pip
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Post by pip on Oct 23, 2019 14:18:52 GMT
Interesting question are investments which at the time FS fell into administration in an ISA were not defaulted, now eligible for tax relief? As I understand it to when FS went into administration they no longer can be an ISA manager and therefore the funds within the account are no longer eligible for tax benefits of being in an ISA. see www.gov.uk/guidance/apply-to-be-an-isa-managerThe loss of ISA status though (if this is correct) would almost certainly be a benefit as one could reasonably, under the rules of P2P tax relief, claim that these loans can reasonably be considered impaired. So what do people think of: a) Calculating the amount in FS ISA's at the time of liquidating b) Consider these amounts no longer in an ISA c) Writing these amounts off d) Offsetting this loss against other P2P income on tax return? p.s. this is not tax advice, more a call for opinions. |
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Post by defaultinator5000 on Oct 23, 2019 14:36:40 GMT
, although not particularly helpful:
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pip
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Post by pip on Oct 23, 2019 14:42:27 GMT
, although not particularly helpful:
Thanks. As I understand it for an investment to be in an ISA it needs to be run by an ISA manager and an ISA manager status automatically ends on administration. HMRC can't have it both ways by not allowing income after ISA manager is wound up to be taxable but to not allow losses to be offset against tax. I will wait to see others thoughts and see if HMRC releases any official guidance before deciding how to treat the default of loans after administration was announced which were previously in an ISA.
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Post by defaultinator5000 on Oct 23, 2019 15:02:53 GMT
I am very interested in this as well - if I can get an income tax relief on the money stuck in folded FS, well, it will be MASSIVE savings for me!
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Oct 23, 2019 15:14:18 GMT
Interesting question are investments which at the time FS fell into administration in an ISA were not defaulted, now eligible for tax relief? As I understand it to when FS went into administration they no longer can be an ISA manager and therefore the funds within the account are no longer eligible for tax benefits of being in an ISA. see www.gov.uk/guidance/apply-to-be-an-isa-managerThe loss of ISA status though (if this is correct) would almost certainly be a benefit as one could reasonably, under the rules of P2P tax relief, claim that these loans can reasonably be considered impaired. So what do people think of: a) Calculating the amount in FS ISA's at the time of liquidating b) Consider these amounts no longer in an ISA c) Writing these amounts off d) Offsetting this loss against other P2P income on tax return? p.s. this is not tax advice, more a call for opinions. Where does it say that entering administration means you cease to be an ISA manager? For companies it says either a petition or resolution to wind up is the criteria
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paulb
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Post by paulb on Oct 23, 2019 15:37:29 GMT
HMRC maintain/publish a list of registered ISA managers, where FS are currently listed (as expected) - the list is supposedly updated monthly, so we should be able to see soon if FS are still managers. The list does contain Lendy, who are also in administration I believe, which does point towards not losing manager status on appointment of administrators.
I guess that's a shame, as it would be good to write the losses off, though a true optimist would say the money is better off remaining in the ISA so it can be moved to another provider. The worst of both worlds would be releasing any recovered funds as cash, but writing off bad loans within the ISA.
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pip
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Post by pip on Oct 23, 2019 15:37:30 GMT
Interesting question are investments which at the time FS fell into administration in an ISA were not defaulted, now eligible for tax relief? As I understand it to when FS went into administration they no longer can be an ISA manager and therefore the funds within the account are no longer eligible for tax benefits of being in an ISA. see www.gov.uk/guidance/apply-to-be-an-isa-managerThe loss of ISA status though (if this is correct) would almost certainly be a benefit as one could reasonably, under the rules of P2P tax relief, claim that these loans can reasonably be considered impaired. So what do people think of: a) Calculating the amount in FS ISA's at the time of liquidating b) Consider these amounts no longer in an ISA c) Writing these amounts off d) Offsetting this loss against other P2P income on tax return? p.s. this is not tax advice, more a call for opinions. Where does it say that entering administration means you cease to be an ISA manager? For companies it says either a petition or resolution to wind up is the criteria I am not going to lie and say this is easy but it also says: "A person ceases to qualify as an ISA manager when they are no longer eligible - for: .... building society, or person falling within section 991 Income Tax Act 2007 .... an Administration Order is made in relation to it ...." Section 991 Income Tax Act 2007 relates to "Meaning of “bank”" Under this act one of the definitions is "a person who has permission under [F1Part 4A] of FISMA 2000 to accept deposits (but see subsection (3) for exclusions),". I believe a P2P lender would fall into this definition under the FISMA 2000 but it is complicated. I believe it's a complex area. I guess the question to HMRC is....are investments in FS within an ISA still eligible for treatment as within an ISA. If the answer is no then I believe that any investments within an ISA at FS are therefore no longer in an ISA wrapper and can be deemed defaulted by the investor (as FS is in administration) and offset against other p2p income.
