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Sam
Sam, Accountant
Category: Tax
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How do I submit income tax losses on the tax return?Doing

Resolved Question:

Doing my tax return online and the question relates to the 'Other UK income' section. Last year I made profit from lending on crowd funding and copy-trading, and I entered the figures in the "Other taxable income (before tax and expenses taken off)" field.

This year, I made loss, and when I enter a negative number and click 'Next', it returns an error: "The amount entered for 'Other taxable income...' must be greater than 0 (zero) or blank. Please amend."

I'm assuming that I can set aside losses from 'Other UK income' against my employment income? I can't enter a negative number and I don't see a field .

Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.

Thanks question
This income in essence is either a loan or in some instances a donation to help projects get off the ground (with many individuals funding them)
Therefore you should be treating this as interest made (rather than profits) and any loss I am afraid is yours to bear as this is not a trade on which you can be credited with any losses made or having a dividend payout if your funded amount sees you owning a share of the project you have invested in.
Or whether these are EIS or SEIS projects, but you cannot simply just show this as other income and you will not to rectify the earlier year tax returns.
Thanks
Sam
Customer: replied 2 years ago.

Sam

I was told the copy-trading income from eToro falls goes under income tax: http://www.justanswer.com/finance/7zsvd-tax-return-i-work-full-time-income.html

I suppose interest earned from lending on Funding Circle should be reported as interest as you mentioned, it seemed similar to eToro so this was error in my assumption. The statement has Total interest earned, with deduction of servicing fee, resulting in Net payments. Do I use the figure with or without servicing fee?

I don't know what EIS or SEIS project mean - I don't think the ones on Funding Circle are, as otherwise I assume I'd have come across these terms.

Please clarify what you mean by "you will not to rectify the earlier year tax returns". Do I need to rectify or do I not need to? And if I need to, how would I do so?

And if the income from eToro goes under Additional income, and I can't enter losses, I assume I can still enter the expenses of gas/elec as £3 and proportion of internet usage, with income as 0. That would result a minor overall loss if that's correct? If I carry losses to future years, how many years can I carry them?

Also, I was searching around and on Funding circle site I found a reference to "Losses on loans to traders" section at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323727/hs296.pdf - so irrecoverable losses can be considered.

Expert:  Sam replied 2 years ago.

Thanks response
You are not a trader, and this does not even fall into the category of money lending, its just a form of investment.
The individual who advised you this was allowable as a trade,I afraid was incorrect, and are not even a UKCustomerso I can only apologise , however I should point out the question you were ill advised on actually related to Forex trading which is not copy lending!
Yes you do need to rectify your earlier year tax returns with any monies you have made through copy lending as this should have been declared as untaxed interest not other income. And you are correct you cannot claim (and I should also advise the same applies to Forex trading too)
Finally you added a link regarding income tax losses, these are not loans per se but investments that you make, as there is every chance you will lose your money, so it falls into a category of high risk investment. You are one of many individuals who choose which project you wish to assist,
However on the plus side from April 2015 - losses from peer to peer landing will be permissible, but they will only be permitted to be offset against peer to peer lending profits. But nothing until then I am afraid.
Thanks
Sam
Customer: replied 1 year ago.

Thanks information, Sam.

I'm still confused about eToro.

Last year, I assigned proportions of my account to copy certain traders - which I monitored and changed as needed. But I also placed some trades myself - so the statement includes sum of both activities.

Another eToro trader suggests that they only report on the tax return when they withdraw funds into their bank account, https://openbook.etoro.com/posts/0__entry__677b66d3-919d-4b80-8359-8e77de7c4ab5. I remember searching last year and had found another similar article, and people suggested they reported as trading income.

And another person claims "this is all tax free income in UK so what you actually earn on eToro is 100% yours to keep, no taxes to pay!".. http://andrewminalto.com/easy-money/ .. and yet another trader at a conference suggested it's trading .. so I keep finding endless different answers on this and I don't know what the right approach is, or if there is one!

Expert:  Sam replied 1 year ago.

Thanks further questions
You asked re the losses on the basis that you had declared the profits, and that is what I have answered on.
But I can advise from HMRCs viewpoint that crowdfunding or peer to peer lending this IS income that must be declared on which tax is due (income tax)
Forex trading is not liable to income tax at all, and I think you have a mix of unauthorised and unknowledgeable individuals all putting their point of view rather than legal and expert knowledge in place here.
I have fully answered your question, along with full reasons behind the position, along with the changes set 2015. other than asking HMRC specific ruling, I am not sure what else I can do to offer you the convincer - other than you having come to a site where we are UK tax experts - some of us are ex HMRC staff, who now run our own businesses as accountants some are accountants, and the odd individuals has been involved in one or two aspects of tax and thinks they are knowledgeable in it all!
But I assure you, if there was any way to claim back these losses, I would only be too pleased to point you in the way to claim them, as I like to save people money so they pay tax in the most efficient way possible.
But ask HMRC ruling though the technical team - so you can satisfy yourself on this matter once and .
Thanks
Sam
Customer: replied 1 year ago.

Thanks clarification, Sam. I understand that losses cannot be claimed, I'm just trying to figure out how to fill in the return correctly, ie which bit goes in which section of the tax return.

Sorry I may not have phrased the question clearly or may not have used the right terms. I'm still unclear on your answer, to decide which section of the tax return I should enter the information in.

I understand that lent to selected businesses via Funding Circle crowdfunding, the income should be declared as interest

Income from crowdfunding

lent to businesses I chose via Funding Circle crowdfunding, I thought this should be declared as interest, as per your first response.. 'Therefore you should be treating this as interest made (rather than profits)'. But I read your last response as this is income tax 'crowdfunding or peer to peer lending this IS income that must be declared on which tax is due (income tax)'. And that from April 2015 peer to peer can be offset against peer to peer lending profits.

Income from eToro

I understand that this year as I've made a loss, I don't need to put anything in the tax return. year, my activity included a mixture of forex, commodities and stocks/shares, eToro provides a single statement. And a mixture of copy-trading and trades I placed on my own. I understand cases (eg forex on its own is not taxed), but it's unclear to me what to do where to place things on the tax return when this encompasses a mixture of things?

Correcting earlier tax returns

Regarding my question about how to rectify previous tax returns, searching online, I found there's usually a 12 months deadline (https://www.gov.uk/self-assessment-tax-returns/corrections). How do I correct the tax returns prior to last year be corrected?

Expert:  Sam replied 1 year ago.

Thanks further questions
You declare it as Untaxed interest on your tax return, which I have already advised you of.
Etoro is forex trading so you do not declare this income, as its not liable to tax, but you also cannot claim any losses made, which I have already advised on
As your tax return - you have up to to 12 months to amend a tax return and not incur a penalty or charge (if additional tax is due) but you can ask HMRC to amend the tax return up to 3 full years previous to the current tax year - so back to 2010/2011
If you filed your tax returns online then you can amend these online.
Might I suggest as you are struggling with your position -it could be prudent to engage the services of a local accountant to manage this
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13707
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Customer: replied 1 year ago.

Many thanks Sam.

Expert:  Sam replied 1 year ago.
You are very welcome
Thanks
Sam

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