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It's the bondholders who are liable for any unpaid tax on the interest, so if the withholding tax was not correctly applied, that's who HMRC would pursue - just as they'd pursue higher rate taxpayers who didn't declare the income and pay the additional tax due.If the FCA had not intervened they would have been paying out 5 million min of quarterly interest in January on this 250 million ( excluding maturing bond paybacks) Dare I say it, HMRC would have got 20% in tax on this 5 million so are they also a victim. Interesting what the values were in the previous quarters since the last audited accounts as LCF funds were growing exponentially and what if any tax was paid. How come HMRC don't get involved in Companies House and scrutinise delayed accounts ploy. Will HMRC get involved in this maize of companies to recoup unpaid taxes. and do FCA alert HMRC
Tax is not deducted at source from any of: bank interest, interest from P2P lending or interest from retail bonds. It seems these unregulated mini-bonds are one of the last vestiges of this old taxation regime. Presumably they don't qualify for inclusion in the Personal Savings Allowance.0 -
Hi Masonic
LCF deduct 20% tax at source and here is the answer to my Q back in 2016.
"We are an investment, not a savings account, so to that extent we have to deduct basic rate tax on the interest payments. This is an instruction from HMRC and our hands are tied on this point.
The Channel Islands point does not work for us. Even if interest was paid to an overseas account then HMRC could be aware of this. There are other factors as well, but in short, the Government are making these types of avenues more and more difficult."
Moreover according to 30 April 2017 submitted accounts, they paid 44,496 tax on operating profit.There tax would have been a lot more on the operating profit had they submitted accounts in April 2018 where there bonds would have probably been 100-150 million at that time so not sure why HMRC does not demand and pursue annual accounts filed on time and was tax actually paid in the absence of final accounts delay tactic/
I am very sorry but am going to post a lengthy May 20016 e mail response from LCF to my queries which is not mentioned in the brochure where some might be of interest to you and others.0 -
LCF May 2016 Clarification e mail response
The initial application process is conducted by Global Currency Exchange Network (GCEN, https://www.gcen.co.uk) which is authorised and regulated by the FCA (number 504346) and is also subject to the Payment Services Regulations 2009 for the collection of client monies. GCEN administers all applications and is responsible for conducting the identification and verification of all potential investors. Once an application has been approved by GCEN and funds have been collected, the funds are passed to their sister company Global Custodian Services (GCS. GCS is also authorised and regulated by the FCA (number 595875) and acts as a repository for funds of approved applicants, keeping them separate from those awaiting approval. Investors’ funds remain in GCS until they are withdrawn by LCF and the associated number of bonds have been issued. It is at this point that investor funds are secured by the charge over LCF’s assets (see below for more detail). While investor funds are held with GCS and the investor is an “eligible claimant”, under FCA rules, if GCS were to default, an investor may be able to make a claim against the Financial Services Compensation Scheme (FSCS). Further details are contained in the bonds Information Memorandum.
An independent security trustee, Global Security Trustees Ltd, holds a charge over all LCF’s assets (to include any new security LCF takes for additional loans made) which it holds on behalf of all bond holders. As an investor you would jointly, along with all other bondholders, benefit from the charge held on your behalf by the security trustee. This charge covers the assets of the company, the cash reserves in the business and the security taken from borrowing companies.
As mentioned above when funds are lent out, a charge over either property or other assets of the Borrowing Company is taken at no more than 75% loan to value. For example, for a loan of £750,000, the value of the charged assets of the borrowing party would need to be at least £1 million. By lending out at no more than 75% loan to value, LCF ensures that investors’ funds are secured and a margin has been built-in as contingency for any downturn in asset value.
All of LCF’s bonds are approved as financial promotions for the purposes of section 21 of the Financial Services and Markets Act 2000. The approval to promote its bonds has been granted by an FCA regulated and authorised company, Sentient Capital London Ltd (FCA number 679298). This means that all information in our marketing material has been approved and verified by Sentient as true and accurate.
The terms and conditions are contained within the Information Memorandum which can be found on our website, https://www.londoncapitalandfinance.co.uk. (At the home page, click on `Our Bonds` for the Information Memorandum`). You do have the option to make your application via our website. If you have any queries at any stage, please do call us on Freephone 0800 830 3131.0 -
30th June 2016 LCF e mail response . It was the 60m assets securing the 11m loan that gave some comfort of their business model if there were any defaults.
Response follows
Do you still have an interest in the LCF fixed rate Bonds?
We have had a lot of people asking about Brexit and what effect it may have. We have seen no decline in business, in fact quite the opposite. We were always of the opinion that Brexit would affect sterling and the stock market. This of course has been the case. We have experienced investors moving their money from stocks and shares into a fixed return to give them certainty.
Our business is asset backed by UK property assets. George Osborne said a few weeks ago that property prices could decrease by 18% post Brexit. We don`t subscribe to this view as there is still high demand and short supply in the market. However, even if that did occur, our business models allows for a 25% devaluation as we will only lend a maximum of 75% loan to value against assets. Our performance is in no way related to the stock markets, currency exchanges etc.
I can also tell you that currently our loan book consists of £11m in company loans and we hold assets to the value of £60m securing these loans. These figures of course change regularly, but those were the figures that I was informed of on Wednesday.0 -
Hi Jim James
How and when did you first notify FCA on LCF as their lack of action has allowed 239 million to enter since June 2016 so they have a moral duty and shoulder some responsibility to recoup this money rather than simply walk away as some postings here imply.
