pip
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Post by pip on Oct 25, 2019 7:39:57 GMT
I'm not in FS and I'm just catching up with this discussion. I'm posting because I disagree with the assumption in the OP that, if ISA status were lost, all losses on the loans would become deductible. In principle, I think the loans would have to be valued as at the date ISA status was lost. Losses up to that date would have happened within the ISA and would not be deductible. Any subsequent losses would be. Any gains (by reference to the value at that date) might well be taxable. In reality, valuing the loans at that date would be extremely difficult and the amounts actually recovered by the administrators (before their costs but after other costs of recovery and sale) might well be considered the best evidence of value. However, I think this is academic because I agree with others that ISA status will probably be retained. Pike I largely agree with you and as have always said am open for a discussion on this topic rather than saying my views are correct. Yes I agree defaulted loans in an isa before the isa wrapper were lost can not be deducted against other p2p income. As to whether the isa wrapper will be retained, well my view is according to hmrc rules, funding secure can no longer be an isa manager as they are in administration and isa’s can only be held by an isa manager. P2p assets in ISAs are by their nature illiquid so I cannot see how the proposed idea of hmrc that the isas can be transferred to another provider in 30 days will work in practice. Therefore either now or after thirty days (who knows!) my assumption is that the isa wrapper is lost and any defaults from that time onwards can be offset against other p2p income. I think under hmrc guidance it would be reasonable to default all fs loans, see passage below from assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/597959/Income_tax_relief_for_irrecoverable_peer_to_peer_loans_FINAL_GUIDANCE__2_.pdf‘A peer to peer loan may be accepted as having become irrecoverable when there is no reasonable prospect of the recovery of the loan. When assessing recoverability, the funds available and potentially available to the borrower must be considered. A claim therefore cannot be established simply because the borrower has insufficient liquidity on the date the loan had been called in. Whether a loan has become irrecoverable should be judged on a case by case basis, however as the loan will be managed by a platform, the platform would usually be in a position to determine when a loan has become irrecoverable. The platform would then inform the lender that the loan had become irrecoverable. If the platform does not undertake this action, then the lender may still determine that the loan has become irrecoverable. However it will be the responsibility of the lender to show that there is no reasonable prospect of the recovery of the loan and it is NOT simply a case of late payment.‘ As I have always said this is a complex area of tax and I would hold even if hmrc said that the isa wrapper exists I think this could be challenged at a tax tribunal. I suspect hmrc may issue guidance on it, I highly doubt they will provide tax advice to an email. I will wait and see how things progress. As always not providing advice giving my opinions and happy for people to challenge.
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Post by Ace on Oct 25, 2019 7:45:33 GMT
Great tip mason . I was totally unaware of this. In fact I was fairly sure you were wrong so I checked and am pleased to say that you are absolutely correct. Sorry to have doubted you. Can someone provide a source for this please? I was of the understanding that barring some unusual circumstances you had to put it back in the same account. Otherwise there would be no need to do ISA transfers, you could just withdraw from one and put in another - which as far as I know you can't as it has to be an interprovider transfer, and has to be in full for current tax year, and you can only have one of each type subscribed to (money contributed to) in current tax year. I found it in the government's guidance for ISA managers hereThe relevant paragraph is " Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule." Sorry, but I don't know how to provide a direct link to the relevant paragraph, so you'll need to search for the quoted text to find the context.
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ilmoro
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Post by ilmoro on Oct 25, 2019 8:19:37 GMT
Can someone provide a source for this please? I was of the understanding that barring some unusual circumstances you had to put it back in the same account. Otherwise there would be no need to do ISA transfers, you could just withdraw from one and put in another - which as far as I know you can't as it has to be an interprovider transfer, and has to be in full for current tax year, and you can only have one of each type subscribed to (money contributed to) in current tax year. I found it in the government's guidance for ISA managers hereThe relevant paragraph is " Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule." Sorry, but I don't know how to provide a direct link to the relevant paragraph, so you'll need to search for the quoted text to find the context. Also here www.moneysavingexpert.com/savings/flexible-ISAs/#howitworks last two points in section.
