Reply to: p2p investment

[ChimpMaster]

Thanks ChimpMaster.

To clarify what do you mean by "..claim relief to work around CGT and SDLT double-taxation". What's that about and how does that work?
(Interested as I have few personal BTLs as well)

Thanks.

Read up on section 162 "incorporation relief" to void having to pay CGT when moving properties in a Ltd Co. It depends a lot on property business being your main occupation.

SDLT is more difficult to mitigate but can be achieved over a period of time with a move to LLP and then Ltd.

None of this is easy and there are many things you will need to consider, so seek out an accountant who is familiar with property and familiar with the process.

It is very likely that your lenders will need to be consulted and they could ask you to refinance on to business loans.

[Pegasus]

No my plans are different. I will be retiring from contracting in a year or so and so will go the MVL route.

I had looked into SPVs and loaning the funds. I would do that if a good property development opportunity came up but it hasn't yet, so I'm more likely to retire from contracting and then invest the funds after taking ER.

All my BTLs are held personally at this time. I may look to incorporate in the future and claim relief to work around CGT and SDLT double-taxation.

Thanks ChimpMaster.

To clarify what do you mean by "..claim relief to work around CGT and SDLT double-taxation". What's that about and how does that work?
(Interested as I have few personal BTLs as well)

Thanks.

[ChimpMaster]

Hi ChimpMaster - have you taken that route? That is, giving a loan to SPV, and buying a BTL through SPV?

JMann - Please let us know what your accountant says.

Please let me know if others have any opinion on this.

No my plans are different. I will be retiring from contracting in a year or so and so will go the MVL route.

I had looked into SPVs and loaning the funds. I would do that if a good property development opportunity came up but it hasn't yet, so I'm more likely to retire from contracting and then invest the funds after taking ER.

All my BTLs are held personally at this time. I may look to incorporate in the future and claim relief to work around CGT and SDLT double-taxation.

[Pegasus]

correct as per my discussion with the accountant

Hi ChimpMaster - have you taken that route? That is, giving a loan to SPV, and buying a BTL through SPV?

JMann - Please let us know what your accountant says.

Please let me know if others have any opinion on this.

[jmann]

I’m not sure spreading your P2P investments between platforms will offer much protection as nobody quite knows what will happen to P2P when the next recession hits. A rapid increase in bad debts / crash in property prices could drive a number of platforms out of business. Even lower risk platforms like Ratesetter have already experienced issues with bad debts being higher than expected, and Wollesley recently announced they’d need additional investment this year to survive.

You might be better putting less in P2P but with higher risk platforms and then putting the rest in FSCS protected accounts – that way your overall return might be the same but you wouldn’t be risking all your capital if the whole of the P2P market goes into meltdown at some point in the next few years.

Yes, that was my main concern regarding p2p. I guess we have to simply put up with lousy interest rate from banks.

[dingdong]

I’m not sure spreading your P2P investments between platforms will offer much protection as nobody quite knows what will happen to P2P when the next recession hits. A rapid increase in bad debts / crash in property prices could drive a number of platforms out of business. Even lower risk platforms like Ratesetter have already experienced issues with bad debts being higher than expected, and Wollesley recently announced they’d need additional investment this year to survive.

You might be better putting less in P2P but with higher risk platforms and then putting the rest in FSCS protected accounts – that way your overall return might be the same but you wouldn’t be risking all your capital if the whole of the P2P market goes into meltdown at some point in the next few years.

[ChimpMaster]

I don't think it would affect entrepreneurs' relief since it will be classed as a loan between 2 companies. I can't see that being classed as an investment. In any case I will check this with my accountant.

correct as per my discussion with the accountant

[Pegasus]

I don't think it would affect entrepreneurs' relief since it will be classed as a loan between 2 companies. I can't see that being classed as an investment. In any case I will check this with my accountant.

Yes, thats exactly what my thought also was. From the viewpoint of the contracting limited company OurCo, it is just a "loan" given to the SPV, on which it will get some interest (similar to what would happen in P2P, savings account etc), so it should not be an issue.

But my accountant said that because the "intent" of that loan is to "invest" the money in BTL through the SPV, there may still be an issue with entrepreneurs' relief.
(I even clarified that if I ever want to close OurCo, I will ensure that the loan has been returned before that etc)

Please have a discussion with your accountant and let us know what he says.

