IFISAcava
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Post by IFISAcava on Oct 25, 2019 17:13:28 GMT
OK, I get all this, complicated as it is.
So why then the "you can only transfer a current year ISA in full" regulation? Seems you can just withdraw however much you want and put it in another ISA (as long as it is a different type of ISA). And the rule that you can't subscribe to the same type of ISA in the same tax year only applies if you have earnt anything on it, and in any case the only time anyone calculates it is 11.59 on 5th April?
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mason
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Post by mason on Oct 25, 2019 19:48:51 GMT
OK, I get all this, complicated as it is. So why then the "you can only transfer a current year ISA in full" regulation? Seems you can just withdraw however much you want and put it in another ISA (as long as it is a different type of ISA). And the rule that you can't subscribe to the same type of ISA in the same tax year only applies if you have earnt anything on it, and in any case the only time anyone calculates it is 11.59 on 5th April? The "current year subscriptions must be transferred in full" predates the introduction of ISA flexibility. It even predates IF ISAs, and the ability to transfer freely between different types of ISA (once upon a time you couldn't transfer a S&S ISA to a cash ISA). I've always thought it rather silly you can't do a partial transfer of current year subscriptions to a different type of ISA (you end up with a valid combination of ISAs), but that's how the rules were originally written and ISA flexibility finally overcomes this issue. I suspect the reason the rule hasn't been relaxed is because the ability to instruct a partial transfer would mess up HMRC's annual returns of statistical information (see www.gov.uk/guidance/annual-returns-of-statistical-information-subscriptions-for-isa-managers ).
I don't believe it is the case "the rule that you can't subscribe to the same type of ISA in the same tax year only applies if you have earnt anything on it", if the ISA is flexible you can reduce your subscriptions to zero and hence be treated as not having subscribed to the ISA in question; if the ISA is not flexible you cannot. So it is purely a case of whether ISA flexibility applies and knowing how much to flexibly withdraw.
Note that the aim is for there to be a 'Z' in the 'Type of account' box (flexible with no net subscriptions), which then requires that zero is entered in the 'Amount subscribed' boxes and the 'Date of first subscription' box is space filled.
The other scenario in which you can subscribe to a second ISA of the same type in the same tax year is if it is a cash ISA, without flexibility, and you withdraw the current year subscriptions in full and then go and open a new cash ISA, under the "self transfer" loophole, though this can only be done once per tax year - apparently to save HMRC some admin work when people make this mistake.
But we're digressing, as none of this applies to FundingSecure and their ISA.
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pip
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Post by pip on Oct 26, 2019 6:30:34 GMT
All: Fs is not a flexible isa. Can we keep this post on topic please. The post is around whether FS isa’s are still in isa wrappers now in admin, not the mechanics of flexible isas.
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Godanubis
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Post by Godanubis on Oct 26, 2019 11:52:32 GMT
You never Know it might be sorted by time next tax due to be filed for 20-21 . Assume it is still in ISA no need to even mention it this year and if not carry over rules apply.
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littleoldlady
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Post by littleoldlady on Oct 26, 2019 13:44:48 GMT
All: Fs is not a flexible isa. Can we keep this post on topic please. The post is around whether FS isa’s are still in isa wrappers now in admin, not the mechanics of flexible isas. However ISA rules are complicated and IMO worth a thread of their own if a mod has the time and inclination to shuffle things.
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pikestaff
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Post by pikestaff on Oct 29, 2019 16:27:27 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. In the event that ISA status is lost, I think the extent to which losses can be claimed against income tax will, in principle, depend on two things: 1. Did the loans become irrecoverable before or after the status was lost? If they became irrecoverable before the status was lost, no tax loss can be claimed. There is a risk that any recoveries after that point would be taxed, but HMRC might not press the point. 2. What were the loans actually worth on that date? My understanding is that if the owner of an asset ceases to hold it in an ISA, the asset is treated as having been sold by the ISA and reacquired outside of the ISA, at its then value (in this case X pence in the pound, where X may be a small number). So, even if the loans became irrecoverable after that date, any tax loss would have to be calculated by reference to their then value, and not to the amount outstanding. And if recoveries exceeded that value, the surplus would, in principle, be taxable. Which is why, unless HMRC has a fit of generosity, it would probably be wisest to deem the amounts actually recovered by the administrators (before their costs but after other costs of recovery and sale) to the best evidence of value at cessation. On this analysis the only deductible for assets previously held in an ISA would be whatever the administrators take.