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pip
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Post by pip on Oct 25, 2019 8:21:24 GMT
Can someone provide a source for this please? I was of the understanding that barring some unusual circumstances you had to put it back in the same account. Otherwise there would be no need to do ISA transfers, you could just withdraw from one and put in another - which as far as I know you can't as it has to be an interprovider transfer, and has to be in full for current tax year, and you can only have one of each type subscribed to (money contributed to) in current tax year. I found it in the government's guidance for ISA managers hereThe relevant paragraph is " Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule." Sorry, but I don't know how to provide a direct link to the relevant paragraph, so you'll need to search for the quoted text to find the context. This only applies to flexible ISAs, FS was not a flexible ISA. To me the fact that we have some providers which provide ISAs which are deemed flexible and some which are not, even within P2P (e.g. lendingcrowd is a flexible ISA) is way too complicated for the average consumer to understand and needs reviewing. However we are where we are and my understanding if that any amounts withdrawn (and I also assume this includes if the wrapper is removed) from a FS ISA in tax year ending 2020 cannot be automatically replaced by the depositor in another type of ISA (e.g. even with flexible ISAs you can only put the money back into the same provider or another provider for a different type of isa I.E. stocks and shares/cash/IF). Based on HMRCs guidance to ISA managers, FS administrators should tell HMRC it is no longer an ISA manager, FS administrators should within 30 days of not being an ISA manager offer consumers to transfer the ISA to another provider, but as the assets are not liquid no idea how that will be handled in practice. I suspect many of the questions as to how IF ISAs work in practice have probably not even yet been considered. I will be on the watch for HMRC trying to concoct rules on the hoof which may not be in favour of investors. I suspect the best thing for consumers will be for HMRC to just say a) the tax wrapper ended on liquidation, b) any defaults after liquidation are off-settable against other p2p income. If they want to create some complicated procedure to allow the ISA wrapper to be transferred without the accompanying cash, they can, but no idea how would work in practice.
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littleoldlady
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Post by littleoldlady on Oct 25, 2019 8:45:12 GMT
Can someone provide a source for this please? I was of the understanding that barring some unusual circumstances you had to put it back in the same account. Otherwise there would be no need to do ISA transfers, you could just withdraw from one and put in another - which as far as I know you can't as it has to be an interprovider transfer, and has to be in full for current tax year, and you can only have one of each type subscribed to (money contributed to) in current tax year. I found it in the government's guidance for ISA managers hereThe relevant paragraph is " Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule." Sorry, but I don't know how to provide a direct link to the relevant paragraph, so you'll need to search for the quoted text to find the context. Trouble is that the second half of that paragraph is ambiguous. Is it "one type at any one time" or "one type during the year". You have read it the first way but the first time I read it I was puzzled as I read it the second way.
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paulb
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Post by paulb on Oct 25, 2019 9:24:39 GMT
There's some interesting discussions going on, but I don't think we'll know for sure that the ISAs have dissolved on administration for another 28 days when we've not received notification that they have, though loss of manager status could be lost (or given up) at any point in the future.
I'd hope with such illiquid "assets", we'd be able to meet the 30 day deadline for migrating to a new manager by submitting the transfer request with the option to transfer the entire amount - it may take months/years for the transfer to actually complete, but I'd hope that giving the instruction within the deadline would be sufficient.
Out of interest, I've noticed several references to P2P losses being offset against P2P gains - is this all they can be offset against, or can they be offset against any other income?
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ilmoro
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Post by ilmoro on Oct 25, 2019 9:26:02 GMT
There's some interesting discussions going on, but I don't think we'll know for sure that the ISAs have dissolved on administration for another 28 days when we've not received notification that they have, though loss of manager status could be lost (or given up) at any point in the future. I'd hope with such illiquid "assets", we'd be able to meet the 30 day deadline for migrating to a new manager by submitting the transfer request with the option to transfer the entire amount - it may take months/years for the transfer to actually complete, but I'd hope that giving the instruction within the deadline would be sufficient. Out of interest, I've noticed several references to P2P losses being offset against P2P gains - is this all they can be offset against, or can they be offset against any other income? No P2P income only
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littleoldlady
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Post by littleoldlady on Oct 25, 2019 9:39:28 GMT
There's some interesting discussions going on, but I don't think we'll know for sure that the ISAs have dissolved on administration for another 28 days when we've not received notification that they have, though loss of manager status could be lost (or given up) at any point in the future. I'd hope with such illiquid "assets", we'd be able to meet the 30 day deadline for migrating to a new manager by submitting the transfer request with the option to transfer the entire amount - it may take months/years for the transfer to actually complete, but I'd hope that giving the instruction within the deadline would be sufficient. Out of interest, I've noticed several references to P2P losses being offset against P2P gains - is this all they can be offset against, or can they be offset against any other income? No P2P income only Certainly not against any old income but how about other types of Innovative Finance, as defined for ISA treatment?
