blender
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Post by blender on Mar 25, 2014 21:01:06 GMT
I see that we will be able to place an FC portfolio into a £15k ISA account, according to the 2014 budget. This is really good news, but I have three questions.
Firstly when will this start? The assumption is that it will be from 1 July 2014.
Secondly will we be able to transfer in an existing portfolio or part of a portfolio? If not, and we have to set up an ISA account with FC and then buy loan parts into it, I cannot think of a more disastrous plan. Everyone will hold off buying until the ISA accounts are available, and there will be an attempted sell-off to re-purchase like we have never seen (the tax benefit being large for the majority). So we must be able to transfer in a portfolio, which begs the question how will that be done if our portfolio is larger than £15k (or whatever we decide to put in). Presumably the included loan parts would be specified in some way.
Thirdly, once the ISA is set up how do we replenish the principal value as repayments are made? And can we trade loan parts which are in the ISA. (Please do not say we have to use Autobid for the ISA)
FC will need to give some answers to these and other questions PDQ. I wonder if they actually know the answers yet.
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Post by GSV3MIaC on Mar 25, 2014 21:21:58 GMT
Short answer seems to be 'nobody knows (yet)' and you've only just scratched the surface of the issues .. how about transfers in/out from/to other ISA vehicles (cash or stocks), for a start. I doubt anything will be ready to fly by July, but I live in hope. The repayments is probably going to require you to have an FC account inside a wrapper where repayment money coming in stays inside the boundary and can be messed with tax free .. see how HL does it for stocks and shares for instance - you wind up with accounts for SIPP, ISA, and 'general funds' (and moving between them is hedged around with problems).
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j
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Post by j on Mar 25, 2014 21:25:49 GMT
A really murky area that will take time & involve a lot of confusion to finally sort out. Typical government politics, throwing quite a good idea about but, with very little detail or explanation to go with it!  |
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Post by transo on Mar 25, 2014 22:35:09 GMT
Secondly will we be able to transfer in an existing portfolio or part of a portfolio? If not, and we have to set up an ISA account with FC and then buy loan parts into it, I cannot think of a more disastrous plan. We almost certainly won't be able to transfer an existing portfolio into an ISA. Under the current ISA rules subscriptions must be in cash, with the (very limited) exception of some shares and depository interests from Save as You Earn (SAYE) and Share Incentive Plans (SIPs, NB: not SIPPS). For shares that you hold outside an ISA the only way to get them into the ISA is to sell them [with the attendant CGT liability], subscribe the sale proceeds to the ISA, and then re-buy them in the ISA [with the attendant stamp duty liability]. Some providers will organise this for you (so called "bed & ISAing"), but there are rules on this - in particular that you can't buy the investment from yourself or your spouse and that they must be bought at the open market price. I've not read the budget documents yet, but I've not seen any suggestion of any changes to these rules.
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Post by oldnick on Mar 25, 2014 22:37:27 GMT
A really murky area that will take time & involve a lot of confusion to finally sort out. Typical government politics, throwing quite a good idea about but, with very little detail or explanation to go with it! This is efficient government at work - let the public chew it over, and take notes. Saves paying consultants, and its quicker. George Osbourne may be lurking on the forum this very minute!
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oldgrumpy
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Post by oldgrumpy on Mar 25, 2014 23:13:50 GMT
I think the whole concept of ISAs in P2p/P2B investments is going to be very complex to launch. It'll probably take the government at least a year to organise, get wrong, and publish the rules, then the platforms will need to build the facility into their offerings, so I don't anticipate anything until 2015/2016 at the earliest, possibly even 2016/2017.
Edit: Changed dates!! Didn't write what I meant.
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Post by bracknellboy on Mar 25, 2014 23:32:35 GMT
I think the whole concept of ISAs in P2p/P2B investments is going to be very complex to launch. It'll probably take the government at least a year to organise, get wrong, and publish the rules, then the platforms will need to build the facility into their offerings, so I don't anticipate anything until 2014/2015 at the earliest, possibly even 2015/2016. Agreed. And it may not /possibly/probably won't be the p2x platforms which offer the ISA wrappers. The declaration of intent is welcome, the premature declarations of probable implementation are ... premature. And all discussions of the implications of a how implementation will work is intellectually interesting, but is currently a hypothesis built on top of a possible theoretical future model that may or may not be provided by certain types of provider. But none the less interesting for that.
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Post by bracknellboy on Mar 25, 2014 23:46:49 GMT
A really murky area that will take time & involve a lot of confusion to finally sort out. Typical government politics, throwing quite a good idea about but, with very little detail or explanation to go with it! This is efficient government at work - let the public chew it over, and take notes. Saves paying consultants, and its quicker. And are likely to come up with more real world applicable answers than the consultants. Maybe.
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blender
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Post by blender on Mar 26, 2014 8:41:21 GMT
Thank you for the discussion of the OP. It does seem that the implementation is fraught with difficulty and we are unlikely to see it in 2014/5, which would explain the very low key FC announcement of really good news. They want the benefit of it for the lenders, for promotional purposes, but an awful lot of time and effort will be required to set up and they need that work, and the effect on current non-ISA lending at a time of low availability of new funds, like a hole in the head. Maybe resolving this ISA/taxation issue is overhanging the serious advertising for funds which FC need to do.
Given the problem of the dynamic nature of the capital, and presumably the need to top up as repayments are made (and losses incurred), I would look for FC providing an FC specific ISA through the platform. As soon as they do this I will want to sell £15k of loans and repurchase within that ISA. Perhaps a few other lenders will also - because even as a standard rate tax payer the tax benefits are large. Maybe a few other lenders will also wish to sell and repurchase. That should be fun.
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Post by GSV3MIaC on Mar 26, 2014 10:06:33 GMT
Since there's no CGT on P2P loan parts (afaik) then there's no real reason to prohibit direct transfers in, or even you selling them to yourself.
That doesn't mean they won't of course, the one criticism you can't level at the tax system is that it is rational or reasonable.
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Post by aloanatlast on Mar 26, 2014 15:03:37 GMT
I believe there is CGT, though most lenders won't pay any unless they also get lucky on the stock market or sell a second home or something.
But the other issue would be to value the transferred-in stock, to apply the £15K annual limit. You don't get to value your loan parts at par if they're worth more. But FC would probably rather not address the question of market values of portfolios, because this makes explicit the fact that manipulating interest rates costs lenders money.
Fact is though, there is no "open market value" analogous to that of shares or works of art, because we haven't really got an open market.
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