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Where Taxpayers and Advisers Meet

Taxation on Investments

vinniebb
Posts:7
Joined:Tue May 01, 2018 5:11 pm
Location:Sawley, Derbyshire
Taxation on Investments

Postby vinniebb » Tue May 01, 2018 5:39 pm

I invest thru a P2P investment website. I understand that I can buy an interest bearing loan (as an investment) on the 'secondary' market at a cost of the capital plus accrued interest at the time of purchase (as the interest is paid with the capital at the end of the load period). When the investment terminates I receive the capital and ALL the interest and am taxed on ALL the interest. What I would like to know is what tax liability does the seller have?

EXAMPLE The original loan is £1,000 for 12 months. The monthly interest is £10. After 10 month I buy the loan for £1,000 plus £100 (accrued interest over 10 months). At the end of the 12 month. But what about the seller's tax liability? If they are liable to CGT it appears to me that the interest has been taxed twice??????

Any ideas please? This is not a problem to me I am just curious....as to if the HMRC are "conning" someone!

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Taxation on Investments

Postby pawncob » Wed May 02, 2018 4:23 pm

There's a deduction for accrued interest.
see:https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim4030

and SAIM 4140.
With a pinch of salt take what I say, but don't exceed your RDA

vinniebb
Posts:7
Joined:Tue May 01, 2018 5:11 pm
Location:Sawley, Derbyshire

Re: Taxation on Investments

Postby vinniebb » Wed May 02, 2018 8:09 pm

Thank you for your reply. Does that mean then in my example the buyer is only taxed on the last 2 months (£20) interest?...not the whole (£120) of the interest? Now that makes perfect sense but is certainly not what the P2P website warns potential buyers on the secondary market.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Taxation on Investments

Postby pawncob » Thu May 03, 2018 11:35 am

Yes. The seller is taxed on the full ten months, and that amount is a deduction from your 12 months of interest, so you pay tax on two months interest.
With a pinch of salt take what I say, but don't exceed your RDA

vinniebb
Posts:7
Joined:Tue May 01, 2018 5:11 pm
Location:Sawley, Derbyshire

Re: Taxation on Investments

Postby vinniebb » Sat May 05, 2018 7:43 pm

Thank you very much PAWNCOB for clearing that up.


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