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    • silvasands
    • By silvasands 16th Jan 13, 11:13 PM
    • 21 Posts
    • 4 Thanks
    silvasands
    Funding Circle
    Just before Christmas, I decided to try Funding Circle. So far, I have invested in approximately 6 companies.There aren`t very many who request a 12 month loan so I have opted for a mix of 12 month, 36 month and one 60 month. These investments add up to just over 1000.I reinvest the interest as you can invest as little as 20.
    I am just dipping my toe in as I enjoy new innovations and it`s also helping companies, which, in turn, hopefully employ people.
    I don`t request the top rate of interest and the companies themselves state the rate they would like to borrow at.I try somewhere in between...not to greedy.
    My only problem as such is, I am dreading the tax form as I have no idea how to go about informing the tax office. I did consider not investing due to the bother of finding out...but decided the challenge would do me good!
    • rwgray
    • By rwgray 19th Jan 13, 7:37 PM
    • 424 Posts
    • 6,303 Thanks
    rwgray
    Tax Situation Funding Circle
    Hi, I just wondered if tax on any money you make off of this is deducted automatically or if you have to declare it...
    Originally posted by skabunny
    In response to you both, I think the tax situation is reasonably well explained on the FC website. You should receive at the end of March a tax statement that takes into account interest, minus fees and any bad debts (tax-deductable*). Like myself, you are not self-assessed but just PAYE through an employer? So you can find out the address of the tax office (see payslip / P60) and your NI number, and I would just mail a copy of the statement to the tax office and ASK THEM WHAT TO DO. They should either bill you or adjust your tax code to cover the amount owing.

    There is some surmise in all of this because I am in my first year too! (Advice always welcome.) But 20% of a modest net profit isn't going to sting anyone. Still much better than any reputable ISA. Though I am moving towards Ratesetter at present, to cover myself with some safer capital. [Do PM for a referral with 20 Amazon vouchers.]

    Regards, Rich.

    * But see my later post regarding Capital Gains Tax versus Income Tax - it may be that the tax is only recoverable in practice if the unrecoverable debts are actually recovered in subsequent years!! Yes, this is more complicated than it sounds...
    Last edited by rwgray; 28-03-2013 at 2:12 PM. Reason: Clarification
  • corrsfan
    In response to you both, I think the tax situation is reasonably well explained on the FC website. You should receive at the end of March a tax statement that takes into account interest, minus fees and any bad debts (tax-deductable). Like myself, you are not self-assessed but just PAYE through an employer? So you can find out the address of the tax office (see payslip / P60) and your NI number, and I would just mail a copy of the statement to the tax office and ASK THEM WHAT TO DO. They should either bill you or adjust your tax code to cover the amount owing.

    There is some surmise in all of this because I am in my first year too! (Advice always welcome.) But 20% of a modest net profit isn't going to sting anyone. Still much better than any reputable ISA. Though I am moving towards Ratesetter at present, to cover myself with some safer capital. [Do PM for a referral with 20 Amazon vouchers.]

    Regards, Rich.
    Originally posted by rwgray
    Sorry ive been a sole trader, and had to fill in tax forms for the past 10 years. The only way the govt will help you is if you make an appointment and take _ALL_ your P60's, statements up there, and they can assist you to tell you what figure to put in what box of the paper return, but you need to know all the figures and fill it in yourself. just telling them youve made 500 interest will need to be factored into everything else tax wise, which is why you need the return done in full.

