SAIM12140 - Peer to peer lending: Calculating peer to peer tax relief: Relief allowed against interest received in later tax years
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.
The Lender can claim relief on peer to peer (P2P) loans that became irrecoverable on or after 6 April 2015, against interest received from loans made through P2P platforms in the 4 years following the year in which the debt became irrecoverable.
This relief can only be claimed if the loss resulting from the irrecoverable loan cannot be used wholly against interest received through P2P platforms in the same year as the loan is treated as becoming irrecoverable.
If carried forward, relief for the outstanding amount of the irrecoverable loan must be used against P2P interest received in the earliest year first, up to a maximum of 4 years.
The 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 the relevant tax year before entering the figure in their tax return.
Example
Harold in tax year 2013 made a series of 10 year loans through platform ‘Wending Lorks’. When a loan made through Wending Lorks became irrecoverable in tax year 2019, Harold’s loss is set against interest arising from Wending Lorks loans in tax year 2019.
However, the amount of the irrecoverable loss in tax year 2019 exceeded the amount of interest received from Wending Lorks loans in that year. Therefore, Harold can carry forward the outstanding amount of the irrecoverable loan to be set off against any P2P interest received in tax year 2020.
If there is any amount of the irrecoverable loan outstanding after being set off against P2P interest received in tax year 2020, the outstanding amount can be carried forward against P2P interest received in tax year 2021, and so on, with the last year for set off being tax year 2023.