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Post by andrewcfa on Mar 21, 2017 16:20:55 GMT
Whilst Crowd for Angels IF-ISA is not on the vote, people can open an IF-ISA with us already. Our secured crowd bonds currently pay up to 9% p.a., usually with interest paid monthly. The are no management or on-going fee's for Investors and as an added incentive, we are offering 2% AER on cash balances up until June 2015. You can find out more here: crowdforangels.com/open-an-isa Ok, Im puzzled. The interest earnt on the cash balance held within a tax free IFISA wrapper isnt tax exempt. Could you explain why? Hi ilmoro, thank you for your reply. Simply put, because the user hasn't invested in a product that can be placed in the IF-ISA, such as a crowd bond. Cash in itself is not eligible for tax free interest within the IF-ISA. We are paying a cash incentive on the outstanding cash balance and whilst the cash is inside the IF-ISA, it is not eligible for the tax free status.
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ilmoro
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Post by ilmoro on Mar 21, 2017 16:50:19 GMT
Ok, Im puzzled. The interest earnt on the cash balance held within a tax free IFISA wrapper isnt tax exempt. Could you explain why? Hi ilmoro, thank you for your reply. Simply put, because the user hasn't invested in a product that can be placed in the IF-ISA, such as a crowd bond. Cash in itself is not eligible for tax free interest within the IF-ISA. We are paying a cash incentive on the outstanding cash balance and whilst the cash is inside the IF-ISA, it is not eligible for the tax free status. Thanks for the reply Now I am more confused. Abundance currently pays interest on cash in its IFISA and states that it is a tax free return (no requirement to invest in a debenture). I also note that Nutmeg pays interest on uninvested cash in its S&S ISA which is tax free. I can see no reference in the HMRC ISA guidance preventing payment of interest on cash held within an IFISA and cash counts as a qualifying investment. Two other approaches ive seen from platforms are: If it is an incentive to invest offered by the platform, its cashback and therefore not taxable. Altenatively it could count as a discount of the crowd bond subsequently purchased and therefore be a capital gain on redemption (but that wouldnt be taxable either) I should note that Im not a financial professional or tax expert so merely based on observation, reading.
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Post by Deleted on Mar 21, 2017 17:24:28 GMT
Hi ilmoro, thank you for your reply. Simply put, because the user hasn't invested in a product that can be placed in the IF-ISA, such as a crowd bond. Cash in itself is not eligible for tax free interest within the IF-ISA. We are paying a cash incentive on the outstanding cash balance and whilst the cash is inside the IF-ISA, it is not eligible for the tax free status. Thanks for the reply Now I am more confused. Abundance currently pays interest on cash in its IFISA and states that it is a tax free return (no requirement to invest in a debenture). I also note that Nutmeg pays interest on uninvested cash in its S&S ISA which is tax free. I can see no reference in the HMRC ISA guidance preventing payment of interest on cash held within an IFISA and cash counts as a qualifying investment. Two other approaches ive seen from platforms are: If it is an incentive to invest offered by the platform, its cashback and therefore not taxable. Altenatively it could count as a discount of the crowd bond subsequently purchased and therefore be a capital gain on redemption (but that wouldnt be taxable either) I should note that Im not a financial professional or tax expert so merely based on observation, reading. Landbay pay the equivalent of interest payments on uninvested cash held in queue but this doesn't apply to IFISA cash as they claim they aren't allowed. I can't recall the precise reasoning! edit: p2pindependentforum.com/post/175159/thread
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mason
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Post by mason on Mar 21, 2017 18:17:20 GMT
Hi ilmoro, thank you for your reply. Simply put, because the user hasn't invested in a product that can be placed in the IF-ISA, such as a crowd bond. Cash in itself is not eligible for tax free interest within the IF-ISA. We are paying a cash incentive on the outstanding cash balance and whilst the cash is inside the IF-ISA, it is not eligible for the tax free status. I think this interpretation of the ISA regulations is wrong. Ever since all ISAs became "NISAs", cash and cash-like investment products have been a qualifying investment for all types of ISA. That's why interest on cash held in a S&S ISA is no longer taxable. I'm happy to be corrected though. Please could you indicate where in the ISA guidance notes it states that IF ISAs are treated differently than other types? Edit: The guidance notes seem to confirm my view: Paragraph 9A.10 just states that cash must be held in sterling and held in a deposit account or an account with a deposit taker, and that this money is recorded and accounted for separately. Perhaps some "creative" use of client money is preventing you from meeting these requirements?
