ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Apr 23, 2017 14:59:05 GMT
As noted by SteveT in an earlier post, this text is taken from HMRC's guidance notes for iSA managers www.gov.uk/government/publications/guidance-notes-for-isa-managers. The underlying law is to be found in ISA Regulation 6: 6(1) All transactions by way of purchase ... shall be made ... (c) in the case of all other account investments, at the price for which those investments might reasonably be expected to be purchased in the open market.
6(3) Investments, or rights in respect of investments, may not at any time... (b) be purchased from— (i) an account investor, or (ii) the spouse of an account investor ...It's crystal clear that direct sales and purchases are not permitted. HMRC tolerates bed and ISA for shares because there is a genuine market price and there are two separate transactions with the market. Neither is likely to be the case for p2p secondary markets at their current state of development. If FS don't have coding to prohibit this they are asking for trouble. Ha. We seem to be going round in circles here. Some dont think it is permitted, others, including FS based on advice received, think it is. Everyone is quoting the same bits of guidance/regs in the hope they can determine explicitly what HMRC are trying to say in an implicit way. Only solution is direct specific query to HMRC with specific examples.
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Liz
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Post by Liz on Apr 23, 2017 15:01:01 GMT
FS are an intermediary between us and HMRC, if members fall foul of the rules, it isn't their fault.
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Apr 23, 2017 15:03:37 GMT
It would be useful to maintain some level of distinction between a number of different behaviours being discussed here that are of increasing levels of dubiousness. They seem to be, in increasing likelihood of being a problem: 1) Selecting a loan part to buy within your ISA that you have listed for sale in your non-ISA account, from a number of equivalent offers, either deliberately or inadvertently. 2) Buying a loan part within your ISA from your non-ISA account that was otherwise unavailable in the market. 3) Buying a loan part within your ISA at a significant discount so as to boost the monetary value of your ISA account. 4) Repeatedly trading loan parts between your ISA and non-ISA accounts at different prices so as to boost the monetary value of your ISA even more significantly. 4) Is absolutely not permitted as it constitutes trading and would result in the ISA wrapper being removed. Had that direct from FS
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r00lish67
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Post by r00lish67 on Apr 23, 2017 15:03:38 GMT
Good clarification, @mason . Also, if I were HMRC, I'd be a bit more miffed about people buying parts into their ISA (either their own or others) already very full of accrued interest with perhaps only just over 30 days left to run, and denying them their 'due' income tax rather than people simply recycling into ISA's. Not that I'm aware of anything that suggests that that behaviour is against any rules.
The issue FS have is that their secondary market was always quite controversial and different in the way it handles tax (although apparently absolutely correct in the eyes of HMRC), and have layered on a new relatively intricate product on top of that, leaving us with quite a few scenarios that are very new, and some that are possibly unique only to FS!
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mason
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Post by mason on Apr 23, 2017 15:06:00 GMT
FS are an intermediary between us and HMRC, if members fall foul of the rules, it isn't their fault. Not really. HMRC will have a very direct relationship with anyone who they take an interest in. If someone does fall foul of the rules, then what will happen is HMRC will take action against the individual (remove investments/subscriptions or void ISA), then the individual may decide to pursue a complaint against the platform, escalating to the FOS if necessary, for compensation, which they may or may not be awarded.
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dzo
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Post by dzo on Apr 23, 2017 15:07:43 GMT
I think basic common sense says that HMRC are unlikely to tolerate it. Otherwise it would be possible set up a platform for the sole purpose of abusing the loophole - imagine FS but with bids as well as offers and no limit on discounts. If FS are liable, as Liz says, maybe we should all be making hay while the sun shines, but I wouldn't want to take the risk. |
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mason
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Post by mason on Apr 23, 2017 15:18:11 GMT
Good clarification, @mason . Also, if I were HMRC, I'd be a bit more miffed about people buying parts into their ISA (either their own or others) already very full of accrued interest with perhaps only just over 30 days left to run, and denying them their 'due' income tax rather than people simply recycling into ISA's. Not that I'm aware of anything that suggests that that behaviour is against any rules. The issue FS have is that their secondary market was always quite controversial and different in the way it handles tax (although apparently absolutely correct in the eyes of HMRC), and have layered on a new relatively intricate product on top of that, leaving us with quite a few scenarios that are very new, and some that are possibly unique only to FS! There's hardly any need for people to transfer the soon-to-expire loan parts to their ISA. It's never been particularly difficult to pass on loan parts with 30-60 days left to run in my experience. A small discount is needed, but much less than 20% of the interest. That was when there were relatively few accounts owned by people who would not pay tax on their interest. I can only imagine the situation will be even better now anyone can operate a tax free account. Either way HMRC is deprived of the same amount of tax revenue.