    Also there is an earlier cutoff point for the paper returns of September/October too, for the tax year ended 5th april, but online bits can be done right up till 31st jan, but the advisers in the tax office cannot help you with those. (though they can walk through the paper version for you to submit it online.

    it takes 2+ weeks for first registration online for the gateway/self assesment services so dont be leaving it late now also. Once youve done it once its a breeze honest,and youll have acess to each historic submission forever & ever online too
    Last edited by corrsfan; 20-01-2013 at 11:55 PM. Reason: technicality needed correcting
    • rwgray
    • By rwgray 21st Jan 13, 2:57 PM
    • 424 Posts
    • 6,303 Thanks
    rwgray
    Sorry ive been a sole trader, and had to fill in tax forms for the past 10 years. The only way the govt will help you is if you make an appointment and take _ALL_ your P60's, statements up there, and they can assist you to tell you what figure to put in what box of the paper return, but you need to know all the figures and fill it in yourself. just telling them youve made 500 interest will need to be factored into everything else tax wise, which is why you need the return done in full.
    Originally posted by corrsfan
    Thanks for that terrifying info, corrsfan! Fortunately (unfortunately?), most of us will be on PAYE and earning less than 2,500 extra per year from these investments, hence able to choose to avoid self-assessment:

    http://www.hmrc.gov.uk/incometax/ways-to-pay.htm#5

    "If you're an employee or a pensioner and you want to pay tax on some of your non-employment income - like investment and rental income - through PAYE rather than by Self Assessment you can ask HMRC to collect it this way. You can do this for up to 2,500 of extra income in a year. If you earn more than 2,500 from savings, investments or rental income you'll need to fill in a tax return."

    So I need to write to my tax office and mention the FC and RS accounts and ask what to do next...

    Rich.x
  • lululumo
    more FC experience
    A few figures might be of interest. I started in Jan 2011 with 1000 increased it to 1500 and then to 2000 currently. Difficult to work out but an average balance of 1000 in the first year and 1800 in the second year wouldn't be far out. My gross earnings have been 170.68 minus 23.18 fees minus 50.39 bad debts equals net earning of 97.11 over two years. The bad debts have all come in this second year, so the return in the first year was indeed about 8% gross,7.3% net, but in this second year after fees and losses it has been about 1.3%. I'm sorry but this is not good enough and I'm in the process of pulling my money out. Very disappointing.
    Originally posted by khris210
    I'm sorry to hear you've been stung but sort of glad to hear that I'm not the only one who happens to have way to much bad debt.
    It seems FC has serious problems with vetting the companies. I invested about 2500.- for a bit less than a year now.
    Already I have bad debt almost equaling my interest minus fees and a further 3 loans about to default which would take my loss to about 10%. Its worth noting that all of the loans which were bad were A* or A rated.
    Needless to say that I'm taking my money back as it comes off the loans...
    So all I can say is be very wary of the headline rates.
    • chamelion
    • By chamelion 25th Jan 13, 4:29 PM
    • 177 Posts
    • 155 Thanks
    chamelion
    with regards to funding circle, can you guys review my thought process?

    Go to loan requests, find a good return loan, let's say 8%. Buy 100 worth in 20 chunks.

    If you win the auction, immediately put your parts for sale for a 1.5% premium.

    So now instead of waiting 12-60 months for your money to be returned, you basically immediately make a good % right off the bat - they only take a .25% commission or something from what i remember.

    Doesn't this mean it's in your best interest to just nab up loans - as many as you can, and immediately sell them if you win the bids?

    I'm sure I'm missing something but I can't picture what it is?
    • rwgray
    • By rwgray 1st Feb 13, 6:03 PM
    • 424 Posts
    • 6,303 Thanks
    rwgray
    Selling Loan Parts?
    ...it's in your best interest to just nab up loans - as many as you can, and immediately sell them if you win the bids?
    Originally posted by chamelion
    That makes sense. Although in your example you'd make maybe 1.25% gross or 1.00 net. So you'd need to turn over a lot of trades to make an income, compared with sitting on the loan parts. I suppose if you bought a chunk of almost everything over a certain rate, you'd be earning faster than I can.

    Anyone else have deeper thoughts on this?

