FAQs

If your question is not answered below please send an email to admin@communitychest.co.uk - we seek to respond promptly and will add any useful questions to this list.

Last updated: 24th May 2017

Q?

Are you Regulated by the FCA?

A.

The ThinCats peer to peer platform that arranges and manages the loans and controls the client money is regulated by the FCA. Community Chest is not regulated because it does not arrange investments or manage client funds. You can find full information about the ThinCats FCA status and membership number on the ThinCats website.

Q?

When do I get the tax relief?

A.

When you make your loan the borrower will produce a Tax Certificate which Community Chest will send to you. The process for making a claim depends upon if you complete a Self Assessment return or have your tax deducted by your employer. You can elect to have the tax credit in the current tax year or carried back to the previous tax year. You can make a claim for relief up to 5 years after the 31st January following the Tax Year in which the investment was made. If you are using the Capital Gains Tax Hold-over relief or Disposal Relief you may need specialist advice. Further information on how to apply is available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/389931/investors-process.pdf

Q?

When the ThinCats IFISA is available can I invest that in Community Chest loans?

A.

We believe that there is nothing to stop you investing your ISA in SITR loans and not have to pay tax on the interest you earn. This is because the SITR relief is separate from your personal tax allowances and everyone except high rate tax payers are entitled to a tax free allowance on interest income of up to £1,000. The ISA tax free income benefit is a similar arrangement and neither have any relation to the type of investment you are earning interest on. However, there is no specific guidance on the subject and sometimes the rules might be changed as a result of specific requests for clarification which might attract the attention of policy makers to the opportunity. It is possible that government may decide that this is a form of 'double counting'  and decide to put an end to it. For this reason we are not planning to highlight the fact that you can get 30% tax relief and not pay tax on the interest income on our website or in the publicity for Community Chest apart from in this FAQ.

Remember that there is no tax benefit available to pension funds, trusts and businesses who invest in SITR loans because they do not pay Income Tax.

Q?

How do you decide if a business is providing sufficient social benefits to be featured by Community Chest?

A.

In order to qualify for tax relief loans will have to pass the 'social benefit' tests that HMRC apply to these schemes and we consider that pre-approval by HMRC is sufficient for the project to be featured by Community Chest. Everyone will have their own favorite good causes they want to support and we don't feel it appropriate for Community Chest to compare the social impact of (say) a cancer support charity with a steam engine preservation society or a community broadband scheme.

However, we do encourage investors to debate the relative merits of each deal on the ThinCats loan platform forum. Investors are expected to make their own investment decisions based upon their own interests and investment objectives and if they are not impressed by the social benefits being offered the loan will be less popular among investors and less likely to fill. If it does get fully subscribed it is likely that a loan with substantial social benefits will attract a lower rate of interest to reflect the level of support from the crowd. In this way the 'market' will judge the merits of each investment and set an appropriate interest rate.

Q?

I’m investing through a limited company; can that qualify for tax relief?

A.

SITR only benefits Income Tax payers so is not available to companies and any investors who do not pay UK Income Tax. When we are able to offer loans that attract CITR they will qualify for Corporation Tax relief but the FCA has imposed a restriction on p2p lending platforms preventing such loans and it may take some time for this policy to be reversed.

Q?

Can I invest my pension fund into these loans and benefit from double tax relief?

A.

Because pension funds do not pay tax there would be no tax benefit for the pension fund but if you consider that the interest available and the opportunity to help a good cause is sufficient return on your investment you could invest. Your pension fund trustees would have difficulty in arguing that an investment producing interest of between 2% and 10% is not commercial when compared to most alternative investments that are likely to return much less but if you are concerned about this it is probably worth asking them the question before making a bid.

Q?

Why can’t Community Chest loans be traded on the ThinCats secondary market?

A.

There are two reasons why they cannot be traded on the secondary market;

  1. if you dispose of your investment before the minimum period (3 years for SITR and 5 years for CITR) you will lose some or all of your tax relief.
  2. the purchaser of a second hand loan would not benefit from the tax relief so the loan part would not be very attractive on the secondary market.

