There are many reasons to work with ShareIn. We can provide you with a tailored investment platform, we can deal with the headache of regulation and we can also help by sharing the expertise that we have built up since we launched in 2011.
One of the areas that causes some confusion for our new crowdfunding clients is the tax treatment of returns made to their investors, something that differs depending on the investment vehicle chosen.
There is no longer a requirement for UK companies to deduct tax from dividend payments made to their shareholders.
Similarly, payments of interest made to lenders of peer to peer loans are made without deduction of tax. This puts the tax treatment of P2P loan interest on a par with bank interest.
In contrast when a UK bond issuer makes a payment of interest, the default position is that they must deduct tax equivalent to the basic rate of Income Tax (currently 20%) ie interest is paid net Income Tax. This requirement is long standing in UK tax legislation and is currently set out in Section 874 of the Income Tax Act 2007.
There are exceptions to this:
- Bonds with a term of 364 days or less
- Bonds that are held within a Stock & Shares ISA or an Innovative Finance ISA
- Payments of bond interest made to UK companies, approved pension funds or charities
In these circumstances interest can be paid gross. (Where the bondholder lives is generally not a deciding factor here and payments of bond interest to non-residents must also be paid with deduction of Income Tax.)
With a mix of investments made through ISAs and entities entitled to receive interest gross, the calculation of investor payments can be complicated. Our platforms can calculate the correct tax deductions and facilitate the payment of dividends and interest to your investors.
If you’re interested in finding out more about ShareIn, then please get in touch.