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paulb
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Post by paulb on Oct 23, 2019 15:45:22 GMT
pip, if you're right, we should find out soon enough - from the page linked above "A manager who has ceased to qualify must inform HMRC and each investor within 30 calendar days of the date he ceased to qualify."
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pip
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Post by pip on Oct 23, 2019 16:06:03 GMT
pip , if you're right, we should find out soon enough - from the page linked above "A manager who has ceased to qualify must inform HMRC and each investor within 30 calendar days of the date he ceased to qualify." Hi Paul, Thanks for this. Yes lendy appearing still appearing on the list of ISA managers is definitely not good for my argument! Maybe HMRC are not that pro-active updating their records and maybe Lendy (or anybody else) has not told them they are not entitled to be an ISA Manager and should be removed from their list. I will let the dust settle, won't be doing next years tax return for a good few months anyway. See if any proper guidance is released and then probably make a judgement call. Sometimes with tax you need to make a judgement call. If I call HMRC nobody I could speak to will know and if I get professional advice they probably won't be able to give me a firm answer and will cost a fortune to get somebody suitably qualified to provide an opinion. I am a Chartered Accountant and while I believe that as FS is in Administration is is no longer an ISA manager and therefore the investments are no longer in a tax wrapper, others may take a different opinion. However I think my argument is defensible and if HMRC launched an enquiry I doubt they would bother going too deep on a hugely complex, technical and probably judgemental area. But for now I will see which way the wind blows.
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mason
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Post by mason on Oct 23, 2019 18:34:08 GMT
Based on the precedent of other companies who have entered administration (and their cash and S&S ISAs), this has no bearing on the ISA status of its customers' funds. Either the ISA is transferred to another ISA manager, or the ISA is liquidated and the proceeds paid out together with letter enabling the customer to reinstate the ISA elsewhere. Any gains/losses/income occur within the ISA wrapper.
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pip
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Post by pip on Oct 23, 2019 18:51:35 GMT
Based on the precedent of other companies who have entered administration (and their cash and S&S ISAs), this has no bearing on the ISA status of its customers' funds. Either the ISA is transferred to another ISA manager, or the ISA is liquidated and the proceeds paid out together with letter enabling the customer to reinstate the ISA elsewhere. Any gains/losses/income occur within the ISA wrapper. Mason, thanks for this interesting. Which companies are you referring to as precedent. I have never seen a mechanism for a customer to be paid out in cash from a liquidation and the isa to be reinstated elsewhere? Have you more details on this letter and when such letters have been issued? Finally I understand why you say any gains/losses/income occur within the ISA wrapper, but I don't understand how this operates as by HMRC's own rules a company seemingly can't be an ISA manager if in administration and a consumer can only hold an ISA through an ISA manager. I can't see any special ISA's managed by administrators when the ISA manager is in administration arrangement and therefore, unless I am mistaken the ISA wrapper no longer exists. Maybe people have treated the ISA as still existing when the ISA manager is in administration, not sure if this has ever been challenged. From what I see though from HMRC's rules on ISA's I cant see how it works.