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Post by dan1 on Apr 23, 2017 16:08:24 GMT
I think basic common sense says that HMRC are unlikely to tolerate it. Otherwise it would be possible set up a platform for the sole purpose of abusing the loophole - imagine FS but with bids as well as offers and no limit on discounts. If FS are liable, as Liz says, maybe we should all be making hay while the sun shines, but I wouldn't want to take the risk. ABLrate recently achieved full FCA authorisation and currently operate a more flexible bid/offer system. Be interesting if they decide to launch an IF-ISA. Tagging ablrate should they not be aware of this thread.
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fasty
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Post by fasty on Apr 23, 2017 16:15:36 GMT
How long did it take folks to get their FS ISA account approved? I applied on day one but not a sausage from them yet.
The main account appears usable but I have no inclination to use it...
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mason
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Post by mason on Apr 23, 2017 16:18:22 GMT
How long did it take folks to get their FS ISA account approved? I applied on day one but not a sausage from them yet. The main account appears usable but I have no inclination to use it... I didn't apply until well into the evening on that first day, and my account was approved within 24 hours.
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SteveT
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Post by SteveT on Apr 23, 2017 16:19:26 GMT
How long did it take folks to get their FS ISA account approved? I applied on day one but not a sausage from them yet. The main account appears usable but I have no inclination to use it... About 2 hours (yesterday)
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fasty
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Post by fasty on Apr 23, 2017 16:21:20 GMT
Hmm thanks folks, I think I'd better contact them.
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stub8535
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personal opinions only. Not qualified to advise on investment products.
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Post by stub8535 on Apr 23, 2017 16:21:24 GMT
My original concern was that gamers are tax evading which is illegal.
They know they are doing it but are too foolish to realise that some greedy behaviours will immediately draw attention to themselves.
Each to their own accordong to their risk appetite.
To acuse fs of being at fault is ludicrous. A gamer can see which is their loan part as it highlights on the sm screen. They know its illegal to buy your own loans. They have created a loss for tax purposes on their main account through the transaction.
Nothing to do with fs if lenders choose to act fraudulently.
I eould hope that gs will sit down and develop ways of unwinding the obvious errors made. I also hope that the unwinding leads to a lowering of miscreants isa allowances for the year in all cases where it can be establiahed that behaviours were contrary to expected nomality.
I wish them luck with it.
The greedy few may bring severe restrictions down on the many by their actions. I hope not.
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mason
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Post by mason on Apr 23, 2017 17:05:07 GMT
A gamer can see which is their loan part as it highlights on the sm screen. They know its illegal to buy your own loans. They have created a loss for tax purposes on their main account through the transaction. Actually, if you have loan parts up for sale in your non-ISA account, they are not highlighted when viewing from your ISA account. If it is "illegal" to buy your own loans, then I don't think it can be assumed anyone doing so knows this. FS apparently believes it is permissible based on the advice it has received. I've looked quite hard for unambiguous information about this to no avail. On losses for tax purposes, my understanding is that gains/losses made on trading loan parts are not subject to CGT, but if someone tried to claim tax relief for a loss they incurred while trading with their own ISA account, then that would be madness. The most likely restriction would be to block all purchases of loans between accounts held by the same investor. I wouldn't consider that very severe.
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pikestaff
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Post by pikestaff on Apr 23, 2017 17:08:33 GMT
As noted by SteveT in an earlier post, this text is taken from HMRC's guidance notes for iSA managers www.gov.uk/government/publications/guidance-notes-for-isa-managers. The underlying law is to be found in ISA Regulation 6: 6(1) All transactions by way of purchase ... shall be made ... (c) in the case of all other account investments, at the price for which those investments might reasonably be expected to be purchased in the open market.
6(3) Investments, or rights in respect of investments, may not at any time... (b) be purchased from— (i) an account investor, or (ii) the spouse of an account investor ...It's crystal clear that direct sales and purchases are not permitted. HMRC tolerates bed and ISA for shares because there is a genuine market price and there are two separate transactions with the market. Neither is likely to be the case for p2p secondary markets at their current state of development. If FS don't have coding to prohibit this they are asking for trouble. As I mentioned a few posts earlier in this thread, the subject of that clause in the regulation is not specified within that part of the text, but using the context set earlier in the same regulation, it appears to be the account manager and not the investor. So, the ISA manager must not purchase investments from the investor such that they become investments within the ISA. This is made clearer in paragraph 10.5 of the ISA Guidance Notes, where the text is almost identical, but "Managers" is specified. From my own reading of both documents, I do not believe the situation with respect to direct purchases is addressed in either. Sorry, I missed your earlier post but I think you are mistaken. As I understand it, the distinction that you are trying to make does not exist, because all transactions within an ISA wrapper are undertaken by the account manager and not by the ISA account holder, who is merely instructing the manager.
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