Peer to peer lending: Transfers of irrecoverable loans
Assignment of irrecoverable peer to peer loans
A lender will not be entitled to this relief because they assign or sell a loan at a loss.
If the lender is able to assign or sell a loan for consideration then the assumption would be that the loan has some market value and is not irrecoverable, although it may be at risk and could have decreased substantially in value.
However in some cases a loan may become treated as irrecoverable, and the lender may then transfer the loan to a recovery agent in order for legal proceedings to be taken.
For example, the loan may be identified as becoming irrecoverable other than by legal proceedings or by reference to security whilst it is are in the hands of the lender. Once the loan has been identified as irrecoverable, the lender may then assign the loan to a recovery agent to take further action.
In this case the loan would be treated as irrecoverable whilst it is are in the hands of the lender, and the lender would be eligible for relief. Any recovery that the lender subsequently receives from that loan, whether through the recovery agent or from anywhere else, will be brought into charge as a subsequent recovery.
Acquisition of irrecoverable peer to peer loans
If a lender assigns a loan that is already treated as being irrecoverable to another person, and the person who acquires the loan is unable to recover some or all of the principle of the loan (whether by legal proceedings, liquidation of security or any other means), then the person who has acquired the loan will not be able to claim this tax relief.
This is because the loan will not become irrecoverable in the hands of the purchaser. For the purposes of the legislation, the loan would have already been considered to be irrecoverable when the purchaser acquired it.