    Rich.x
    • rwgray
    • By rwgray 14th Feb 13, 7:14 PM
    • 424 Posts
    • 6,303 Thanks
    rwgray
    Tax Advice for p2p
    So I need to write to my tax office and mention the FC and RS accounts and ask what to do next...
    Originally posted by rwgray
    Quoting myself is the first sign of madness... but I heard back from HM Revenue & Customs today, and they did indeed say simply to:

    "...send us the profit and loss statement each year to enable us to assess the amount of tax due."

    So, if you are not in business and not self-assessed, it should be easy!

    Rich.x

    p.s. feel free to PM for referral to Funding Circle or Ratesetter - I am currently earning 9% [minus their fee equivalent to 1%] and 6% respectively - gross of tax. Watch this space...
  • Steve1055
    P2P Funding Circle
    New to this and to Funding Circle, I decided to invest at the beginning of Jan 2013 as 8-9% return looked good, but I assumed this was over a year but its not, its all very complicated as their loans are based on the Amortising calculation. I stupidly assumed I would get 8-9% per year, but with fees etc, I feel I will be lucky with a 36 month loan to get these numbers, which makes their APR a lot less than the 8%+ i hoped to get. FC tell me the return per month should be reinvested to get the best %. As you receive interest and capital per loan per month, so you can reinvest, albeit each loan is a small sum. Being new to it all I wonder if I have this correct, also their web pages/summary pages are not user friendly, or have I missed something.

    Thanks in advance
    • rwgray
    • By rwgray 16th Feb 13, 3:37 PM
    • 424 Posts
    • 6,303 Thanks
    rwgray
    When is an interest rate not an effective interest rate?
    FC tell me the return per month should be reinvested to get the best % ... albeit each loan is a small sum.
    Originally posted by Steve1055
    My understanding is that the % shown is the flat rate paid on the outstanding amount, which diminishes monthly, hence becomes vanishingly small towards the end of a loan. I need to reinvest the repayments and interest from time to time. Buying loan parts is a useful way to do this as you can get decent rates on parts costing 15-25 or so. I should post something about buying loan parts if anyone is interested?

    Rich.
  • saver9999
    Ratestter identity validation.
    Ratesetter is very inflexible when it comes to identity verification. I tried to set up a linked account to operate on behalf of my mother, but although she has lived here all her life, owned a house, has several bank/savings acounts, and is on the electoral register she never seems able to be verified electronically. Ratesetter asked for either a driving license or passport for verification. She has neither. Usually pension documents, bank statements, utility bills are sufficient for other institutions, but Ratesetter just refused to accept any of these and just said she could not invest.
    I have lost count of the number of times I have had to help her send off identity documents to various banks etc. and there seems to be no way of updating the central records so it has to be done again each time. But this is the first time an organisation has been so inflexible. If anybody knows a way of getting her identity recorded permanently please let me know.
  • jawj
    Tax and fees change rates considerably
    I have been looking to put some money into Zopa due to poor rates but I'm not convinced the Media and MSE are really giving people a clear picture of what they can expect.

    Zope has a calculator on their site that show after fees, tax and bad debt the actual rate you will get.

    If you put in the highest recommended lending rate on long term B class loans (8.1%) into this calculator is gives an actual final rate of 3.7%. I really don't think this extra is worth the time/risk n this type of thing.

    On a short term A loan at 5.5% to actually return is 3.1%

    This is based on basic 20% tax payer.

    I would strongly encourage MSE to really make this clearer on their page as people thing they will get 8% and they wont!

    I cant post the link but its in help FAQ's / lending / tax

    Also anyone who doesn't do self assessment will need to if they do any P2P lending.

    All i can say is beware and please MSE update your page to reflect this major missing part of your guide!

