Income Tax Act 2007 section 412A

Relief for irrecoverable peer-to-peer loans

Section 412A provides income tax relief where the principal of a peer-to-peer loan made through a qualifying platform becomes irrecoverable, setting out the conditions for eligibility, how the relief is calculated, and the types of income against which it can be offset.

• Relief is available where a peer-to-peer loan made through a platform operator becomes irrecoverable on or after 6 April 2015, provided the lender has not assigned the right to recover the principal
• The irrecoverable amount is deducted from the lender's net income for the tax year in which the amount became irrecoverable, but only against interest income from qualifying peer-to-peer loans made or acquired through the same platform
• For loans that became irrecoverable between 6 April 2015 and 5 April 2016, a formal claim must be made; from 6 April 2016 onwards, the relief applies automatically without a claim, which also means the loss can no longer qualify for capital gains relief under the Taxation of Chargeable Gains Act 1992
• A loan is treated as "irrecoverable" if the outstanding principal cannot practically be recovered, disregarding the possibility of recovery through legal proceedings or the enforcement of any security granted over the loan