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HMRC internal manual

Savings and Investment Manual

Peer to peer lending: Calculating peer to peer tax relief: Relief allowed against interest received in the same tax year - Through the same platform

The person who made the loan, or the person to whom the rights to recover the principal of the loan have been assigned, are both referred to here as simply as the Lender.

From 6 April 16 onwards

Relief for irrecoverable peer to peer (P2P) loans is given by deducting the amount of irrecoverable P2P loans from the P2P interest that the Lender receives from other P2P loans when calculating the lenders taxable income for the tax year in which the amount became irrecoverable.

From 6 April 2016 relief for irrecoverable P2P loans against income from P2P loans that are made through the same platform will be given automatically, that is without the need for the lender to make a claim in a tax return.

The amount of P2P interest that the Lender will be subject to tax on is:

  • the total amount of P2P interest that they receive through each platform, less
  • the principal of P2P loans made through the same platform that have become irrecoverable in the same tax year.

 

Example 1

Paul makes a series of interest bearing 5 year loans through Platform ‘Zapo’ in tax year 2015. In tax year 2017 one of the loans becomes irrecoverable. The amount of interest which Paul will be treated as receiving through ‘Zapo’ for tax purposes will be the amount of interest they received from other loans made through the ‘Zapo’ in the tax year 2017 less the irrecoverable amount of the loan.

6 April 15 to 5 April 16

The Lender can also claim relief on P2P loans that became irrecoverable on or after 6 April 2015 against other interest received in the same tax year from other P2P loans that were made through the same platform as the now irrecoverable loan.

This relief should be claimed in a tax return.

In order to claim relief in a tax return the lender should deduct their available relief from the P2P interest that they have received in that year before entering the figure in their tax return.

Example 2

Niall makes a series of interest bearing 5 year loans through Platform ‘Zapo’ in tax year 2014. In November 2015 one of the loans becomes irrecoverable. Niall can set off the irrecoverable amount of the loan against any interest received from other loans made through ‘Zapo’ in his tax return in the tax year 2015.