Fixed bond rate tax free but not ISA

Val35

I’m confused as I’ve come across fixed bond savings offering really high returns and claiming to be tax free e.g paramount wealth and London Bonds Group.

I have had a lump sum from insurance and maxed my ISA allowance and looking to make a variety of deposits for different amounts. 
1. How can these be tax free yet not ISAs?
2. Paramount says your money is legally protected but on first glance I can’t see FSCS mentioned though other similar fixed bond rate providers mention it.
3. I’m confused as this is very different to the fixed rate savings accounts offering interest rates at 1.2%

Any advice? I would like to put away different sums for different periods of time 

Alexland

Stick to products listed on the MSE best buy savings tables which are vetted to check they are not mini bond scams. Never heard of these people but as a general rule if you come across what looks like a mini bond scam then be aware you would be unlikely to see your money again beyond perhaps a few interest rate repayments for people that get in early enough while the scheme is still soaking up new money from others.

https://www.moneysavingexpert.com/savings/

Grim reading about Blackmore and LC&F bonds where the money is taking some effort to find:

https://www.ftadviser.com/your-industry/2020/04/23/mini-bond-scheme-collapses-owing-45m-to-investors/

As you can see tens of thousands of people are out of pocket with some losing life changing amounts.

dunstonh

The word bond is one of the most misused going.      It is used by some to refer to fixed term deposits (what you appear to want) through a range of alternative products with bond in the name right through to extremely high risk mini bonds.  There are also plenty of fraudulent sites out there (a week doesn't appear to go by without someone here posting on about one) where a genuine corporate bond is being "marketed" as a savings account with a high rate.  But in reality, when you send the money, the scammer runs off with it leaving you with nothing. 

Here are some things you can do which may help identify scams/clones etc.  Some things are obvious. Others may be circumstantial.

1 - Check the FCA register. FCA Register - https://register.fca.org.uk/  If the firm is not FCA authorised then they are not genuine.  However, be on guard for cloning scams.  i.e. where a caller or website uses a genuine firm name that would appear on the register to pretend they are from a real firm.   Often picking a firm that appears on the register as an EEA company or one that has an obscure entry such as interim consumer credit act permissions and not a proper FCA entry.    

2 - Doing a whois search on the website. https://www.nominet.uk/whois/    Most genuine financial services companies will be on a website domain that has been in held for many years and is held long term.    Most scams will only buy a domain for one year and use a cheap consumer-level registrar.    This doesn't mean it is a scam.  In theory, a small localised firm may use consumer-level registrars but big companies won't.   Most will buy a domain for many years in advance as its cheaper to do so.  Most scams are short term.  They will only be in place for a few months.  So, websites will usually be recently purchased and have a year.

3 - No genuine regulated firm cold calls on investments.  Work on the assumption that a cold call is likely to be fraudulent and hang up (this goes for cold calls in all areas. Not just financial)

4 - If an account is genuine and has a high-interest rate then you will see it on the tables at MSE

5 - Use your common sense.   If it is too good to be true then it almost certainly isnt real.   Why aren't all the various popular interest rate comparison sites listing it?   Why is it only found on obscure sites that often have referral links?   

6 - Cold callers and scam websites are not ethical. They are not honest.  They will tell you want they think you want to hear to scam you out of your money.   Just because they say it has FSCS protection does not mean it does.  

7 - Where addresses are shown, they often use virtual offices.  And offices that appear to be quite upmarket or prestigious.  Canary Wharf, for example, has a directory of companies in their offices.  

8 - Look at the website for inconsistencies and errors.  Look at testimonials claiming 3 or 5 or more years of perfect service or returns being paid.   Does that tie in with a company that didnt have a website or a business just a few months earlier?   Look at the footer to see the compliance warnings.   Are they correct? (remember any marketing of regulated financial services products, which includes deposits and regulated investments requires FCA authorisation). 

9 - Not a reliable method by itself. Check companies house: https://beta.companieshouse.gov.uk/    All limited companies, PLCs and LLPs are listed at companies house.  A cloning scam may not work with this option but a genuine firm would be listed there.  The only businesses that are not listed at companies house are sole traders and partnerships.

Do a check using the above guide and I think you will find enough to make your own mind up.    The experienced posters and those that are in the industry already know what they are going to find before they even look.

ColdIron

Both appear to be typical unregulated investments, they will be tax free inasmuch as you may not get your money back

• Paramount Wealth
  Website registered 18th Feb 2020, address is a serviced/virtual  office
• London Bonds Group
  Website registered 7th April 2020, another serviced/virtual office

Up to you but I would rather eat wasps

Alexland

ColdIron said:

Both appear to be typical unregulated investments, they will be tax free inasmuch as you may not get your money back

With LC&F wasn't there an issue where HMRC declared their ISA wrapper invalid and so the victims, sorry investors, did have a theoretical tax liability on the early interest payments before it went belly up? My memory is failing me on how that ended.

masonic

Alexland said:

ColdIron said:

Both appear to be typical unregulated investments, they will be tax free inasmuch as you may not get your money back

With LC&F wasn't there an issue where HMRC declared their ISA wrapper invalid and so the victims, sorry investors, did have a theoretical tax liability on the early interest payments before it went belly up? My memory is failing me on how that ended.

I don't recall seeing anything to suggest HMRC's view could be challenged, so I expect investors have had to pay some tax as a result of their theoretical interest.

Alexland

masonic said:

I don't recall seeing anything to suggest HMRC's view could be challenged, so I expect investors have had to pay some tax as a result of their theoretical interest.

Wonder if any actually paid up...?

masonic

Alexland said:

masonic said:

I don't recall seeing anything to suggest HMRC's view could be challenged, so I expect investors have had to pay some tax as a result of their theoretical interest.

Wonder if any actually paid up...?

It's a good question, and the only people who would have paid up are those who pro-actively declared the interest. According to the latest update from the administrators it will be a while before they get around to reporting on such matters. But I've had discussions with HMRC around taxable interest I received from a certain P2P platform that went pop, and it was suggested I did my best to estimate and declare this sooner rather than later as interest would be applied to any underpaid tax from the date it would have become due (HMRC's rates have hovered around 2.5-3.25% in recent years). That was a return I was going to go back and amend when an accurate figure became known... 2 tax years later and I'm still waiting.

dunstonh

Expect to see one of these on the FCA's warning list shortly.

badger09

ColdIron said:

Both appear to be typical unregulated investments, they will be tax free inasmuch as you may not get your money back

• Paramount Wealth
  Website registered 18th Feb 2020, address is a serviced/virtual  office
• London Bonds Group
  Website registered 7th April 2020, another serviced/virtual office

Up to you but I would rather eat wasps

Would you like to borrow my barge pole so you can encourage them out of their nests?