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Osborne set to announce tax free treatment for peer-to-peer lending


A powerful incentive for investors, the move should increase the number of people who choose to lend money via the sites, which in turn will mean more capital being available to individuals and businesses.

Following the consultation, any changes would not be likely to occur until April 2015, a year after the peer-to-peer industry comes under the jurisdiction of the UK’s new financial regulator, the Financial Conduct Authority.

“This news would be a huge win for British investors up and down the country, and represent a seminal moment for our industry,” said Samir Desai, co-founder of Funding Circle, which has facilitated loans worth £180m to more than 3,000 businesses since it was set up in 2010. The company’s own research suggests that more than a third of its users would invest more if they could do so through an Isa.

Peer-to-peer platforms like Funding Circle, Zopa and Ratesetter act as facilitators, allowing savers to lend money directly to borrowers. Some arrange loans for individuals, others lend to businesses. The Peer-to-Peer Finance Association estimates that the industry has provided £750m to borrowers so far.

Lending platforms say they have been working with the Treasury for months, providing information about the way the industry works and the risks involved for savers.


“We have been asking for access to Isa funding for a number of years,” said Giles Andrews, chief executive of Zopa, the UK’s first peer-to-peer platform. “And we’ve already looked at what we will need to do. Inclusion would level the playing field. It’s a sign of the industry growing up and maturing.”

So far, platforms are unsure whether they will be eligible for inclusion in cash or investment Isas.

“We believe that the P2P model will sit most naturally in the stocks and shares Isa and we continue to have extremely positive discussions with HMRC about making that a reality,” said Peter Behrens, co-founder of RateSetter.

The anticipated funding boost that could arise if peer-to-peer investment is eligible for Isas means that providers are jostling for inclusion.

However, a source close to the industry said that it expected equity-based crowdfunding websites, such as Seedrs or Crowdcube, to be excluded on the basis that they should only be aimed at sophisticated investors.

If Isa inclusion is limited to websites that facilitate loans, then there is still some confusion about whether websites that arrange bonds will also be eligible.

Bruce Davis, director of Abundance Generation, a platform that arranges debentures for renewable energy, said that debt instrument crowdfunding sites were also in talks with the Treasury and were “hopeful”.

“We have put in our pitch,” he said. “We are in a strange limbo because in the regulation consultation we were lumped in with all equity based crowdfunders but we’d argue that what we provide is actually a loan – it’s just semantics.”

Since their launch in 1999, Isas have proved extremely popular with the British public, who used the accounts to save more than £57bn in the last tax year according to the Tax Incentivised Savings Association.

Isa holders can save up to £11,520 in stocks and shares or £5,760 in cash in 2013-2014 without paying any income tax or capital gains tax on returns.

In last year’s Autumn Statement the government announced that a ban on shares traded on Aim (the Alternative Investment Market) in Isas would be lifted.

The Treasury declined to comment.


Source: FT

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