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HMRC internal manual

Savings and Investment Manual

Peer to peer lending: Introduction

This guidance sets out the rules on how to apply Income Tax Relief for irrecoverable loans that occur on Peer to Peer (P2P) Investments under Chapter 1A of Part 8 Income Tax Act 2007. This tax relief was brought in at Section 32 Finance Act 2016.

This tax relief allows P2P loans that become irrecoverable to be relieved by the lender against interest that they receive from other P2P loans.

P2P lending is an area of Financial Technology that enables individuals and businesses to lend to each other through the intermediary of an Internet platform. The sector seeks to avoid a traditional financial middleman such as a bank by having a platform act as a conduit to arrange and manage loans made directly between the lender and the borrower.

P2P lending platforms are regulated by the Financial Conduct Authority under Part 4A of the Financial Services and Markets Act 2000.

The purpose of this relief is to ensure that people who invest in P2P loans are subject to tax on the return that they make from their lending portfolio as a whole. This will create a level playing field for the taxation of income from P2P lending when compared to the taxation of traditional forms of retail investment and bring the tax position of the peer to peer sector in line with other forms of investment products available for individuals to purchase, such as collective investment schemes (more detail in SAIM6000).