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  • jamesd
    Ultimately I wouldn't be surprised if P2P is thrown in with other unregulated investments, with the 'light touch' regulation continuing, but investors having to self-certify high net worth or sophisticated, or agree to be Restricted Investors and limit their P2P exposure to less than 10% of their net worth
    Originally posted by masonic
    None of those regulatory restrictions apply to unregulated investments, They apply to certain types of regulated investment and the FCA administers them as specified by the acts of Parliament that imposed them.

    Zopa started out as an almost unregulated investment, with no FSA supervision, just the OFT lending license that was required, but not to protect lenders. They imposed their own limits to help lenders avoid being classed as lending as a business activity but neither the OFT nor HMRC required it.
    • masonic
    • By masonic 13th Mar 19, 6:31 AM
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    masonic
    None of those regulatory restrictions apply to unregulated investments, They apply to certain types of regulated investment and the FCA administers them as specified by the acts of Parliament that imposed them.

    Zopa started out as an almost unregulated investment, with no FSA supervision, just the OFT lending license that was required, but not to protect lenders. They imposed their own limits to help lenders avoid being classed as lending as a business activity but neither the OFT nor HMRC required it.
    Originally posted by jamesd
    They apply to unregulated mini-bonds. For example, those who invested in London Capital & Finance mini-bonds were required to complete an investor declaration and classify themselves as either High Net Worth, Sophisticated or Restricted, and Financial Promotions about the bonds had to be approved by a FCA Authorised Firm, even though the investment was unregulated.

    Both EISs and VCTs are unregulated collective investment schemes, and investors in those coming through retail channels need to self-certify as belonging to one of the above investor classes, and again I believe the Financial Promotions must be approved by a FCA Authorised Firm.

    The Restricted Investor Statement includes the text "I undertake that in the twelve months following the date below, I will not invest more than 10% of my net assets in non-readily realisable securities."
    See COBS 4.7 Direct offer financial promotions, in particular 4.7.7 which applies to Financial Promotions that are disseminated in such a way that they are likely to be received by a Retail Client.
    Non-readily realisable securities include (c) a non-mainstream pooled investment, such as (a) a unit in an unregulated collective investment scheme.

    None of this currently applies to P2P lending (though a small number of P2P platforms voluntarily comply with COBS 4.7.9-10). It is currently regulated under the 'light touch' regime, but it wouldn't be difficult for the FCA to include P2P within the non-mainstream pooled investment umbrella and wash its hands of trying to regulate the sector any more stringently than unregulated investments. I doubt anyone would notice the difference, other than Retail Clients who arguably have too much of their net assets invested in P2P.
    Last edited by masonic; 13-03-2019 at 7:35 AM.
  • jamesd
    Neither VCTs nor EISs are generally classed as unregulated collective investment schemes, though it is possible to structure them in a way that is caught by the unregulated collective investment schemes regulations. The FCA considered and rejected that idea.

    Not sure whether you missed my point. You seem to be writing as though the FCA UCIS regulations mean there's no regulation of them, rather than them not fitting into certain FCA-regulated category, so something can be a U (by the FCA) CIS but still be a collective investment that is regulated in various ways.
    Last edited by jamesd; 14-03-2019 at 9:22 AM.
    • masonic
    • By masonic 14th Mar 19, 12:24 PM
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    masonic
    Not sure whether you missed my point. You seem to be writing as though the FCA UCIS regulations mean there's no regulation of them, rather than them not fitting into certain FCA-regulated category, so something can be a U (by the FCA) CIS but still be a collective investment that is regulated in various ways.
    Originally posted by jamesd
    Hopefully I'm writing as though these types of non-mainstream investments have more restrictions around their sale to retail clients than P2P does, as that was the point I have been trying to make. Yes, I fully acknowledge that unregulated investments are regulated in various ways, such as those in COBS 4.7 discussed in my previous post - that's exactly what I am trying to get across.

