News Briefing - Crowdfunding, SME And Alternative Finance

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Herewith today's crowdfunding, SME and alternative finance news round-up.

1.UK – P2P

P2P Finance News runs a piece on the taxation of P2P.

 

“THE UK tax code is reportedly 12 times the size of the King James Bible at more than 10 million words, and while not all is relevant to peer-to-peer platforms and investors, there is plenty that baffles the sector.

Tax on P2P is paid in a similar way to savings or investments. Income tax is due on interest payments and capital gains tax (CGT) may be due on the sale of loans for example on the secondary market. This is typically reported at the end of the tax year by filing a self-assessment return or – where less than £3,000 tax is paid overall – by altering the tax code so anything owed is effectively taken from an employee’s monthly payslip. Corporate investors would report any interest in their accounts and company tax return.

HMRC clarified in March last year that investors can offset losses from defaulted loans or those in arrears against interest from others. But Neil Faulkner, founder of P2P analysis firm 4th Way, believes more clarity is needed on how this works for loans purchased on secondary markets.

“If interest has been accrued and not yet paid – such as with loans that roll all the interest to the end of the loan – lenders will be liable for tax on all the accrued interest,” he says. “If the loan is repaid early, the lender could end up with a tax loss.

“Lenders could factor that into their calculations when deciding what price to pay for existing loan parts and should spread their money across lots of loans so that you don’t get unlucky on just one loan.”

When it comes to CGT, very few people are likely to be impacted as the profit would need to be above the current allowance of £11,300, and many platforms cap the premiums on loan sales. However, Faulkner adds that it would be useful to have specific guidance on CGT and P2P rather than the generic tax rules.”


 

2. UK – P2P

 

Archover launches a service to lend against SME R&D tax reclaims from HMRC, reports P2P Finance News.

 

“PEER-TO-PEER business lender ArchOver is expanding into research & development (R&D) advance loans.

Businesses that can show they are claiming R&D tax credits from HMRC will be able to secure a loan against this commitment.

The loans will aim to fill the gap for companies waiting for the R&D payments to come through.
Borrowers will pay rates from 12 per cent and lenders will receive interest from 10 per cent per year.

The government has set aside approximately £1.5bn per year for companies they deem to be undertaking qualifying R&D activities and eligible firms can claim cash repayments of up to 33 per cent of R&D expenditure.”


3. UK – FinTech

Crowdfundinsider reports some vigorous acquisition activity:

“Starling Bank announced it has inducted the first wave of fintech startups in its new marketplace. This news comes just a few months after the UK-base challenger bank received approval by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) to offer customers a wide array of financial products.

According to TechCrunch, the fintech companies that have signed up for the marketplace are PensionBee, Wealthsimple, Kasko, and Habito. The bank reported that the companies must receive regulatory approval.  As previously reported, Starling has also partnered with Flux to offer item-level receipts and loyalty for Flux merchants.”

 

 

4. US – FinTech

Bitcoinist reports a new ICO:

“This week EOZ are preparing for their token sale which will commence on Sunday 18th of February. EOZ is a new blockchain-powered lending platform and governed ecosystem that applies blockchain technologies to the cryptocurrency investment industry.

The team behind EOZ left Wall Street after 11 years of trading and decided to bring their knowledge and experience of trading to the Cryptocurrency market. After four successful years mastering the blockchain industry they started to develop their own algorithms for their Artificial Neural Network which they are now sharing with the public.

The traditional investment market is awash with issues leaving clients feeling frustrated and looking for alternatives. Highlighting these problems are support and funding issues, high fees and confusion over investment funds; EOZ has sought about creating a solution.

The decentralization of cryptocurrencies was a perfect place for EOZ to create a platform for cryptocurrency trading in the financial industry with the goals of providing a stable, accessible, and secure platform. Knowing that the cryptocurrency market is growing rapidly, EOZ aims to offer a safer and reliable alternative to current offerings in the form of their EOZ token which will be backed by a tangible lending and referral program through seamless peer to peer transactions.”

 

 

5. US – FinTech

 

The IRS is on the hunt for use of cryptocurrencies as a laundering device, reports Crowdfundinsider.

 

“In March of 2014, the Internal Revenue Service issued  an FAQ on digital currencies and the tax treatment of transactions in crypto like Bitcoin. In brief, the IRS said that virtual currency should be treated as property for U.S. federal tax purposes. “General tax principles that apply to property transactions apply to transactions using virtual currency.” But since that time, the IRS has not been super vocal in its pursuit of cryptocurrency traders and any potential gains of which they are not reported to the tax officials.

This past week, in a write up by Bloomberg, it became clear the taxman is on the hunt for scofflaws and money launderers that are transacting in crypto.”

 

6. US – Equity

 

Entrepreneur Ajay Yadav argues in Forbes that every start-up should host its own equity crowdfunding campaign as a means of doing research and building community:

 

“I believe that every startup – even those with $17 million in Series A funding – should host a crowdfunding campaign.

That much capital can afford you a lot of acquired users. But, at that stage, your priority should be building a community. How can you find and grow a base of people that engage with your brand beyond simple usage?

The answer is investment. Investing in a startup – regardless of that startup’s size or success rate – gives people a more significant reason to discuss and care about that brand.

When someone invests, they have “skin in the game” beyond consumerism. Investment makes someone a brand ambassador and changes their perspective on the relationship they share with that brand. If they believe in a company enough to put funds towards its success, they’ll be the first to talk about it with others.

Letting customers into your company through investment gives them ownership and makes them a part of your success. In return, they help you do your job of spreading the word and providing feedback.

So, providing opportunities to invest not only benefits you through funding and engagement but also creates a sense of honesty and responsibility among your investors.

And that’s not something you can pay for.”