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pip
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Post by pip on Oct 29, 2019 21:02:10 GMT
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. In the event that ISA status is lost, I think the extent to which losses can be claimed against income tax will, in principle, depend on two things: 1. Did the loans become irrecoverable before or after the status was lost? If they became irrecoverable before the status was lost, no tax loss can be claimed. There is a risk that any recoveries after that point would be taxed, but HMRC might not press the point. 2. What were the loans actually worth on that date? My understanding is that if the owner of an asset ceases to hold it in an ISA, the asset is treated as having been sold by the ISA and reacquired outside of the ISA, at its then value (in this case X pence in the pound, where X may be a small number). So, even if the loans became irrecoverable after that date, any tax loss would have to be calculated by reference to their then value, and not to the amount outstanding. And if recoveries exceeded that value, the surplus would, in principle, be taxable. Which is why, unless HMRC has a fit of generosity, it would probably be wisest to deem the amounts actually recovered by the administrators (before their costs but after other costs of recovery and sale) to the best evidence of value at cessation. On this analysis the only deductible for assets previously held in an ISA would be whatever the administrators take. Pike thanks for this. My thoughts to your points below: 1) HMRC says the tests for a loan to become unrecoverable in 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 "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....If the platform does not undertake this action, then the lender may still determine that the loan has become irrecoverable.....Under the legislation for income tax relief for irrecoverable peer to peer loans in certain circumstances a loan may be treated as irrecoverable for the purposes of the relief even if there may be a prospect that the lender could recover some of the amount outstanding. This is the case for the following situations: Loans with securityWhen loans are made against security, a loan may be treated as becoming irrecoverable as if the security did not exist. Loans where legal recovery action is takenWhen the borrower has entered legal recovery procedures such as liquidation, administration, receivership or bankruptcy the loan may be treated as becoming irrecoverable as if such action was not available. I think the legislation gives the lender quite a bit of leeway here. The first test is has the platform defaulted the loan, if it was before the platform folded then we are in agreement if held in an ISA then not tax deductible. If the platform didn't then the lender may determine that the loan is irrecoverable. The lender can therefore decide when they take this decision, and quite reasonably this could be after administration, after another/lack of update on the loan or once the recovery on the loan is clear. 2) I am not sure which legislation you are referring to which deals with how the value of assets leaving lapsed ISAs should be treated. In the absence of this I think the HMRC guidance on loans is clear, a loan is either defaulted or not. Page 10 on the above hmrc guidance gives some tangential guidance in this area, but note it speaks about when the loans are sold between two persons, neither apply in this case. With no market price and no impairment required by the primary method of the platform defaulting a loan, then i think no issues here. The good news is that the onus on how to treat these loans is with the lender, it is us that need to prepare the tax return not hmrc. I will await further guidance from hmrc.
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Post by sirkillalot on Nov 8, 2019 14:53:11 GMT
Has anyone managed to transfer their FS ISA cash out to another provider since FS went into Administration? I have a small amount of cash sitting in an ISA (just got a bit more with Wake Green Rd paying out) so would like to transfer it to another provider.
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Post by FSAG Forum on Nov 8, 2019 23:00:29 GMT
Has anyone managed to transfer their FS ISA cash out to another provider since FS went into Administration? I have a small amount of cash sitting in an ISA (just got a bit more with Wake Green Rd paying out) so would like to transfer it to another provider. I'm afraid we're not even able to withdraw cash at the moment.
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Post by brummiefred on Dec 13, 2019 11:09:56 GMT
"A manager who has ceased to qualify must inform HMRC and each investor within 30 calendar days of the date he ceased to qualify."
As the 30 days have passed, do we have an update on the current status of FS ISA's, or have I missed it somewhere?
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pip
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Post by pip on Dec 13, 2019 15:34:21 GMT
"A manager who has ceased to qualify must inform HMRC and each investor within 30 calendar days of the date he ceased to qualify." As the 30 days have passed, do we have an update on the current status of FS ISA's, or have I missed it somewhere? I have no further updates I am afraid. I will post if I have any more info on this topic.
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