    Retail investors must make a declaration and pledge not to invest more than 10% of their net worth into these types of investment, whereas there is no such restriction for P2P. My previous post #2437, which started our exchange stated that I wouldn't be surprised if the same rules were applied to P2P such that investors would either need to certify as high net worth or sophisticated or agree not to put more than 10% of their net assets into P2P. This wouldn't be a bad thing in my view.
  • jamesd
    The biggest issue is that it wouldn't address the key trouble areas in P2P, like Moneything grossly misrepresenting the risk of the Birkenhead loan by not mentioning the earlier overspending by the developer, then them defaulting by overspending being the reason for the third loan. Thereby largely disregarding their regulatory requirement for them to properly disclose the risk, which is a critical role the P2P firms are supposed to be fulfilling. It's a thing that should be distinguishing P2P from mini-bonds. The Birkenhead spending issues continued until the loan defaulted, leading to substantial initial losses on the security sale to those who'd had the history of this kept from them, that might not be recovered by the various forms of legal action that Moneything are trying.

    It's the sort of thing that caused me to recommend against using Lendy in 2016. If you can't trust the loan descriptions you aren't in a position to know whether a loan's risk level is appropriate and the platform ends up being uninvestable because you aren't able to pick which loans to go into.
    • masonic
    • By masonic 15th Mar 19, 8:25 AM
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    masonic
    The biggest issue is that it wouldn't address the key trouble areas in P2P, like Moneything grossly misrepresenting the risk of the Birkenhead loan by not mentioning the earlier overspending by the developer, then them defaulting by overspending being the reason for the third loan. Thereby largely disregarding their regulatory requirement for them to properly disclose the risk, which is a critical role the P2P firms are supposed to be fulfilling. It's a thing that should be distinguishing P2P from mini-bonds. The Birkenhead spending issues continued until the loan defaulted, leading to substantial initial losses on the security sale to those who'd had the history of this kept from them, that might not be recovered by the various forms of legal action that Moneything are trying.

    It's the sort of thing that caused me to recommend against using Lendy in 2016. If you can't trust the loan descriptions you aren't in a position to know whether a loan's risk level is appropriate and the platform ends up being uninvestable because you aren't able to pick which loans to go into.
    Originally posted by jamesd
    I agree with your sentiments, but this regime of 'light touch' regulation clearly isn't working. There are several ways to address this:

    (1) Make P2P firms liable in cases where they have not met their regulatory requirement to make their communications clear, fair and not misleading, preferably with FSCS protection for Financial Ombudsman decisions against the firm [very unlikely]
    (2) Take enforcement action against firms who issue misleading financial promotions and other communications such that it is sufficiently harmful to their business that they would not dare risk it [possible, but the FCA is not known for acting swiftly - it might take them a year or two to get around to doing something, and this course of action risks platform failure]
    (3) Withdraw the FCA stamp of approval from this type of investment and make the platforms issue the same sort of health warnings and restrictions required of non-mainstream investments.
    • Nardge
    • By Nardge 15th Mar 19, 9:16 AM
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    Nardge
    Unfortunately, the introduction of the secondary market does not change the fact that the Kuflink ISA is not flexible and you have paid into it this tax year.

    Your choices remain the same:-
    - Transfer the invalid IFISA to a valid ISA (e.g. RS) before the end of the tax year (cost: 35)
    - Allow HMRC to instruct Kuflink to invalidate and remove the money (cost: a small amount of tax on interest within the ISA)
    Originally posted by masonic
    Good Morning,

    Apologies as this query is not exactly about P2P, but does stem from it.
    Masonic also previously outlined my options here.

    'New' money was paid into two P2P firms in error (Ratesetter and Kuflink) this tax year.
    Payment of 142.58 into Kuflink makes a double subscription, I'll be hearing from HMRC as a result.

    We all have a 20,000 ISA allowance. HMRC will "invalidate and remove the money" aka the Kuflink 142.58.
    - Once removed, this will mean I'll have only invested 19,857.42 (20,000 - 142.58)?
    - If to oversubscribe 20,142.58 now, once HMRC have expunged the Kuflink money, this will leave 20,000 overall?
    - Should I thus oversubscribe to 20,142.58, or that will incur extra penalty?

