Launch of IFISA

Perfect for overseas investors, thank you.

Actually ignore me, I was getting confused with HMRC guidlines 6.14a quoted above which I had misread as an FS T&C as that section is also covered by 10.5 which is where I had read it so assumed the previous reference was from FS

This point has been made elsewhere I believe. You are correct that provided the loan is sold (into an ISA or to someone else) then there is no income tax liability on the seller. I've made use of this feature of FS for quite some time, selling loans at a suitable discount to appeal to non-taxpayers.

However, I don't believe there is much chance of a loan defaulting during the time window in which it could be sold on the secondary market (I guess that would take the borrower entering administration/bankruptcy independently of the FS loan), so holding outside of the ISA initially may be of little advantage. I don't intend to adopt a strategy that involves selling into my ISA.

Because lots of loans are on the SM at unrealistic prices or for sale in only small amounts or none at all.  Some as much as 4% premium, clearly massively overpriced and not a market price.  We would only ever know the market price if sales were published.  
Are they breaking ISA rules anyway? 

Don't we need to differentiate between a 'transfer' and a 'sale/purchase'?  With a transfer, something is moved between two accounts with no possibility of interference from an external source.  So FS are saying that you can transfer cash into your ISA as a subscription, but you can't transfer loan parts.  That sounds fine to me.

In order to get loan parts into an ISA, they have to be bought on the open market (the FS SM) at the market price.  ISTM that it ought to be OK if you bought parts on the SM from your own non-ISA account as long as there's at least one other person offering parts of that loan for sale at the same price.  (Wouldn't that preclude someone from offering parts to their ISA at a silly discount or premium?)  If you could have bought the parts from someone else at the same price, then I don't see how HMRC would be losing out if you bought the parts from your non-ISA account instead of from that other investor. 

I accept that there are rules, and some are more restrictive than others, but I have difficulty understanding why HMRC would bother to pursue anyone for a breach of a technical rule if there's no harm done and no advantage gained.  What would be the point?

But perhaps I'm being wildly optimistic. 

In my view, having looked through the ISA guidance notes and Legislation, they are not breaking any rules unless the sales are deemed to be at an off market price. As Liz points out, in an illiquid market like that of FS, where you can only see one side of the market, buying a part of the same loan from someone else and then selling your own at a similar price can be quite challenging. I have several of my loan parts up for sale, having bought some within my ISA at what I considered to be a very good price (already at a discount and lots of sellers with similar offers. I'm already undercutting them by some margin yet may need to drop to an even larger discount in order to get my parts to sell. So the spread, which I had no way of discerning from the market, is much larger than I thought.

We've had problems with bots on other SMs. Perhaps we need a bot on this one


If you can see one side of the market, you probably have enough information to prevent yourself falling foul of selling at an off-market price. Every offer listed is a real offer. People who list at crazy premiums are not mucking around - if someone bites, they will give up their loan part for that price. In a market, there will be a number of offers and a number of bids. The market price will lie somewhere between the best offer and best bid. We cannot see the bids as none are entered into the market, but it is reasonable to assume for pretty much any loan that someone would buy it given a large enough discount. Sold prices are unlikely to be all that reliable either, since the price could conceivably jump around quite a bit between one sale and the next, especially for those loans that are not traded often.

If there was an offer that had been published to the market for some time and had not sold and a sale is made at or immediately below that best offer price, then it would almost certainly lie between the best offer and next best bid, and would therefore constitute a reasonable market price.

If there are no offers, then that's where the situation could be risky, but even in that situation FS has set upper and lower bounds for market price, so it could be argued that off-market prices lie outside of those bounds. Personally, I'd not take that risk. Those selling to themselves at a 4% discount when the best offer (and likely recent sales) lie at a much higher price are asking for trouble IMHO.

The only issue as far as FS are concerned based on their discussions with FCA, HMRC etc is repeat transfer of loan parts between IFISA and standard account which would constitute trading & would lead to the offending accounts losing their tax wrapper status. Not entirely convinced myself (unfortunately regs are implicit rather than explicit when it comes to p2p investments) but then not that convinced that the ISA wrapper actually provides great benefits on FS anyway, given that the SM structure limits tax liabilities already, so currently unlikely to use FS ISA.  Reservations about platform have already reduced my investments considerably and the IFISA wont reverse this, especially with the lack of flexibility.