    Cheers
    Last edited by jawj; 07-03-2013 at 11:35 AM.
    • rwgray
    • By rwgray 7th Mar 13, 2:47 PM
    • 424 Posts
    • 6,303 Thanks
    rwgray
    Dodgy Calculator
    If you put in the highest recommended lending rate on long term B class loans (8.1%) into this calculator is gives an actual final rate of 3.7%. I really don't think this extra is worth the time/risk n this type of thing. On a short term A loan at 5.5% to actually return is 3.1%
    Originally posted by jawj
    http://uk.zopa.com/help/help-faqs-lending#returns

    Quoting Zopa, "Over the last 12 months lenders have lent their money out at an average rate of 5.5% (after charges and actual average annualised defaults)."

    - that would be 4.4% after basic tax?

    I found a calculator under section 13 and it does indeed show some terrible returns e.g. B Short 9.0% pays 3.5% net! Whereas A* Long 9.0% pays 6.0% but I guess these are very hard to come by.

    I'm not with Zopa... The odd thing I've noticed with FC is that the C class loans have the lowest rates of default, by any measure.

    ~ Rich.x
    Last edited by rwgray; 08-03-2013 at 1:41 PM. Reason: clarification
  • jamesd
    Zope has a calculator on their site that show after fees, tax and bad debt the actual rate you will get.
    Originally posted by jawj
    Well, close, but it's not will get but might get, since you can get more or less depending on whether the default rates are above or below the estimate. But your point is right in general.

    Also anyone who doesn't do self assessment will need to if they do any P2P lending.
    Originally posted by jawj
    Not so in general. You can just tell HMRC by phone or letter how much gross interest you have received and they can adjust your tax code to allow for it.

    There's only one likely P2P lending that does guarantee a requirement for self-assessment, isePankur. That's because it's foreign interest so always requires a tax return however low the interest amount is.

    http://uk.zopa.com/help/help-faqs-lending#returns

    Quoting Zopa, "Over the last 12 months lenders have lent their money out at an average rate of 5.5% (after charges and actual average annualised defaults)." - that would be 4.4% after basic tax?
    Originally posted by rwgray
    No. The defaults are deducted after tax, not before, because defaults can't be deducted from interest income. The Zopa quote would be right only for someone not paying tax. Their FAQ calculator does get this order right.

    There are many investments that can be held in a S&S ISA that pay more than UK P2P lending does, without the tax to deal with. Or even with tax if the whole ISA allowance has been used. As with investments in general the capital values will vary, both up and down, so check on them and be sure you accept the amount of volatility before investign.
    Last edited by jamesd; 08-03-2013 at 10:47 AM.
    • rwgray
    • By rwgray 28th Mar 13, 2:09 PM
    • 424 Posts
    • 6,303 Thanks
    rwgray
    Not Tax Advice
    I have received a clarification from Funding Circle regarding the current tax status of unrecoverable debt in peer-to-peer lending to businesses. While reiterating that they are unable to provide anything that might legally constitute tax advice, nevertheless, in general:

    "...our understanding is that bad debt can be offset against CGT, but not against income tax. If there are recoveries in future years these need to be treated as capital gains; bad debt loss can be carried forward and offset against future CGT."

    This is reassuring for those who are regularly subject to Capital Gains Tax, but for most of us, a serious cause for concern until and unless the law changes to protect ordinary private investors. It seems preposterous that all net gains from this form of lending will be subject to one form of taxation, but bad debts are only recoverable against a different tax entirely!

    I'll know more once FC have issued our annual statements and IR have had a chance to respond to mine through good old PAYE.