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ilmoro
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Post by ilmoro on Oct 23, 2019 20:03:51 GMT
Where does it say that entering administration means you cease to be an ISA manager? For companies it says either a petition or resolution to wind up is the criteria I am not going to lie and say this is easy but it also says: "A person ceases to qualify as an ISA manager when they are no longer eligible - for: .... building society, or person falling within section 991 Income Tax Act 2007 .... an Administration Order is made in relation to it ...." Section 991 Income Tax Act 2007 relates to "Meaning of “bank”" Under this act one of the definitions is "a person who has permission under [F1Part 4A] of FISMA 2000 to accept deposits (but see subsection (3) for exclusions),". I believe a P2P lender would fall into this definition under the FISMA 2000 but it is complicated. I believe it's a complex area. I guess the question to HMRC is....are investments in FS within an ISA still eligible for treatment as within an ISA. If the answer is no then I believe that any investments within an ISA at FS are therefore no longer in an ISA wrapper and can be deemed defaulted by the investor (as FS is in administration) and offset against other p2p income. Peer to peer lenders to not have permission to accept deposits AIUI which is a specific permission (see permissions held by Starling/Monzo as an example and the definitions in the client money permissions compared to P2P lenders, specifically the absence of the word deposit for the latter. They cant hold cash in their own right only through a bank who is the deposit taker.
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mason
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Post by mason on Oct 24, 2019 11:48:46 GMT
Mason, thanks for this interesting. Which companies are you referring to as precedent. I have never seen a mechanism for a customer to be paid out in cash from a liquidation and the isa to be reinstated elsewhere? Have you more details on this letter and when such letters have been issued? Finally I understand why you say any gains/losses/income occur within the ISA wrapper, but I don't understand how this operates as by HMRC's own rules a company seemingly can't be an ISA manager if in administration and a consumer can only hold an ISA through an ISA manager. I can't see any special ISA's managed by administrators when the ISA manager is in administration arrangement and therefore, unless I am mistaken the ISA wrapper no longer exists. Maybe people have treated the ISA as still existing when the ISA manager is in administration, not sure if this has ever been challenged. From what I see though from HMRC's rules on ISA's I cant see how it works. The obvious example is Beaufort Securities - no direct experience here, but see www.pwc.co.uk/services/business-recovery/administrations/beaufort/beaufort-faqs.html"BACSL ceased to qualify as an ISA Manager effective from 1st March 2018. Ordinarily, individual ISA account holders would be required to transfer their account to another ISA manager within 30 days to preserve the ISA status of their assets. However, having regard to BACSL’s special administration, HMRC have agreed to relax such a deadline in order to preserve ISA status. You therefore do not need to take any action at this time." Where I have had experience is in the collapse of Icesave, one of the Icelandic banks embroiled in the financial crisis, see www.professionaladviser.com/ifaonline/news/1336525/hmrc-extends-isa-deadline-icesave-saversthough the circumstances in this case are a little different and the Beaufort example is more relevant to the FS IFISA.
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pip
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Post by pip on Oct 24, 2019 12:11:48 GMT
Mason, thanks for this interesting. Which companies are you referring to as precedent. I have never seen a mechanism for a customer to be paid out in cash from a liquidation and the isa to be reinstated elsewhere? Have you more details on this letter and when such letters have been issued? Finally I understand why you say any gains/losses/income occur within the ISA wrapper, but I don't understand how this operates as by HMRC's own rules a company seemingly can't be an ISA manager if in administration and a consumer can only hold an ISA through an ISA manager. I can't see any special ISA's managed by administrators when the ISA manager is in administration arrangement and therefore, unless I am mistaken the ISA wrapper no longer exists. Maybe people have treated the ISA as still existing when the ISA manager is in administration, not sure if this has ever been challenged. From what I see though from HMRC's rules on ISA's I cant see how it works. The obvious example is Beaufort Securities - no direct experience here, but see www.pwc.co.uk/services/business-recovery/administrations/beaufort/beaufort-faqs.html"BACSL ceased to qualify as an ISA Manager effective from 1st March 2018. Ordinarily, individual ISA account holders would be required to transfer their account to another ISA manager