The UK Government has published a consultation paper on the deduction of income tax from interest on peer to peer lending. Closing comments are expected by September 18, 2015.
The query tackles the issue of who should deduct and pay taxes. The challenge is not a cut and dry matter as the “current form of legislation is complex for both the borrower and the platform, and the effect is hard to understand for the lenders”.
In a traditional bank loan there is a one-to-one relationship, borrower to lender, but in peer to peer lending the borrower receives funding from many sources – which remain unknown. The only entity that maintains information on both parties is the P2P lending platform. If the burden is placed on the lending platform this could “constrain development of the market and the way P2P loans are sold and managed”.
The UK government has remained supportive of allowing a “more competitive financial sector” and thus is expected to handle this issue carefully.
The consultation was previously announced by the Chancellor of the Exchequer in his Autumn statement in September of 2014. Any newly created rules would apply from April 2017.
The consultation is embedded below.
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