Taxation of interest from peer to peer lending - are fees tax deuctible?

M

mtk

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Hi there,
background
I was thinking of doing peer to peer lending through one of the websites fo r P2P lenders
Taking grid finance as an example....
1) their fees are per website are 15% of the interest income.
2) their website says interest is classed as investment income which makes sense to me so it would be taxed at my marginal rate.

My Question is if interest rate is 10% am I taxed
1) on the 10% at my marginal rate ?
or
2) on the 10x.85= 8.5%?

ie can i deduct the P2p lender's charges from the investment income for tax purposes?
thanks everyone
 
The net interest received (8.5% per above) would be the taxable amount. They should be able to issue you with an interest statement each year in order to prepare a return.
 
rob oyle said:
The net interest received (8.5% per above) would be the taxable amount. They should be able to issue you with an interest statement each year in order to prepare a return.
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I don't think that fees are deductible from Interest.

I also think that where the payer if the interest is a company that they have to deduct standard rate income tax on the interest and remit it to the Revenue.
 
Joe_90 said:
I don't think that fees are deductible from Interest.
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I'd be interested to know why not - this is a fee imposed by the facilitating company of the arrangement and therefore is income that does not come to the lender. I was trying to think of an analogy (broker charges perhaps?) but couldn't come up with a good one!

Joe_90 said:
I also think that where the payer if the interest is a company that they have to deduct standard rate income tax on the interest and remit it to the Revenue.
Click to expand...
Things could get messy if this was the case - the borrower pays the interest to the facilitating company in the middle so has no direct interaction with the lender. This company takes its cut before paying the balance to the lender - it's up to the lender to declare the income and sort out his own tax position.
 
Personally I'd be surprised if one could get a deduction on the basis that it's a passive investment rather than a trade of providing loan finance.
 
Joe_90 said:
I also think that where the payer if the interest is a company that they have to deduct standard rate income tax on the interest and remit it to the Revenue.
Click to expand...

This aspect is mentioned on their (grid finance) website and they say payer does not deduct any tax.
 
Gordon Gekko said:
Personally I'd be surprised if one could get a deduction on the basis that it's a passive investment rather than a trade of providing loan finance.
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probably but would be good know for sure.,, maybe i'll ask revenue
 
You're on a sticky wicket here, I fear. I am assuming this is a non-Irish P2P website. In which case, we are talking Case III. If I recall correctly, foreign branch income is allowed to have foreign losses set against it. That is the only listed exception.

You are not an exception, you could be taxed on Gross 100% before the 15% fees are paid.
 
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