within 30 days to preserve the ISA status of their assets. However, having regard to BACSL’s special administration, HMRC have agreed to relax such a deadline in order to preserve ISA status. You therefore do not need to take any action at this time." Where I have had experience is in the collapse of Icesave, one of the Icelandic banks embroiled in the financial crisis, see www.professionaladviser.com/ifaonline/news/1336525/hmrc-extends-isa-deadline-icesave-saversthough the circumstances in this case are a little different and the Beaufort example is more relevant to the FS IFISA. Hi Mason, Thanks for this very useful. Be interesting to see what HMRC say, if anything. Looks from the above that, a) in the Beaufort securities case a company cannot be an ISA manager in administration and b) unless we hear otherwise the ISA status of the accounts will cease 30 days after administration (have not found any legislation on this but hey ho). If that is the case are not FS investors best waiting thirty days, and then writing off the assets as not being in an ISA wrapper? I am not even sure what the legal status would be if an investor told HMRC that they did not wish to take advantage of HMRC's offer to preserve the ISA status. From my reading of the legislation I read it means that no ISA manager means no ISA wrapper. Just because HMRC agree to let people take out an equivalent ISA elsewhere to the same value as the value previously in a wrapper at the old ISA manager doesn't change my position that assets held in an ISA wrapper are no longer in an ISA wrapper when the ISA manager goes into administration and therefore one can offset any losses incurred after administration against other income. Again this is not advice, just a call for discussion.
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ilmoro
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Post by ilmoro on Oct 24, 2019 12:48:06 GMT
The obvious example is Beaufort Securities - no direct experience here, but see www.pwc.co.uk/services/business-recovery/administrations/beaufort/beaufort-faqs.html"BACSL ceased to qualify as an ISA Manager effective from 1st March 2018. Ordinarily, individual ISA account holders would be required to transfer their account to another ISA manager within 30 days to preserve the ISA status of their assets. However, having regard to BACSL’s special administration, HMRC have agreed to relax such a deadline in order to preserve ISA status. You therefore do not need to take any action at this time." Where I have had experience is in the collapse of Icesave, one of the Icelandic banks embroiled in the financial crisis, see www.professionaladviser.com/ifaonline/news/1336525/hmrc-extends-isa-deadline-icesave-saversthough the circumstances in this case are a little different and the Beaufort example is more relevant to the FS IFISA. Hi Mason, Thanks for this very useful. Be interesting to see what HMRC say, if anything. Looks from the above that, a) in the Beaufort securities case a company cannot be an ISA manager in administration and b) unless we hear otherwise the ISA status of the accounts will cease 30 days after administration (have not found any legislation on this but hey ho). If that is the case are not FS investors best waiting thirty days, and then writing off the assets as not being in an ISA wrapper? I am not even sure what the legal status would be if an investor told HMRC that they did not wish to take advantage of HMRC's offer to preserve the ISA status. From my reading of the legislation I read it means that no ISA manager means no ISA wrapper. Just because HMRC agree to let people take out an equivalent ISA elsewhere to the same value as the value previously in a wrapper at the old ISA manager doesn't change my position that assets held in an ISA wrapper are no longer in an ISA wrapper when the ISA manager goes into administration and therefore one can offset any losses incurred after administration against other income. Again this is not advice, just a call for discussion. Im not sure that the BS case proves that you cant be an ISA Manager in administration due to the circumstances surrounding their entry into administration ie its highly likely HMRC pulled the permission for failing to comply with the rules not insolvency. Waiting to see what happens with SVS but as yet they dont AIUI appear to have lost their status.
If FS do lose they ISA status then investors have 30 days to transfer their ISA. I would expect that as that isnt possible HMRC would provide an extension to retain the wrapper until it is possible to move.
FS entering administration is not in itself grounds for claiming losess under SAIM 12000, the loans themselves have to be in legal recovery or FS declare them as irrecoverable, and under a managed winddown that is not automatic.
As an aside, any losses used to offset income from another platform or carried forward to another year have to be claimed through a tax return.
As most of the losses wont be relevant until after April 2020 as they are likely to fall in the current tax year, plenty of time for the situation to become clearer.
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