    I look forward to hearing from you,
    With Kind Regards
    Last edited by Nardge; 15-03-2019 at 9:28 AM.
    • masonic
    • By masonic 15th Mar 19, 9:49 AM
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    masonic
    It wouldn't incur any extra penalty, but there is a slim chance HMRC might forgive your original mistake and not take any action, which is even less likely if you have both oversubscribed overall and subscribed to an invalid combination of ISAs.
    • masonic
    • By masonic 15th Mar 19, 6:01 PM
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    masonic
    For those unfortunate enough to have invested in Collateral, a new FAQ has been posted on the administrators' website: https://www.bdo.co.uk/getmedia/7cbbab1e-f4b5-4d0e-b150-bebeba0609fc/FAQ-15-March-2019.pdf.aspx

    Note the error in the date of the next report, which should read 27th May 2019.
  • jamesd
    'New' money was paid into two P2P firms in error (Ratesetter and Kuflink) this tax year. Payment of 142.58 into Kuflink makes a double subscription, I'll be hearing from HMRC as a result.

    We all have a 20,000 ISA allowance. HMRC will "invalidate and remove the money" aka the Kuflink 142.58.
    - Once removed, this will mean I'll have only invested 19,857.42 (20,000 - 142.58)?
    - If to oversubscribe 20,142.58 now, once HMRC have expunged the Kuflink money, this will leave 20,000 overall?
    - Should I thus oversubscribe to 20,142.58, or that will incur extra penalty?
    Originally posted by Nardge
    Because you are still within the 20,000 allowance HMRC will "repair" the Kufflink subscription as standard practice.

    If you were to add more money to the Ratesetterr ISA HMRC may tell them to remove the excess via a partial repair notice.

    You can call the HMRC ISA Helpline for guidance on what to do.

    Before contacting HMRC you might usefully contact Kuflink to find out whether you're still in the period when you can cancel or withdraw your application and be refunded. Easiest way because "investors will be treated as though they have not subscribed to an ISA". It won't even be included in their usual reporting to HMRC.
    • masonic
    • By masonic 17th Mar 19, 8:14 AM
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    masonic
    Because you are still within the 20,000 allowance HMRC will "repair" the Kufflink subscription as standard practice.
    Originally posted by jamesd
    The whole Kuflink subscription is invalid because it is the second IFISA Nardge has subscribed to in the 2018/19 tax year (technically the fourth, but the other two were flexible and subscriptions were flexibly withdrawn). So the funds will likely be removed during repair and lead to some unused allowance in the 2018/19 tax year. Not that I'm advocating overloading the valid IFISA to compensate for that.

    Before contacting HMRC you might usefully contact Kuflink to find out whether you're still in the period when you can cancel or withdraw your application and be refunded. Easiest way because "investors will be treated as though they have not subscribed to an ISA". It won't even be included in their usual reporting to HMRC.
    Unlikely as the subscription was made last year.
    Earlier discussion on the topic if you're interested: https://forums.moneysavingexpert.com/showthread.php?p=75115204
    Last edited by masonic; 17-03-2019 at 8:27 AM.
    • jono1975
    • By jono1975 17th Mar 19, 11:55 AM
    • 30 Posts
    • 7 Thanks
    jono1975
    I am new to this and have invested 1000 with Ratesetter last month with their one year plan, I was inticed by the 100 new investor bonus. Interest due to be paid in 2020.

    I am a basic rate tax payer and don't fill in self assesments. This year my tax code has been adjusted to claim untaxed interest as I've gone over my PSA.

    My question is, do HMRC receive interest details from P2P in the same way as my savings accounts and adjust my tax code accordinly, without my need to fill in a self assessment.

    Sorry if this has been asked before.
    Last edited by jono1975; 17-03-2019 at 11:59 AM. Reason: grammar
    • DireEmblem
    • By DireEmblem 17th Mar 19, 11:57 AM
    • 307 Posts
    • 214 Thanks
    DireEmblem
    There seems a bit of negativity on this thread of late - I think P2P lending is great. I've been in Zopa almost from the start, and although I miss the safeguard, my returns after bad debt have always averaged above the 5% mark, which is pretty decent given the consistency.


    Ok yes, so I could possibly earn more investing, but its good to diversify in terms of savings.
    • masonic
    • By masonic 17th Mar 19, 12:58 PM
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    • 8,987 Thanks
    masonic
    I am new to this and have invested 1000 with Ratesetter last month with their one year plan, I was inticed by the 100 new investor bonus. Interest due to be paid in 2020.

