Peer to peer (P2P) lending permits individuals and businesses to lend to each other through the intermediary of an internet platform. A traditional financial middleman such as a bank is not required as the platform acts as a conduit to arrange loans directly between the lender and the borrower. Tax relief now being introduced is intended to create a level playing field between different types of lending.
The UK has issued final guidance on the application of income tax relief for irrecoverable loans made by P2P investments. The tax relief is to be introduced by legislation included in the Finance Bill 2016. The relief allows tax relief for irrecoverable P2P loans by offsetting the amount against interest received from other P2P loans.
