james
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Post by james on Apr 6, 2016 3:30:14 GMT
Here's what the new rules say about bed and ISA transactions for IF: " 9A.8 Peer-to-peer loans held outside of the ISA wrapper cannot be sold, and repurchased inside an innovative finance ISA except where the loans are sold and are made available for purchase (using cash held by the ISA manager), at the same price, by any lender in the open market. That is, the loans must be available for purchase by more than one prospective purchaser.
It will not therefore usually be open to a platform to purchase a lender’s portfolio of loans and for the proceeds to be used to reacquire the same loans inside the ISA wrapper. Any purchase would need to be of loans made openly available to any prospective lender." This means that such transfers will need to be made on a fastest fingers basis via any secondary market. Good luck with being fast enough to get it done before someone else buys! This will be less risky where a platform allows splitting of a loan into smaller pieces and consolidation after purchase, so you can sell and buy back in small enough chunks for it to be non-painful. For platforms like Zopa and RateSetter it is in essence impossible to carry out such a transaction pair because their secondary markets provide no way to sell or buy individual loan parts. Their secondary market pricing policies also make such exercises potentially expensive. For platforms like Ablrate, MoneyThing and SavingStream such transactions are straightforward and cost-free, though do be alert for the possibility of automated buy instructions that a platform may provide, which could automatically buy anything you put up for sale before you get a chance to buy it yourself. Platforms that do provide such tools can facilitate ISA transfers by time windows where automated transactions will not be carried out and where all other automated buying and selling is also prohibited. It was interesting to note the absence of any explicit price restrictions. This may mean that on platforms with pricing flexibility you can sell £1k of loan for a penny to anyone who wants to buy it, including your ISA, effectively circumventing the subscription limit, provided you take the risk that your ISA will not be the buyer. A series of transactions selling at £999 with the ISA as the intended buyer and then selling from the ISA at £1k with the non-ISA account as the intended buyer could achieve the same effect with less loss risk. |
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james
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Post by james on Apr 6, 2016 3:42:16 GMT
Cash in an IF ISA will have some FSCS protection. The new rules require that the cash be held in a deposit or share account and both of those have FSCS protection at either £75k or £50k.
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ablender
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Post by ablender on Apr 6, 2016 4:14:03 GMT
Here's what the new rules say about bed and ISA transactions for IF: " 9A.8 Peer-to-peer loans held outside of the ISA wrapper cannot be sold, and repurchased inside an innovative finance ISA except where the loans are sold and are made available for purchase (using cash held by the ISA manager), at the same price, by any lender in the open market. That is, the loans must be available for purchase by more than one prospective purchaser.
....... It was interesting to note the absence of any explicit price restrictions. This may mean that on platforms with pricing flexibility you can sell £1k of loan for a penny to anyone who wants to buy it, including your ISA, effectively circumventing the subscription limit, provided you take the risk that your ISA will not be the buyer. A series of transactions selling at £999 with the ISA as the intended buyer and then selling from the ISA at £1k with the non-ISA account as the intended buyer could achieve the same effect with less loss risk.Doesn't "at the same price" set an explicit price restriction?
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littleoldlady
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Post by littleoldlady on Apr 6, 2016 7:00:18 GMT
Many of us will want to transfer past year's cash ISAa paying very little into IFISAs and transfer existing loan holdings into this money. ISTM that platforms with a SM like SS, MT, FS AB etc could facilitate this with a bit of initiative. When we B&B a loan part it does not matter if we repurchase the same loan part, only that it is part of the same loan. So a platform could advise a starting time for a particular loan and we all put our loan parts up for sale at that time and try to repurchase. This should mean that most of the loan is repurchased by sellers rather than bought by new buyers. The platform could advise only existing holders of the start time.
Can anyone see any snags with this idea? Also refer to james' post 3 posts earlier.
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SteveT
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Post by SteveT on Apr 6, 2016 7:12:49 GMT
Many of us will want to transfer past year's cash ISAa paying very little into IFISAs and transfer existing loan holdings into this money. ISTM that platforms with a SM like SS, MT, FS AB etc could facilitate this with a bit of initiative. When we B&B a loan part it does not matter if we repurchase the same loan part, only that it is part of the same loan. So a platform could advise a starting time for a particular loan and we all put our loan parts up for sale at that time and try to repurchase. This should mean that most of the loan is repurchased by sellers rather than bought by new buyers. To make it better the platform could advise only existing holders of the start time. Can anyone see any snags with this idea? Also refer to james' post 3 post earlier. Human nature, perhaps? What's to stop another lender taking advantage and hoovering up your pre-loved parts as they hit the market at the pre-arranged time?!
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littleoldlady
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Post by littleoldlady on Apr 6, 2016 7:15:14 GMT
Doesn't "at the same price" set an explicit price restriction? No. The price can be anything (but it must be the same for all buyers).