    I am a basic rate tax payer and don't fill in self assesments. This year my tax code has been adjusted to claim untaxed interest as I've gone over my PSA.

    My question is, do HMRC receive interest details from P2P in the same way as my savings accounts and adjust my tax code accordinly, without my need to fill in a self assessment.

    Sorry if this has been asked before.
    Originally posted by jono1975
    Supposedly yes, but in practice the information being received by HMRC even in respect of savings accounts is questionable. As always, if you have a tax liability, it is something you should inform HMRC about.
    • masonic
    • By masonic 17th Mar 19, 1:12 PM
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    • 8,987 Thanks
    masonic
    There seems a bit of negativity on this thread of late - I think P2P lending is great. I've been in Zopa almost from the start, and although I miss the safeguard, my returns after bad debt have always averaged above the 5% mark, which is pretty decent given the consistency.
    Originally posted by DireEmblem
    As long as you'll still think P2P lending is great if you start to suffer capital losses, then there's nothing wrong about that. I'm happy to continue investing in P2P even though I've suffered some substantial losses - about a fifth of my capital is tied up in defaults so I don't know yet what my actual net return will be, but I suspect it will end up close to the 8% mark. However, past performance is no guide to the future and I'm fully prepared for the risk of future capital losses outstripping my returns.

    Ok yes, so I could possibly earn more investing, but its good to diversify in terms of savings.
    P2P lending accounts are certainly not equivalent to savings accounts. There is no need to diversify savings unless you hold more than 85k with one organisation.

    In the case of P2P you are investing, not saving. P2P is a high risk investment with 100% loss potential and no FSCS cover even in situations where you are defrauded. The risk profile is different between S&S and P2P. S&S investments are highly volatile and can fall in value very quickly, whereas P2P loans are not as readily tradeable, so are not very volatile, but can be subject to irrecoverable losses in a way that mainstream S&S investing is not.
  • jamesd
    The whole Kuflink subscription is invalid because it is the second IFISA Nardge has subscribed to in the 2018/19 tax year (technically the fourth, but the other two were flexible and subscriptions were flexibly withdrawn). So the funds will likely be removed during repair and lead to some unused allowance in the 2018/19 tax year.
    Originally posted by masonic
    Invalid but repairable so long as the 20,000 limit hasn't been exceeded, as HMRC says in the Guidance Notes for ISA Managers page I linked to in my last post:

    "In general, the invalid subscriptions can be repaired as long as the total subscriptions in the tax year do not exceed the overall subscription limit"

    Adding more money to the Ratesetter ISA would be a substantial mistake because:

    "All investments in a repairable ISA lose their tax exemption from the date of the first invalid subscription up to the date of repair. Up to this date the repairable ISA is effectively treated in the same way as a void ISA."

    At the moment it's just the Kuflink account that isn't getting ISA tax relief but adding more money to Ratesetter would do that to the whole Ratesetter balance as well, unless HMRC chooses not to. The partial voiding for excess subscription has a comparable effect to the repairable one and it's partial voiding that seems applicable.
    Last edited by jamesd; 17-03-2019 at 9:26 PM.
  • jamesd
    I've been in Zopa almost from the start... Ok yes, so I could possibly earn more investing, but its good to diversify in terms of savings.
    Originally posted by DireEmblem
    Zopa and other P2P are investments without even the FSCS protection against fraud and theft losses that other common investments have.

    Capital volatility of P2P values varies depending on the platform but I don't know of any with variable secondary market prices that reports the mark to current secondary market prices as the value as a bond fund would. So in general the volatility just isn't reported to you.

    On Zopa the capital value falls when interest rates rise but Zopa only tells you if you ask for a sale quote. The price rises after a rate drop but Zopa keeps the increase.

    On platforms with user controllable secondary market prices I've bought and sold at discounts of 25% at Ablrate, the maximum they permit; have sold down to 25% at Huddle to exit a loan, also their limit; have sold at greater discounts at Bondora; have bought and sold at premiums.

