HMRC bows to pressure to put P2P Isa on platforms

HMRC bows to pressure to put P2P Isa on platforms

Financial advisers will now be able to use ‘aggregator platforms’ to diversify the loans within an Innovation Isa when it is launched next month.

HM Revenue & Customs has confirmed several peer-to-peer lending platforms can be chosen by an ‘Isa manager’ – or investment adviser – using a so-called aggregator platform.

This will allow loans from different lending businesses to be pooled into a single Innovative Finance Isa similar to a stocks and shares Isa.

Speaking to FTAdviser, a spokeswoman from HMRC said: “The Innovative Finance Isa rules will provide for the aggregator model, to the extent that the Isa manager is regulated by the FCA, and the platform in question has full FCA permissions.

“We will monitor the development of the market and consider whether any further changes are required as this model develops.”

She also pointed out that loans must be made with funds that the investor has subscribed to their Isa manager.

The move comes after months of lobbying from the industry, following concerns that the new Isa would only facilitate loans from a single lending platform, meaning investors’ money would be highly exposed to a single investment strategy.

HMRC received eight responses from P2P operators, industry representatives and other businesses for a technical consultation on the Isa, which took place between 8 December 2015 and 1 February this year.

Some called for technical changes concerning which institutions could offer innovative finance Isas and which payments would qualify to be held in these accounts.

Following this consultation, HMRC amended draft legislation to allow loan repayments collected by another institution (such as a lending platform) and passed to the Isa manager to be eligible for Isa status.

In January, Jake Wombwell-Povey, managing director of peer-to-peer technology provider Goji, wrote to HMRC to criticse the Innovation Isa for failing to spread risk.

He said this latest move is great news for the industry, stating it will increase competition and accessibility to the P2P market for a wider pool of investors. “This subtle difference in regulation will have a colossal impact on investor’s who choose to participate in P2P lending.

“IFAs will now be able to build a balanced IFIsa portfolio across a range of platforms, as opposed to being limited to invest in a single platform which presented investment risk and limited diversification.”

Mr Wombwell-Povey also said it creates a level playing field for P2P platforms, meaning the bigger players will not be able to swarm the market.

Chancellor George Osborne announced in the Budget that from next year the Isa limit will increase to £20,000, which Mr Wombwell-Povey said is another “massive boost” for the industry.

Dan Farrow, director at SNB Wealth Management, said: “I’m a fan of innovation, but P2P lending is an inherently high-risk product to be offering and advising clients to take up.

“I understand that a platform provides a greater diversification for investors, but this still leaves me asking if the rates on offer justify the underlying risk and is this something that could blow-up in a few years times when rates do rise and investors plead ignorance in a complaint to the FOS.