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ilmoro
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Post by ilmoro on Mar 21, 2017 18:32:21 GMT
Thanks for the reply Now I am more confused. Abundance currently pays interest on cash in its IFISA and states that it is a tax free return (no requirement to invest in a debenture). I also note that Nutmeg pays interest on uninvested cash in its S&S ISA which is tax free. I can see no reference in the HMRC ISA guidance preventing payment of interest on cash held within an IFISA and cash counts as a qualifying investment. Two other approaches ive seen from platforms are: If it is an incentive to invest offered by the platform, its cashback and therefore not taxable. Altenatively it could count as a discount of the crowd bond subsequently purchased and therefore be a capital gain on redemption (but that wouldnt be taxable either) I should note that Im not a financial professional or tax expert so merely based on observation, reading. Landbay pay the equivalent of interest payments on uninvested cash held in queue but this doesn't apply to IFISA cash as they claim they aren't allowed. I can't recall the precise reasoning! edit: p2pindependentforum.com/post/175159/threadThanks Landbay situation did come to mind, just says for tax reasons but like mason I cant see anything in the guidance to support the view.
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mason
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Post by mason on Mar 21, 2017 19:33:08 GMT
Landbay pay the equivalent of interest payments on uninvested cash held in queue but this doesn't apply to IFISA cash as they claim they aren't allowed. I can't recall the precise reasoning! edit: p2pindependentforum.com/post/175159/threadThanks Landbay situation did come to mind, just says for tax reasons but like mason I cant see anything in the guidance to support the view. I could understand why a cash payment that isn't interest could not be paid into an ISA. But it just seems like a poorly structured product if the return being paid on deposited cash cannot be classed as interest. It also makes me slightly nervous of what risk there may be in holding uninvested cash on account if it isn't being held in either P2P investments or in a deposit account.
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pikestaff
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Post by pikestaff on Mar 22, 2017 8:17:22 GMT
I think any return on investments within the ISA will be tax free including the interest actually earned on that cash. However, client cash has to be held in a client money account on which the true interest return at present will probably be zero (or as close to zero as makes no difference).
Where platforms pay "interest" on uninvested cash it is almost certainly being paid from the platform's own resources. If I understand it correctly, Landbay have been told that such payments are not allowed on ISA funds, full stop. That does not surprise me at all. It looks like crowdforangels have had similar advice.
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Post by andrewcfa on Mar 22, 2017 9:00:53 GMT
Yes we have had similar advice, but I can see it is a point that needs further clarity. Like you ilmoro, I am not a tax expert but I will ask one of the legal team for clarification.
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pikestaff
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Post by pikestaff on Mar 22, 2017 13:20:23 GMT
Assuming that "interest" on uninvested cash is being paid from a platform's own resources, it is really a form of cashback.
A platform cannot pay a cashback into an investor's ISA because this would be a subscription by someone other than the investor. Only the investor is allowed to subscribe.
Whether a cashback (which in this case would IMO be taxable as income) could be paid outside the ISA is less clear. I can't immediately spot anything to say no, but I'm not an expert in this area.
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treeman
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Post by treeman on Mar 27, 2017 10:34:27 GMT
Does anyone have a any recommendations for a suitable Cash ISA to use as a holding account for this years allowance pending transfer to a suitable IFISA(s) (hopefully) later this year ?
Coventry BS seems suitable ? Flexible, no withdrawal restrictions, appears to allow partial transfers and slightly more than naff-all interest in the meantime.
