It’s been a long while coming, but it’s finally nearing crunch time for the Innovative Finance ISA (IFISA).
The journey – believe it or not – started back in the run-up to the 2014 Budget, when the then-Chancellor, George Osborne, first announced that P2P loans would be eligible for ISA inclusion. This was a huge stride forward for the industry, recognising the work done by so many to bring crowd finance into the mainstream, and providing platforms with potential access to a slice of the £58bn currently held in low-earning Adult Cash ISAs.
The P2P component of the plans officially launched in April this year, and crowdfunded debt securities will follow suit when the relevant secondary legislation comes into force on 1 November. The hurdle of full FCA authorisation has delayed IFISAs catching on so far this year but that is set to change.
With the regulator indicating that substantial progress will be made towards clearing the backlog of P2P authorisations in the next few months, P2P platforms will soon be in a position to offer ISAs. Equally, as of 1 November, crowdfunding platforms (many of whom have been authorised for some time) will be in a position to manage an ISA that includes any debt securities listed on their platforms.
In these circumstances, we expect to see a raft of IFISA launches ahead of tax-year end. Partly this will be P2P and crowdfunding platforms taking on ISA manager status in their own right, but ISA qualifying products may equally be offered through specialist ISA managers who provide access to a range of platforms.
Looking forward, then, what are the key steps in becoming IFISA ready?
Get up and running in 3 steps
Many clients have been asking us about how to get the hallowed ISA manager status, but it's not that complex. Here are the 3 main steps as we see it:
1. Get fully authorised
Full FCA authorisation is, unavoidably, the first step towards offering the IFISA. Neither interim permissions nor an appointed representative arrangements cut the mustard if you want to manage the ISA yourself; firms must either be fully authorised by the FCA in their own right, or have achieved equivalent authorisation in another European state and be 'passporting' in to the UK.
If you’re still in the queue for authorisation, however, don’t despair – there’s lots you can be doing to make sure your wider internal processes are up to scratch so that when the moment comes, you’re ready to pounce (see point 3, below).
2. Become an approved ISA Manager
Once fully authorised, the next step is to apply to HMRC for approval as an ISA Manager. There are a couple of hoops to jump through here, but the HMRC application form and process are relatively straightforward.
Even better news, a decision should be made by HMRC within 14 days!
3. Make your processes ISA compliant
Being an IFISA manager also involves staying on the right side of a number of HMRC rules on an ongoing basis. These cover areas like
There are also some new additions to the FCA Handbook that you will need to build into your processes.
Whether you’re well on your way to offering the IFISA or considering it for the first time, we’d love to hear from you if you have any questions about adapting to the rules, or could simply use an extra pair of hands as you put together your application.
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