City minister Harriett Baldwin has branded peer to peer lending a “brilliantly innovative new form of finance – which we want to see continue to grow and evolve.”
In a speech to the Peer-to-Peer Finance Association (P2PFA) Summit in London yesterday (21 October), Ms Baldwin said peer-to-peer lending can plug the funding gap for small businesses.
Ms Baldwin said: “I am proud of the fact that the UK has the largest P2P and alternative finance sector in Europe. We’ve worked hard for that.
“We knew, for example, that for the sector to mature, it would be important to bring it within the correct statutory framework. Proportionate regulation will protect consumers lending and borrowing via a P2P platform and allow the sector to continue to grow.
“P2P platforms and fintech provide competition, ideas, and technology– making people’s lives better and the markets more effective. When you do well, your businesses flourish. Excellence breeds excellence.
“Customers have the services they need to meet their aspirations. And this country becomes better off, as a result of all this activity taking place here in the UK. We are ambitious, because you are ambitious too. I can sense the energy in this room.
“The businesses here – from Funding Circle to RateSetter to Zopa – are some of the most innovative in Europe.”
The MP for West Worcestershire highlighted the fact as part of the savings package announced in the March 2015 Budget, the Conservatives confirmed they would expand the range of products that can be held in stocks and shares Isas to include loans made through P2P platforms.
Holding P2P loans within an Isa will mean that interest received on the loans will not be subject to tax. These rules will come into force from the start of the next tax year, on 6 April 2016.
From earlier this year, investors in P2P platforms have also been allowed to offset any losses from P2P loans which go bad against other P2P income, reducing the amount of income tax that the individual has to pay on the P2P interest.
Ms Baldwin said: “The objective here is to level the playing field, and make P2P more attractive to investors by equalising the advantage banks and other investment products have over them.
“We have also been consulting with industry on the implementation of new withholding tax obligations, to apply across all P2P lending platforms from April 2017.
“I appreciate the engagement this sector has had with the government on this issue, and we will be publishing our response soon – watch this space.”
Ms Baldwin’s gushing praise for P2P came after new research revealed that 40 per cent of people would consider investing in peer to peer when the Innovation Isa launches next April.
A survey conducted by One Poll among 500 active investors by lending platform ThinCats found that the new Isa will expand the market by as much as a third, as investors seek to utilise the tax advantages available to them.