Q?

Are the other ThinCats sponsors involved in these deals?

A.

We are expecting that the existing ThinCats sponsors will prove to be the main source of SITR lending opportunities because of their network operating across the country looking for ThinCats deals. However we are not ruling out direct approaches. In all cases the Sponsor will be described as "Community Chest" in order to highlight the difference from 'normal' secured ThinCats loans.

Q?

Is Community Chest and ThinCats the only platform to be offering social investments?

A.

We know that there are two equity/quasi-equity crowdfunding platforms who have been supported by Big Society Capital and there are other platforms offering ways to support social businesses. We have also seen social businesses raise funds on ThinCats and Funding Circle without giving investors access to SITR tax relief. There are also managed funds that offer a portfolio of socail investments and provide tax relief but the fund manager decides which investments are made. As far as we know we are the only peer to peer lending platform offering investors the opportunity to 'pick their own' investments which is how we believe that true peer to peer lending should operate.

Q?

I know a lot of people would be keen to support their own project through Community Chest but the £1,000 minimum bid is a problem for some?

A.

We are constrained by the ThinCats software that currently sets the minimum bid at £1,000. We are hoping that we will eventually be able to get this reduced to £200 but that change is likely to take a few months to implement.

In the short term the only way round that would be for several people to combine their investment through a ThinCats account owned by a single person. If that happens you must make your own arrangements and make sure that you can all work together and remember that the only person who can claim the tax relief is the named owner of the account!

Q?

My favourite project would be interested in applying for a loan; if they do can I invest in that project?

A.

Yes you can. We think that the Community Chest proposition will open up a whole new market for supporters of social businesses to invest in their own favourite project and at the same time they will get the chance to learn more about how peer to peer lending  works. However, if you already provide more than 30% of the loan and/or equity capital for a social business you may not qualify for tax relief if you make another loan.

Q?

I’m not a UK tax payer but I like the idea, can I invest anyway?

A.

Yes!

Q?

Is there a risk that the normal ThinCats investment criteria that a business must be viable and have the means to pay back the loan will be compromised because of the desire to help a good cause?

A.

Although there will not be a security rating ThinCats still allocates a star rating to the loan having graded it in the same way as for other loans.

Although it takes much longer to bring a social investment to the market we believe that in the long term there are many more good social investment opportunities than we need and this means that Community Chest and ThinCats can afford to be very selective about the deals that are offered. However, it is possible that the interest rate resulting from an auction is lower because investors may not be so demanding regarding returns on their investment. As always with ThinCats, that is for the individual investor to decide when bidding.

Q?

I don’t like the idea of making money out of helping a good cause; can I donate my interest to charity?

A.

For the time being you will need to make your own arrangements to donate your income to charity. Don't forget to claim Gift Aid when you make your donation - your chosen charity should be able to provide the form you need to fill in.

Q?

Even though these loans are not secured the borrowers still have the duty to repay them. Will the ThinCats recovery team be actively managing these loans?

A.

Yes, one of the great advantages of the arrangement with ThinCats is that the recoveries team will be able to help with the management, monitoring and recovery of loans.

Q?

Community Chest offers loans to charities and social businesses; does that mean we should expect to lose our money?

A.

All investments involve some degree of risk but we will be working hard to minimise them. We will be carefully selecting those projects that we believe will be capable of repaying the loan and commercial viability is a key requirement.

Q?

ThinCats has only ever offered secured business loans so is there a danger of confusing ThinCats members by offering unsecured loans? Wouldn’t it be better to have a separate platform for Community Chest?

A.

ThinCats Members are generally experienced in making their own investment decisions and we think that most will welcome the opportunity to ‘put something back’ without needing to open an account on a dedicated platform. The only significant problem we can foresee is the risk of confusing ThinCats members by mixing up secured and unsecured loans. We must make sure that Community Chest loans are clearly defined as being different and not suitable for all investors.

It is our long term objective to have a dedicated Community Chest Platform but there is no point in doing that until there is sufficient deal flow to make that worthwhile.