    Rich.x
  • a4a
    Hi I have been lending on FC for around 18 months and find it good though it does have its drawbacks.
    1 Not many companies turn down loans and if they do there will always be other companies on there. Plus if you dont want to wait for days for a bidding to finish or loose out on a bid you can also buy loan parts. But sellers can charge between 0 to 3%. It does say on the filters that sellers will pay you 0 to 3% but i have never seen any loan parts on this.
    2 The FC web site is not the best in the world and on occations has crashed or frozen when attractive auctions come to an end. This has happend to me a few times. The last time i was outbid with around ten miniutes to go but could not re bid because of the amount of people trying to get last miniute bids in. In the end it just didnt freeze the all web site crashed. This is very common on FC so try and get last bids in about an hour before the end if you can.
    3 Remember also that companies on there can go bust and you can loose your money. At the moment i have 59 loans on there and 3 have outstanding payments on them. One company is now three months behind and the other one month. The third has gone into liquidation. FC will chase these companies but i am informed that it can take over a year or more and in some instances not be succsesful. Although companies are ranked A Good to C Average the companies i am owed are one A and two Bs.
    But on the whole i am glad i started lending on there. At the moment the intrest im getting on the 59 loans is 10.3% and varying between one to five years in length. Which is a hell of a lot better than the banks. Plus there is a feelgood factor that your helping out small buisnisses that the banks wont help.
    Although im not an expert if you have any other questions please ask. There is also a Independent Funding Circle Forum set up by lenders where you can ask. I used it a bit at the begining and was very helpful.
    Originally posted by yorksguy11
    Hi there,
    I know this is quite an old post but I came across it whilst searching for an answer I can't find and wondered if you knew.
    What would happen to an outstanding loan if a P2P company went bust ?
    Would I as the lender have to deal with the borrower direct, or would the administrator take over and manage the debt ?
    Would the debt be assigned to anyone ?
    Do you know the answer or know where I could find the answer?
    Thanks for your help.
    Tony
    • badger09
    • By badger09 31st Mar 13, 5:43 PM
    • 6,647 Posts
    • 6,150 Thanks
    badger09
    Hi there,
    I know this is quite an old post but I came across it whilst searching for an answer I can't find and wondered if you knew.
    What would happen to an outstanding loan if a P2P company went bust ?
    Would I as the lender have to deal with the borrower direct, or would the administrator take over and manage the debt ?
    Would the debt be assigned to anyone ?
    Do you know the answer or know where I could find the answer?
    Thanks for your help.
    Tony
    Originally posted by a4a
    I don't have any experience of lending through them, other than Zopa.

    This is what their FAQs (21) have to say on the subject. You could also search on their Lender forum, where this comes up on a fairly regular basis.

    http://uk.zopa.com/help/help-faqs-lending#safe
  • a4a
    [QUOTE=badger09;60335097]I don't have any experience of lending through them, other than Zopa.

    This is what their FAQs (21) have to say on the subject. You could also search on their Lender forum, where this comes up on a fairly regular basis.


    Thanks for this but I still cant see where it says anything about the p2p going bust (unless i've missed it).

    It talks about assignment of loans but when the loans default. I'm interested to know what happens if the p2p goes bust, who handles all the debts ?

    Thanks
    • badger09
    • By badger09 31st Mar 13, 7:15 PM
    • 6,647 Posts
    • 6,150 Thanks
    badger09
    [QUOTE=a4a;60336059]
    I don't have any experience of lending through them, other than Zopa.

    This is what their FAQs (21) have to say on the subject. You could also search on their Lender forum, where this comes up on a fairly regular basis.


    Thanks for this but I still cant see where it says anything about the p2p going bust (unless i've missed it).

    It talks about assignment of loans but when the loans default. I'm interested to know what happens if the p2p goes bust, who handles all the debts ?

    Thanks
    Originally posted by badger09
    Have you actually read FAQ 21?
  • a4a
    Ah no I hadn't thanks.

    That does explain in part but is still a bit vague because it doesn't explain;

    a) What the vigorously robust contingency plan is and
    b) How can a lender have a contract with the borrower if the lender doesn't have a credit consumer licence.

    It also doesn't explain whether a lender can pursue the borrower again on the grounds it doesn't have an OFT licence as a debt collector nor any Data protection certificate.

    However, I will email them on these points but I'm not certain I will get a complete answer other than a 'politician's reply', but thanks very much for your help, much appreciated.
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