The exact origin of the saying ‘the devil is in the detail' has never been conclusively established, but it might well have been invented by a person whose job it was to make sense of Government Budget statements. The latest effort from Chancellor George Osborne on December 4 proved true to form. Much of the information vital to the Alternative Finance sector didn't make the headlines, but was buried in the Budget notes waiting to be unearthed.
Without doubt it was the radical changes to Stamp Duty that stole the show. However, from the industries point of view, the best news of all was that investors who suffer from bad debts after lending via P2P platforms will, in future, be able to offset their losses against interest income for tax purposes. Graeme Marshall, CEO of FundingKnight, described it in his response as 'his number one wish and Christmas come early'. The relief, which will be effective from 2016 on loans made from April 2015, is obviously welcome, but, above all, is fair because it will level the playing field.
The second piece of seriously good news was that there will be a review of regulation that currently stands in the way of institutional lending through P2P platforms. Thus another historical and unintended obstacle will be removed from the path of an alternative finance sector that is on the march.
Third, it now looks increasingly likely that a third class of ISA - the other two being cash and shares - will be created specifically to accommodate P2P investments. Apart from the sheer fairness of that decision, it underlines how far official thinking has travelled in favour of a more competitive and evolving financial marketplace.
For tax students, yet more evidence of the shift in Government thinking was provided by subtle changes to withholding tax regarding interest payments from P2P platforms to individuals.
Finally, Mr Osborne reaffirmed that the Government will help SMEs and alternative finance providers by mandating the banks to provide access to their credit data and refer on any businesses they turn down for finance.
In terms of immediate response to the Chancellor's statement, if you were tuned into the BBC at 12.30pm on the day you might have felt like the friend forgotten from the invitation list to a party, but if you took the time to wade your way through the 108 page official document immediately afterwards - as sadly I did - you could have been equally tempted to break out the bubbly. Brain Bartaby, CEO of Proplend, clearly another avid reader, described it in his blog as 'very encouraging for the Peer to Peer Lending Industry – thank you Mr Osborne!'
Louise Beaumont, Head of Public Affairs and Marketing at GLI Finance welcomed the announcements, but characteristically kept the pressure on by aiming her fire at the stalling Funding for Lending Scheme saying: “Part of the solution is to focus much more attention on the structural issues inherent in the business finance ecosystem. Despite access to the Funding for Lending Scheme, traditional players are failing to adequately pass on the benefits of cheap capital to SMEs and it has been left to the alternative finance sector to close this gap – indeed alternative lenders not only filled the FLS gap in Q3 after FLS-backed lending fell, but provided an additional £140m to small businesses".
Leaving any political machinations to one side, what remains crystal clear is that 2014 has turned out to be a pivotal year for the alternative finance industry. Regulation and the regulators are clearly struggling to keep pace with the financial revolution that is taking place, but no one can now say that the way ahead is barred, either by Government or the establishment. Who would have been brave enough to predict that a year ago? Roll on 2015.
by Amelia Caldecott, 5 minute read
by Kate Waller, 6 minute read