Any views / comments on this, from other experienced members here, are also most welcome.

Thanks.

[jmann]

Can you please confirm with your accountant whether setting up a SPV for BTL, and giving a loan from your parent company to SPV for this purpose, affect your chances of getting Entrepreneur Relief later on?

Thats what my accountant told me last year, but did not appear 100% confident. So will be useful to get more opinions on that.

Thanks.

I don't think it would affect entrepreneurs' relief since it will be classed as a loan between 2 companies. I can't see that being classed as an investment. In any case I will check this with my accountant.

[Pegasus]

I am based in Surrey. I don't have any experience in BTL but I have been researching into this for the past few months. I already spoken to property tax specialist, so as soon as I can source good properties then it should be fine. If you have experience in this field please do PM.

I checked with my accountant regarding investing surplus cash in p2p and I was told as long as the investment is below 20% of company asset then it should be fine. So that means I can't invest any more in p2p. So I guess I need to concentrate in setting up SPV company for BTL.

Can you please confirm with your accountant whether setting up a SPV for BTL, and giving a loan from your parent company to SPV for this purpose, affect your chances of getting Entrepreneur Relief later on?

Thats what my accountant told me last year, but did not appear 100% confident. So will be useful to get more opinions on that.

Thanks.

[jmann]

Interesting plan and not far off my thoughts too. Where are based? Do you have any prior experience of property or a network to leverage? (PM me if better)

It sounds like you won't be able to claim ER when/if you MVL, because you've been investing your company funds. However, you could possibly keep your Ltd Co, change the SIC and then run your property development trade through it.

I am based in Surrey. I don't have any experience in BTL but I have been researching into this for the past few months. I already spoken to property tax specialist, so as soon as I can source good properties then it should be fine. If you have experience in this field please do PM.

I checked with my accountant regarding investing surplus cash in p2p and I was told as long as the investment is below 20% of company asset then it should be fine. So that means I can't invest any more in p2p. So I guess I need to concentrate in setting up SPV company for BTL.

[ChimpMaster]

I have no debt. I am already taking £80k per year so I don't want to pay any more tax. I have no mortgage to worry about. Cash is simply sitting in saving accounts which is why I am looking for better interest rate via p2p.

I am actually looking into property development and hopefully I will move into that within 6 months. I want the surplus cash to generate passive income. Keep in mind £1000+ per month just from interest is not bad at all. Few years ago I was just earning £50+ per month.

I already have shares and stocks ISA. I am investing in funds and shares. I have invested via SEIS and VCT but these are all under my personal name. I am trying to generate more passive income using company surplus cash. That's why I am trying to figure whether to increase p2p investment or invest in something else.

Interesting plan and not far off my thoughts too. Where are based? Do you have any prior experience of property or a network to leverage? (PM me if better)

It sounds like you won't be able to claim ER when/if you MVL, because you've been investing your company funds. However, you could possibly keep your Ltd Co, change the SIC and then run your property development trade through it.

[Darren at Fox-Bartfield]

BTL

I am getting 4% interest which is much better than saving accounts. I know there are several p2p platforms which offer higher interest rate but I don't think its worth the added risk.

May be a better return than a savings account but generally not as good as a BTL which tend to have better income return than the 4% plus the potential capital growth as well, especially if you're investing mortgage free. Like the idea of diversifying but seems quite a lot of exposure to a big chunk of cash that's has no protection.

[jmann]

I have no debt. I am already taking £80k per year so I don't want to pay any more tax. I have no mortgage to worry about. Cash is simply sitting in saving accounts which is why I am looking for better interest rate via p2p.

I am actually looking into property development and hopefully I will move into that within 6 months. I want the surplus cash to generate passive income. Keep in mind £1000+ per month just from interest is not bad at all. Few years ago I was just earning £50+ per month.

I already have shares and stocks ISA. I am investing in funds and shares. I have invested via SEIS and VCT but these are all under my personal name. I am trying to generate more passive income using company surplus cash. That's why I am trying to figure whether to increase p2p investment or invest in something else.

[northernladuk]

IMO I'd be diversifying in to something else at those numbers. Spreading across platforms is wise but I'd be looking at something else. Not p2p to be totally comfortable. Not 100% convinced of p2p though hence the caution so up to you.