The UK will relax pressures on peer to peer (P2P) lending scheme participants by removing the need to pay income tax on any bad debts incurred from lending through the P2P format.
A statement from the UK Treasury said: "This Autumn Statement announces support for P2P and crowdfunding platforms through a package of measures to remove barriers to their growth from regulation and tax rules.
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"These include a new bad debt relief for lending through P2P platforms; a consultation on whether to extend ISA eligibility to lenders using crowdfunded, debt-based securities and an intention to review financial regulation which currently stands in the way of institutional lending through P2P platforms.
James Meekings, co-founder of P2P funding site Funding Circle said: "This change in the tax system will make lending to small businesses via our marketplace much fairer for individual investors, putting them in an equal position to larger lenders such as banks. More than 35,000 people currently lend through Funding Circle and the average investor could earn up to 25% more per year as a result of this change. This could potentially be significantly higher depending on an individual’s investment strategy."
The UK government said it was committed to reducing barriers to investment in the UK, and it intended to introduce a new targeted exemption from withholding tax for interest on private placements – a form of long-term non-bank debt financing.