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ilmoro
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Post by ilmoro on Oct 25, 2019 9:47:49 GMT
Certainly not against any old income but how about other types of Innovative Finance, as defined for ISA treatment? No, peer to peer loans only as defined in the guidance, not least has to be article 36H and from a platform with 'operating an electronic platform for lending' permission. Bonds, debentures etc dont qualify, nor do platforms like BC & LI as a result.
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Post by Ace on Oct 25, 2019 9:52:47 GMT
I found it in the government's guidance for ISA managers hereThe relevant paragraph is " Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule." Sorry, but I don't know how to provide a direct link to the relevant paragraph, so you'll need to search for the quoted text to find the context. Trouble is that the second half of that paragraph is ambiguous. Is it "one type at any one time" or "one type during the year". You have read it the first way but the first time I read it I was puzzled as I read it the second way. sorry if I've misunderstood your point, but I think I read it the same as you. I.e. You can flexibly move cash between ISA types in the current tax year, but can't flexibly move cash between ISAs of the same type. I don't see any other way to read it, but I'm no scholar of English.
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Greenwood2
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Post by Greenwood2 on Oct 25, 2019 10:01:18 GMT
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ilmoro
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Post by ilmoro on Oct 25, 2019 10:10:10 GMT
I found it in the government's guidance for ISA managers hereThe relevant paragraph is " Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule." Sorry, but I don't know how to provide a direct link to the relevant paragraph, so you'll need to search for the quoted text to find the context. Trouble is that the second half of that paragraph is ambiguous. Is it "one type at any one time" or "one type during the year". You have read it the first way but the first time I read it I was puzzled as I read it the second way. Standard ISA rules apply. So in a tax year you can only subscribe new money to one ISA of each type. So if you open and subscribe to a flexible IFISA, you can withdraw those funds and place them in a cash or S&S ISA (old or new) as current year subscriptions. If you withdrawal all current year subscriptions so the ISA is closed you could then open a new IFISA as if the previous one had never existed. However, any income, ie money over & above the subscription amount, can only be replaced in the existing ISA if it only contains current year subscriptions which somewhat restricts the previous point.
So if you invested £10k in MT IFISA this year, you could withdraw £5k and move it to a cash or S&S ISA without transfer.
You could move all £10k to an AC IFISA as long as no interest/capital gain had been recieved. (obviously not possible with MT but possible with other IFISA products)
If any income had been earnt you could move all £10k to a cash or S&S ISA but not the income. The income could be moved to a non-ISA but would have to be returned to MT to retain tax status. If MT had closed the account as empty, the income can not be returned unless MT reopened the acccount.
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mason
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Post by mason on Oct 25, 2019 12:08:09 GMT
I found it in the government's guidance for ISA managers hereThe relevant paragraph is " Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule." Sorry, but I don't know how to provide a direct link to the relevant paragraph, so you'll need to search for the quoted text to find the context. This only applies to flexible ISAs, FS was not a flexible ISA. To me the fact that we have some providers which provide ISAs which are deemed flexible and some which are not, even within P2P (e.g. lendingcrowd is a flexible ISA) is way too complicated for the average consumer to understand and needs reviewing. However we are where we are and my understanding if that any amounts withdrawn (and I also assume this includes if the wrapper is removed) from a FS ISA in tax year ending 2020 cannot be automatically replaced by the depositor in another type of ISA (e.g. even with flexible ISAs you can only put the money back into the same provider or another provider for a different type of isa I.E. stocks and shares/cash/IF). Based on HMRCs guidance to ISA managers, FS administrators should tell HMRC it is no longer an ISA manager, FS administrators should within 30 days of not being an ISA manager offer consumers to transfer the ISA to another provider, but as the assets are not liquid no idea how that will be handled in practice. I suspect many of the questions as to how IF ISAs work in practice have probably not even yet been considered. I will be on the watch for HMRC trying to concoct rules on the hoof which may not be in favour of investors. I suspect the best thing for consumers will be for HMRC to just say a) the tax wrapper ended on liquidation, b) any defaults after liquidation are off-settable against other p2p income. If they want to create some complicated procedure to allow the ISA wrapper to be transferred without the accompanying cash, they can, but no idea how would work in practice. Strictly, FS administrators should inform HMRC the company is in administration and it is for HMRC to decide the next steps. It is almost certain consumers will not be granted the option to transfer their ISA to another provider within the normal timescales, and transfers of IF ISAs have additional complexities meaning transfers very likely wouldn't be completed for months (or years) owing to the need to follow through the recovery process for non-performing loans held within them. The best thing for one group of consumers will be if their ISA wasn't an ISA and they could claim tax relief on their losses; the best thing for another group of consumers is if the ISAs preserve their tax status and they can ultimately transfer them elsewhere. Whether someone falls into one group or the other will depend on the likely recovery outcome of the loans in which they were invested, the total balance of their ISA account and amount of uninvested cash they held at the time FS went under, along with other factors. So be prepared for disagreements with other investors as to the best way for the situation to be resolved.