LCF statement to me that " Our business is asset backed by UK property assets." is clearly an erroneous statement unless the LCF Borrowers and others have put up their mansions as security which the FCA should pursue..0 -
Sledger, given they've been lying to customers for years about FCA protection and how safe these "bonds" are, and the fact they've not produced accounts for years, and thats the word of someone who may believe it but may have been lied to themselves, why would anyone believe any of that?0
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An independent security trustee, Global Security Trustees Ltd, holds a charge over all LCF’s assets (to include any new security LCF takes for additional loans made) which it holds on behalf of all bond holders. As an investor you would jointly, along with all other bondholders, benefit from the charge held on your behalf by the security trustee. This charge covers the assets of the company, the cash reserves in the business and the security taken from borrowing companies.
LCF security trustee, Global Security Trustees Ltd, couldn't really be called independent. They were registered at the same address as LCF and with one of the LCF directors. The name sounds impressive but they're a dormant company with £100 in the bank
https://damn-lies-and-statistics.blogspot.com/2019/01/london-capital-global-security-trustees.html
However since April 2018 Global Security Trustees Ltd is now owned by a company based in Malta. Why would a LCF want a company in Malta to have control of the trustees? Does it make those assets out of reach of UK regulators?AnotherJoe wrote: »Sledger, given they've been lying to customers for years about FCA protection and how safe these "bonds" are, and the fact they've not produced accounts for years, and thats the word of someone who may believe it but may have been lied to themselves, why would anyone believe any of that?
That's the bit I'm struggling with most at the minute. The investors seem to realise that LCF has sold them a product that isn't FCA regulated or protected and misled them about the risks but they are still prepared to believe what LCF tell them. "They were so nice to deal with and paid my interest on time". I'm not suggesting LCF is a scam but any scam would fail quickly if the salespeople were rude.
There is an element blaming the FCA for stopping their interest payments rather than understanding that LCF are the ones who have caused the whole situation by firstly misleading savers into buying and then by giving FCA sufficient concern that they need to investigateRemember the saying: if it looks too good to be true it almost certainly is.0 -
It's the correct treatment for an unregulated mini-bond in which money is lent directly to the issuer. Deduction of tax at source is now a red flag that the investment is not a mainstream product suitable for consumers.Hi Masonic
LCF deduct 20% tax at source and here is the answer to my Q back in 2016.
"We are an investment, not a savings account, so to that extent we have to deduct basic rate tax on the interest payments. This is an instruction from HMRC and our hands are tied on this point.
The Channel Islands point does not work for us. Even if interest was paid to an overseas account then HMRC could be aware of this. There are other factors as well, but in short, the Government are making these types of avenues more and more difficult."
This assumes that LCF continued to trade at a profit, which may not be the case. HMRC is rarely quick to act. It has plenty of time to investigate and collect the tax and appropriate penalties. It also now has preferred creditor status in UK insolvencies, meaning it would be paid in full before bondholders (who would be unsecured creditors) recover a penny.Moreover according to 30 April 2017 submitted accounts, they paid 44,496 tax on operating profit.There tax would have been a lot more on the operating profit had they submitted accounts in April 2018 where there bonds would have probably been 100-150 million at that time so not sure why HMRC does not demand and pursue annual accounts filed on time and was tax actually paid in the absence of final accounts delay tactic/0 -
It also now has preferred creditor status in UK insolvencies, meaning it would be paid in full before bondholders (who would be unsecured creditors) recover a penny.
Not for corporation tax and other taxes owed by the business, if it's the change in the recent Budget you're referring to. Only on taxes owed by others and collected by companies on their behalf like National Insurance. For taxes owed directly by the business, HMRC is still at the back of the queue with the other unsecured creditors.
I imagine that withholding tax on investors' interest would come under the preferred creditor category, as it is owed by investors and not LCF.
In theory LCF bondholders might rank ahead of HMRC for taxes owed by LCF, as they are supposedly secured creditors, but as secured creditor status is worthless without professional due diligence into the security (which hasn't happened), it's moot. (This applies to both P2P and unregulated investments.) If LCF has no assets then it doesn't matter.There is an element blaming the FCA for stopping their interest payments rather than understanding that LCF are the ones who have caused the whole situation by firstly misleading savers into buying and then by giving FCA sufficient concern that they need to investigate
Classic financial Stockholm Syndrome. LCF's directors are holding the money hostage. They are the ones with power over the investors. Therefore the investors' instinctive response is to identify with their money's captors as a survival strategy.0 -
[QUOTE:]Classic financial Stockholm Syndrome. LCF's directors are holding the money hostage. They are the ones with power over the investors. Therefore the investors' instinctive response is to identify with their money's captors as a survival strategy.[/QUOTE]
I remember some years ago a Ponzi like CIS set up by the founder who had bought a small island, named it as a country and created a bank in its name. He was issuing checks in the name of this bank for the payments to unit investors. Of course the Bank of Englsnd would not honour the checks, so with characteristic bravado he wrote to all the "investors" asking for money to help him sue the Bank of England. Yes, some paid up and of course that disappeared too. "A fool and his money are easily parted," goes the saying.0
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