    On platforms without variable pricing liquidity changes instead of price and it reduces for loans perceived as having difficulties even on variable pricing platforms, notably those with a price floor insufficient for the anticipated loss..
    • Nardge
    • By Nardge 18th Mar 19, 5:42 PM
    • 125 Posts
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    Nardge
    Invalid but repairable so long as the 20,000 limit hasn't been exceeded, as HMRC says in the Guidance Notes for ISA Managers page I linked to in my last post:

    "In general, the invalid subscriptions can be repaired as long as the total subscriptions in the tax year do not exceed the overall subscription limit"

    Adding more money to the Ratesetter ISA would be a substantial mistake because:

    "All investments in a repairable ISA lose their tax exemption from the date of the first invalid subscription up to the date of repair. Up to this date the repairable ISA is effectively treated in the same way as a void ISA."

    At the moment it's just the Kuflink account that isn't getting ISA tax relief but adding more money to Ratesetter would do that to the whole Ratesetter balance as well, unless HMRC chooses not to. The partial voiding for excess subscription has a comparable effect to the repairable one and it's partial voiding that seems applicable.
    Originally posted by jamesd
    Many thanks to you 'jamesd' and 'masonic' for trying to help me out

    If I read you and Masonic correctly, the advice is to leave Kuflink as it is, and to NOT aim to compensate the 20,000 allowance as outlined and detailed by myself above. HMRC will correct Kuflink, and the Ratesetter will be left as it is.

    What I wish to avoid is a trawled out headache with HMRC, so the option of paying Kuflink for reimbursement of my erroneous 'New' 2019/19 ISA Money remains...

    For the tax year 'New' 2018/19 ISA I've:

    Ratesetter - 13,051
    Kuflink - 142.58 (the error, oversight)

    Yet to be invested from the 'overall' 2018/19 20,000 ISA allowance - 548

    Therefore if to use only 405.42 of this, and outwith of IF ISA (548 - 142.58), HMRC will leave Ratesetter and hopefully myself alone? Otherwise I feel I might as well pay Kuflink to rectify things beforehand for peace of mind.

    With Kind regards
    Last edited by Nardge; 18-03-2019 at 6:20 PM.
    • masonic
    • By masonic 18th Mar 19, 5:47 PM
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    masonic
    Invalid but repairable so long as the 20,000 limit hasn't been exceeded, as HMRC says in the Guidance Notes for ISA Managers page I linked to in my last post:

    "In general, the invalid subscriptions can be repaired as long as the total subscriptions in the tax year do not exceed the overall subscription limit"
    Originally posted by jamesd
    Yes, but isn't the way to repair an ISA breaching the invalid combination of ISAs rule to remove the subscriptions from the 2nd (or later) ISA of the same type? That is what the worked examples in the old ISA Guidance Notes document showed.

    In this case the invalid subscriptions are the only subscriptions made to the ISA. Whether it is repaired or voided only makes a practical difference if the ISA also contains valid subscriptions from an earlier tax year.

    Adding more money to the Ratesetter ISA would be a substantial mistake because:

    "All investments in a repairable ISA lose their tax exemption from the date of the first invalid subscription up to the date of repair. Up to this date the repairable ISA is effectively treated in the same way as a void ISA."

    At the moment it's just the Kuflink account that isn't getting ISA tax relief but adding more money to Ratesetter would do that to the whole Ratesetter balance as well, unless HMRC chooses not to. The partial voiding for excess subscription has a comparable effect to the repairable one and it's partial voiding that seems applicable.
    Yes, this is a very good (further) reason not to oversubscribe to the Ratesetter ISA.
    Last edited by masonic; 18-03-2019 at 7:32 PM.
    • masonic
    • By masonic 18th Mar 19, 5:51 PM
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    masonic
    If I read you and Masonic correctly, the advice is to leave Kuflink as it is, and to NOT aim to compensate the 20,000 allowance as outlined and detailed by myself above? HMRC will correct Kuflink, and the Ratesetter will be left alone.

    What I wish to avoid is a trawled out headache with HMRC, so the option of paying Kuflink for reimbursement of my 'New' 2019/19 ISA Money remains...
    Originally posted by Nardge
    The Kuflink ISA is not flexible, so making a withdrawal will make no difference. It has a rather steep transfer out fee, so it will cost you more to transfer it in to a valid ISA than you can expect to suffer from HMRC's actions. So the wait and see approach is the only sensible one at this stage.
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