Individuals lending through peer to peer platforms will be able to offset any losses from loans which go bad against other P2P income, the government announced today.
As part of the Autumn Statement, support for P2P lending and crowdfunding platforms will come through a package of measures to remove barriers to their growth from regulation and tax rules.
These include a new bad debt relief for lending through P2P platforms, a consultation on whether to extend Isa eligibility to lenders using crowdfunded, debt-based securities and an intention to review financial regulation which currently stands in the way of institutional lending through P2P platforms.
It will be effective from April 2016 and, through self-assessment, will allow individuals to make a claim for relief on losses incurred from April 2015.
Christine Farnish, chair of the Peer-to-Peer Finance Association, welcomed the chancellor’s endorsement of the nascent industry.
“The reforms to debt relief will provide greater certainty for lenders and will begin to create a level-playing field for our industry.
“We are also pleased that government has committed to review the ‘lending in the course of business’ anomaly.”
Bruce Davis, co-founder and chief executive of crowdfunding firm Abundance, added that extending the Isa consultation to debt securities means that P2P investors will also be able to add debentures and bonds into their Isas, helping investment in green infrastructure and other ethical investment projects.
“We also welcome the continued focus on creating a level playing field for P2P and crowdfunding to compete with the mainstream banks by ensuring lenders can write off bad debts (as banks already do), opening up bank data and investigating the market for payment and banking services provided to alternative finance.”
He added that the increased allowance for Social Investment Tax Relief will open up a new market for investors, “who want the ‘win win’ of doing good with their money while still making a good financial return”.