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littleoldlady
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Post by littleoldlady on Oct 25, 2019 16:40:55 GMT
Trouble is that the second half of that paragraph is ambiguous. Is it "one type at any one time" or "one type during the year". You have read it the first way but the first time I read it I was puzzled as I read it the second way. Standard ISA rules apply. So in a tax year you can only subscribe new money to one ISA of each type. So if you open and subscribe to a flexible IFISA, you can withdraw those funds and place them in a cash or S&S ISA (old or new) as current year subscriptions. If you withdrawal all current year subscriptions so the ISA is closed you could then open a new IFISA as if the previous one had never existed. However, any income, ie money over & above the subscription amount, can only be replaced in the existing ISA if it only contains current year subscriptions which somewhat restricts the previous point.
So if you invested £10k in MT IFISA this year, you could withdraw £5k and move it to a cash or S&S ISA without transfer.
You could move all £10k to an AC IFISA as long as no interest/capital gain had been recieved. (obviously not possible with MT but possible with other IFISA products)
If any income had been earnt you could move all £10k to a cash or S&S ISA but not the income. The income could be moved to a non-ISA but would have to be returned to MT to retain tax status. If MT had closed the account as empty, the income can not be returned unless MT reopened the acccount.
Thanks for the clarification. So, after withdrawing all current years subscriptions to a flexible IFISA it is Ok for me to declare that " I have not subscribed, and won’t subscribe, to another innovative finance ISA in the same tax year that I subscribe to this innovative finance ISA" on the grounds that although I actually have, the previous subscription is treated as if it never happened? Although this is somewhat academic in the case of IFISAs as all current years subs are unlikely to be held in transferable cash.
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mason
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Post by mason on Oct 25, 2019 16:49:35 GMT
Standard ISA rules apply. So in a tax year you can only subscribe new money to one ISA of each type. So if you open and subscribe to a flexible IFISA, you can withdraw those funds and place them in a cash or S&S ISA (old or new) as current year subscriptions. If you withdrawal all current year subscriptions so the ISA is closed you could then open a new IFISA as if the previous one had never existed. However, any income, ie money over & above the subscription amount, can only be replaced in the existing ISA if it only contains current year subscriptions which somewhat restricts the previous point.
So if you invested £10k in MT IFISA this year, you could withdraw £5k and move it to a cash or S&S ISA without transfer.
You could move all £10k to an AC IFISA as long as no interest/capital gain had been recieved. (obviously not possible with MT but possible with other IFISA products)
If any income had been earnt you could move all £10k to a cash or S&S ISA but not the income. The income could be moved to a non-ISA but would have to be returned to MT to retain tax status. If MT had closed the account as empty, the income can not be returned unless MT reopened the acccount.
Thanks for the clarification. So, after withdrawing all current years subscriptions to a flexible IFISA it is Ok for me to declare that " I have not subscribed, and won’t subscribe, to another innovative finance ISA in the same tax year that I subscribe to this innovative finance ISA" on the grounds that although I actually have, the previous subscription is treated as if it never happened? At the end of the tax year, flexible ISA managers will calculate the total amount subscribed during the tax year minus the total amount flexibly withdrawn (plus the total amount of replacement subscriptions made). If that equals zero, then they will report to HMRC that you have not subscribed to the ISA in that tax year. For platforms that show you your remaining allowance for the tax year, this should equal exactly £20,000.
Providing the above is true, you should have no issue opening and funding an IF ISA elsewhere in that tax year.
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