manuals there are some pages on valuing things.

Sorry don't have any links to hand but a google with HMRC IHT manual keywords along with what you are looking for often finds something usefull.

G6JNS

ctdctd wrote: »

Hi,

I'm plodding through the IHT400 and sub-forms for a simple estate for a relative - I'm the Executor.

IHT will be due.

I'm not sure what to do for 2 peer to peer lenders Ratesetter & Funding Circle. It looks like they go on the IHT416 form - Debts due to Estate, but at what value?

These lenders manage multiple personal and business loans of £10 upwards over 3-5 years. Interest is fixed but outstanding capital could be repaid at any time at the borrowers choice.

I could enter:-
Current capital outstanding + cash value as given by loan managers at time of death.
Estimated value if accounts are liquidated after probate
Estimated value of final loan repayment totals

Any suggestions as to the best option?

You need to get paid for professional advice. A couple of jundred pound might save you much more.

ctdctd

getmore4less wrote: »

I would phone HNRC for some guidence on how to value them.....

...HMRC IHT manual

Yep, tried phoning them but got no real help beyond put what I think is best on the form and they'll query it if they disagree!

Thanks for the reference to the IHT manual - lots of stuff in there but I can't see anything much to help.

There's not a lot tied up with peer to peer so I think I'll go for the current valuation and see what happens. It will be liquidated come probate anyway.

getmore4less

Nothing in the manual that covers a debt that has interest and can't be called in immediately?

Keep_pedalling

RS and FC are very different beasts. I would not class any RS investment as dept and treat it as as standard interest bearing saving, because you do not chose your borrowers and you don't even know who they are once the loans have been set up so you can't provide the info required on 416. There will be no bad depts to worry about because of the provision fund, and you can simply liquidate all the loans once you have probate.

With FC you know exactly who you lent the money too, and you you going to have a batch of bad depts in there as well. Having said that you can also liquidate all the good depts once you have obtained probate.

None of the IHT forms really deal with P2P lending, trying to add hundreds or even thousands of micro loans on IHT416 would be horrendous and personally I would treat both as bank / building soc accounts on IHT400, as I do on my tax returns although you may want to take some professional advise on this.

ctdctd

getmore4less wrote: »

Nothing in the manual that covers a debt that has interest and can't be called in immediately?

Not that covers this situation.
FC have said the loans will be liquidated at a small cost which isn't quite the same as calling in a loan but it does mean they won't run to term.

RS have said the loans can be liquidated, again at a small cost, but also say they can be left to run to term within the estate. I don't want to administer this over the next 5 years so will again liquidate the loans.

HMRC say treat debt as if it runs to term - these won't.

ctdctd

Keep_pedalling wrote: »

RS and FC are very different beasts. I would not class any RS investment as dept and treat it as as standard interest bearing saving, because you do not chose your borrowers and you don't even know who they are once the loans have been set up so you can't provide the info required on 416. There will be no bad depts to worry about because of the provision fund, and you can simply liquidate all the loans once you have probate.

With FC you know exactly who you lent the money too, and you you going to have a batch of bad depts in there as well. Having said that you can also liquidate all the good depts once you have obtained probate.

None of the IHT forms really deal with P2P lending, trying to add hundreds or even thousands of micro loans on IHT416 would be horrendous and personally I would treat both as bank / building soc accounts on IHT400, as I do on my tax returns although you may want to take some professional advise on this.

Thanks, interesting suggestion.
All the loans were done automatically so although you can see the FC borrowers, no choice was made at the time of lending.

So, value at date of death on IHT416 or treat as bank account on IHT406 - either option with explanatory notes on main form.

I think I may give HMRC another quick call!

g6jns_2

ctdctd wrote: »

Thanks, interesting suggestion.
All the loans were done automatically so although you can see the FC borrowers, no choice was made at the time of lending.

So, value at date of death on IHT416 or treat as bank account on IHT406 - either option with explanatory notes on main form.

I think I may give HMRC another quick call!

Get any answer in writing otherwise you are wide open to them denying it. If the sum is significant it may be economic to get proper paid for advice if it can save some IHT.