Charity Bank CITRA Offering

Tony_F

As a previous saver I've just received an offer to open a new 5 year community investment tax relief account (CITRA) which pays only 0.1% interest but you can claim 5% tax relief for each tax year the account is open. This looks good but to qualify you must put an equal amount into a fixed rate 5 year account that pays 1.4% taxable. Have any other members this offer & if so what do you think of it? I'm a standard rate tax payer.

masonic

I can't find any mention of this account on their website, but I did find this very old FT article

I've never heard of this before. I'd certainly make sure that you are only investing in deposit accounts protected by the FSCS. This all sounds very reminiscent of a credit union named DotCommUnity that tried to push people into investment products and then went insolvent shortly afterwards.

Edit: Found the Government description of the scheme here

Subject to certain conditions, CITR is available to an

individual or company
who invests (by way of loan, securities or share capital) - see CITM4005,
in an accredited Community Development Finance Institution (CDFI) - see CITM2005

And from here:

An investment is a qualifying investment if ... there are no arrangements concerning protection of the investor against risks relating to the investment

So your capital is at risk.

Tony_F

The Charity Bank Ltd is an accredited UK bank & both the CITRA & qualifying a/cs are covered by the FSCS. Previous offers have been commented on by MSE either on the main site or forum. This one may not appear on the Charity Bank website because it is currently only being offered to current & previous clients. I am wondering if other members here have received this offer & if so what they think of it. If my arithmetic is correct it equates to about 3.8% pa for a basic rate tax payer which isn't bad for a 5 year fixed a/c. Am I right?

masonic

I can't find any recent commentary on MSE to suggest these accounts are covered by the FSCS. The best I could do is this post on the Fool boards suggesting capital is at risk:
http://boards.fool.co.uk/i-have-had-citr-investments-with-charity-bank-for-12595990.aspx

That seems to agree with HMRC regulations that prohibit losses being covered by a protection scheme. It may be that they were allowed to be covered under the FSCS many years ago and the situation has since changed.

I'd imagine that if these accounts worked the way you think they do, you'd have received plenty of responses from moneysavers that used them. I'd be very interested in an account like this, but it sounds too good to be true.

David42

As an existing Charity Bank customer I received this offer, and the terms state that it is protected by the FSCS.

masonic

David42 wrote: »

As an existing Charity Bank customer I received this offer, and the terms state that it is protected by the FSCS.

Specific wording would be helpful. For example, there are separate FSCS rules relating to deposits and investments and there are multiple accounts involved in this offer. If any one of them is treated as an investment rather than a deposit, then it may have FSCS protection, but that protection will not compensate you for losses arising from investment performance.

Tony_F

The info I got with the application forms clearly states that both the the CITRA & the qualifying account are covered by the FSCS compensation scheme. I've had 2 CITRAs with this bank running consecutively but when the last one matured in June 2015 they were not able to offer this type of a/c and I was put on a priority waiting list in case they became available again. This offer is not as attractive as before but still beats most fixed 5 year accounts. I suggest if Masonic or others would be interested in this CITRA (Issue 7) they contact The Charity Bank to see if the offer is or will be available to new clients.

jimjames

David42 wrote: »

As an existing Charity Bank customer I received this offer, and the terms state that it is protected by the FSCS.

So are my investments but I could still lose all my money

masonic

Tony_F wrote: »

The info I got with the application forms clearly states that both the the CITRA & the qualifying account are covered by the FSCS compensation scheme.

Like jimjames, I hold many investments that are covered by the FSCS, but in which I could lose my capital, so weasel words like "covered by the FSCS" do not hold much meaning for me. I've seen through these forums how people have been misled into investing into risky investments by other firms, such as a notable credit union, on the basis of such tactics. The precise wording used in the financial promotion will be enlightening - if it is just that investments are "covered by the FSCS", then it is bargepole time for me!

I suggest if Masonic or others would be interested in this CITRA (Issue 7) they contact The Charity Bank to see if the offer is or will be available to new clients.

I'm interested, first and foremost, in what exactly Charity Bank is offering. I am not interested in having any dealings with them if it is what I think it is.

Malthusian

The Community Investment Tax Relief scheme aims to encourage people to invest (that is, risk) their money in "social enterprise" type investments by giving them tax relief.

It is very simple. HMRC doesn't give you tax relief for putting your money in FSCS-protected deposits. Either your capital is at risk, which is why the Government is offering you a tax incentive to risk it. Or it is an artificial tax wheeze, in which case HMRC will come after you in due course. Either way I pass.

Slim

These are interest paying deposit accounts issued by a UK bank and as such are covered by the Financial Services Compensation Scheme.