Wondering if my searches have missed any better ?
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mason
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Post by mason on Mar 27, 2017 10:44:36 GMT
Assuming that "interest" on uninvested cash is being paid from a platform's own resources, it is really a form of cashback. A platform cannot pay a cashback into an investor's ISA because this would be a subscription by someone other than the investor. Only the investor is allowed to subscribe. Whether a cashback (which in this case would IMO be taxable as income) could be paid outside the ISA is less clear. I can't immediately spot anything to say no, but I'm not an expert in this area. It's interesting therefore that Abundance is able to pay 2% interest on uninvested cash within an IF ISA. I'm not sure how they are doing that, but it seems it is possible. It may be that they are doing something similar to AC's QAA. The nearest equivalent from the world of cash ISAs would be the HSBC Save Together scheme, where people could open a Loyalty Cash ISA and receive a £25 per month top up from HSBC each month they paid in £25 of their own money. This was called interest, and perhaps a clearing bank has the power to do this, where an IF ISA manager does not.
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ilmoro
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Post by ilmoro on Mar 27, 2017 10:47:23 GMT
Assuming that "interest" on uninvested cash is being paid from a platform's own resources, it is really a form of cashback. A platform cannot pay a cashback into an investor's ISA because this would be a subscription by someone other than the investor. Only the investor is allowed to subscribe. Whether a cashback (which in this case would IMO be taxable as income) could be paid outside the ISA is less clear. I can't immediately spot anything to say no, but I'm not an expert in this area. It's interesting therefore that Abundance is able to pay 2% interest on uninvested cash within an IF ISA. I'm not sure how they are doing that, but it seems it is possible. It may be that they are doing something similar to AC's QAA. The nearest equivalent from the world of cash ISAs would be the HSBC Save Together scheme, where people could open a Loyalty Cash ISA and receive a £25 per month top up from HSBC each month they paid in £25 of their own money. This was called interest, and perhaps a clearing bank has the power to do this, where an IF ISA manager does not. Abundance has cash ISA permision whereas CFA only has IF ISA permission. No idea if this makes any difference.
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mason
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Post by mason on Mar 27, 2017 10:48:24 GMT
Does anyone have a any recommendations for a suitable Cash ISA to use as a holding account for this years allowance pending transfer to a suitable IFISA(s) (hopefully) later this year ? I used TSB, since I already have a couple of current accounts there, making the flexible withdrawals/replacements very easy.
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ilmoro
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Post by ilmoro on Mar 27, 2017 11:23:49 GMT
www.gov.uk/guidance/individual-savings-accounts-for-managers-isas-managing-stocks-and-shares-isasSection covering eligible investments in S&S ISA, cash Investors are not liable to UK Income Tax on interest paid on cash on deposit held in a Stocks and Shares ISA.
Rules appear to have changed July 2014 and the relevant section referring to this has been removed from full guidance document. Cant find anything similar for IFISA but then if the rule had previously been abolished then why state it if it never applied in IFISA case. Difficult to see why S&S and IFISA would be treated differently.
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mason
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Post by mason on Mar 27, 2017 12:46:02 GMT
www.gov.uk/guidance/individual-savings-accounts-for-managers-isas-managing-stocks-and-shares-isasSection covering eligible investments in S&S ISA, cash Investors are not liable to UK Income Tax on interest paid on cash on deposit held in a Stocks and Shares ISA.
Rules appear to have changed July 2014 and the relevant section referring to this has been removed from full guidance document. Cant find anything similar for IFISA but then if the rule had previously been abolished then why state it if it never applied in IFISA case. Difficult to see why S&S and IFISA would be treated differently. For an IF ISA, cash is a qualifying investment (paragraph 9A.5 of the ISA guidance notes) and may be held in a deposit account (paragraph 9A.10), so there is no issue around cash deposits, unlike their used to be in S&S ISAs when cash was not a qualifying investment.
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