What is the Innovative Finance ISA? What are the conditions for investing?

This is a freeview 'At a glance' guide to Innovative Finance ISAs.

The Innovative Finance ISA is a class of ISA available from 6 April 2016.

  • It is offered by peer-to-peer lending platforms with the appropriate regulatory permissions.
  • Interest and gains from peer-to-peer loans will benefit from ISA tax advantages.

From 1 November 2016, the range of investments that could be held in an Innovative Finance ISA was extended to include certain debentures issued by companies or charities, including those offered via crowdfunding platforms.

A number of conditions have to be met regarding the issuer, debentures, and investor:

  • The debenture must be a transferable security issued by a company or charity.
  • The investment must be facilitated through an electronic system by a person with the appropriate regulatory permissions.
  • The investment cannot be part of a tax avoidance scheme or arrangement.
  • The debenture is not made available by reason of being (in the past, present or future) an employee, director, partner, trustee or officeholder.
  • The investor is not connected with the issuer.
  • The debenture is not connected with any other investment held outside an ISA.

This expansion of the Innovative Finance ISA was previously announced and consulted on in 2015, with draft legislation published in August 2016. The final legislation came into force on 1 November 2016.

Useful guides on this topic

ISA guide
What is an ISA? What are the limits? How are ISAs taxed?

Crowdfunding: Tax issues
What is crowdfunding? What are the tax issues relating to crowdfunding?

External link

Legislation introducing the Innovative Finance ISA: The Individual Savings Account (Amendment No 2) Regulations 2016, SI 2016/364

Legislation to expand the scope of the Innovative Finance ISA: Individual Savings Account (Amendment No 3) Regulations, SI 2016/977

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