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littleoldlady
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Post by littleoldlady on Apr 6, 2016 7:17:51 GMT
Many of us will want to transfer past year's cash ISAa paying very little into IFISAs and transfer existing loan holdings into this money. ISTM that platforms with a SM like SS, MT, FS AB etc could facilitate this with a bit of initiative. When we B&B a loan part it does not matter if we repurchase the same loan part, only that it is part of the same loan. So a platform could advise a starting time for a particular loan and we all put our loan parts up for sale at that time and try to repurchase. This should mean that most of the loan is repurchased by sellers rather than bought by new buyers. To make it better the platform could advise only existing holders of the start time. Can anyone see any snags with this idea? Also refer to james' post 3 post earlier. Human nature, perhaps? What's to stop another lender taking advantage and hoovering up your pre-loved parts as they hit the market at the pre-arranged time?! Nothing, except that they wont know the start time and with the exception of SS they would need sufficient cash in their account and hopefully they would be vastly outnumbered by repurchasers. Sellers would only put up for sale loan parts where they were prepared to take the risk in return for getting a 20-40-45% tax advantage. Providing there are other purchasing opportunities it would not be a disaster to be unable to repurchase the same loan.
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ablender
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Post by ablender on Apr 6, 2016 7:19:38 GMT
Do you think that we have enough questions to put forward to the platforms or is there anyone who would like to propose others?
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SteveT
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Post by SteveT on Apr 6, 2016 7:21:54 GMT
They would, under your suggestion, if they already held some of the loan, and at least one lender still appears able to hoover up pretty much anything on SS at will so presumably others could too.
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littleoldlady
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Post by littleoldlady on Apr 6, 2016 7:24:20 GMT
They would, under your suggestion, if they already held some of the loan, and at least one lender still appears able to hoover up pretty much anything on SS at will so presumably others could too. Yes this is yet another disadvantage of the much loved (by others, but not me) INPL feature of SS.
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ablender
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Post by ablender on Apr 6, 2016 7:25:46 GMT
They would, under your suggestion, if they already held some of the loan, and at least one lender still appears able to hoover up pretty much anything on SS at will so presumably others could too. I think that this is going to be as stable a mechanism as passing a person on a stretcher from one small boat to another with people standing up.
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ablender
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Post by ablender on Apr 6, 2016 7:27:52 GMT
They would, under your suggestion, if they already held some of the loan, and at least one lender still appears able to hoover up pretty much anything on SS at will so presumably others could too. Yes this is yet another disadvantage of the much loved (by others, but not me) INPL feature of SS. I do not think that you need INPL in this case. If I am going to invest my ISA money in SS, I already have it. It means that I have a "surplus" of money that need to be invested. Please go slow on the word "surplus". It does not mean that it is there for the taking. 
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pikestaff
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Post by pikestaff on Apr 6, 2016 8:04:43 GMT
"...It was interesting to note the absence of any explicit price restrictions. This may mean that on platforms with pricing flexibility you can sell £1k of loan for a penny to anyone who wants to buy it, including your ISA, effectively circumventing the subscription limit, provided you take the risk that your ISA will not be the buyer. A series of transactions selling at £999 with the ISA as the intended buyer and then selling from the ISA at £1k with the non-ISA account as the intended buyer could achieve the same effect with less loss risk." The guidance notes are not the regulations. There may be no explicit restrictions in the guidance notes (probably because HMRC does not understand the difference between secondary markets on the SM and the stock market), but it is still necessary to comply with the regulations. These require purchases and sales by the ISA to be at a fair market price: - For purchases by the ISA (reg 6(1ZB)): "...the amount of the payments must be ... such as might reasonably be expected to be made under such an agreement entered into in the open market."
- For sales by the ISA (reg 6(2A)): "...at a price for which the investment might reasonably be expected to be sold or otherwise transacted, as the case may be, in the open market."
Any platform that permits or connives at "fastest finger first" sales to an ISA at an undervalue, or sales from an ISA at an overvalue (such as selling bad debts to yourself at par with a view to getting tax relief outside the ISA) will therefore be in breach of the regulations and putting itself and lenders at risk.There is also the general condition in reg 6(3)(b) that "investments, or rights in respect of investments, may not at any time ... be purchased from (i) an account investor, or (ii) the spouse or civil partner of an account investor, so as to become account investments under an account to which the account investor subscribes or has subscribed." On the face of it, this conditon would preclude any sales by lenders to their own ISAs. However, on many (but not all) platforms, "sales" take the legal form of a redemption and new issue. This fig leaf may well be enough, where it is available. But transactions will still have to be at a fair market price.
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ablender
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Post by ablender on Apr 6, 2016 10:08:35 GMT
Cash in an IF ISA will have some FSCS protection. The new rules require that the cash be held in a deposit or share account and both of those have FSCS protection at either £75k or £50k. I do not understand that any money invested will have any FSCS protection.
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james
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Post by james on Apr 6, 2016 11:29:04 GMT
Cash in an IF ISA will have some FSCS protection. The new rules require that the cash be held in a deposit or share account and both of those have FSCS protection at either £75k or £50k. I do not understand that any money invested will have any FSCS protection. Money invested will not have FSCS protection. The amount of any FSCS protection for uninvested cash will depend on where the cash is held. In the fullness of time I suppose we'll see statements from platforms that distinguish between uninvested cash and investments.
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