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Peer2Peer Finance News | January 18, 2019

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Checkmate over IFISA data

Checkmate over IFISA data
Marc Shoffman

HMRC is facing claims that it is understating the popularity of the Innovative Finance ISA (IFISA) and displaying a lack of urgency in responding to contradicting figures.

In August, the taxman released data which showed the IFISA took £17m in subscriptions, equating to 2,000 accounts, in its first tax year since its April 2016 launch. Even though the ISA tables only account for new money, not transfers, separate figures announced by the providers themselves have contradicted this.

Read more: HMRC’s IFISA numbers come under scrutiny

Ethical peer-to-peer bonds platform Abundance claims it was the biggest IFISA provider of the last tax year, having seen 1,436 IFISA accounts opened, equating to a total investment of £10.5m. Abundance said that £2.8m of its £10.5m figure was from ISA transfers, giving it £7.7m of new subscriptions for the 2016/2017 tax year.

But Crowdstacker also claims it was the biggest, with £15.6m taken over the tax year across 1,548 IFISA accounts, £6.5m of which was transfers. This suggests the P2P business lender had £9.1m of new ISA subscriptions.

Just the numbers from these two platforms alone takes new IFISA subscriptions to £16.8m, close to HMRC’s figure of £17m, and shows a total of 2,984 accounts, already above the 2,000 claimed by the taxman. This also leaves little room for the other players who were in the market at the time.

Business lender Crowd2Fund claims 983 individuals opened accounts in the 12 months to March, while Lending Works says it had 815 investors providing £9m. Property P2P lender Landbay says it took £1.7m, although none have provided a breakdown of how much was transfers or new subscriptions.

Read more: Abundance made up majority of IFISAs in the last tax year

Confusingly, HMRC says its figures are compiled from the companies’ submissions, raising questions about where the discrepancy emanates from. One source told Peer2Peer Finance News that a government official had “shrugged” when they had raised the disparities over the IFISA numbers. The source expressed frustration over HMRC’s lack of urgency over the issue. Another industry source said they had held back from raising the contradictory figures with HMRC through fear of damaging their relationship with the government department.

In the case that providers have got their figures wrong, they could be exposed to burdensome HMRC audits and penalties of up to £3,000.

“It is less likely that HMRC has its numbers wrong as HMRC bases its numbers on the annual reports provided by platforms,” Jake Wombwell-Povey, chief executive of Goji, which provides administration for some IFISA providers, said. “I think it is much more likely that platforms have reported their numbers incorrectly.

“Ultimately we won’t know unless HMRC does an audit of IFISA managers. From what we have seen, some platforms have less robust systems than others, so I think platforms should be careful what they wish for.

“If they shout too loudly, HMRC may well undertake quite substantial platform audits and that will be both time consuming and potentially financially painful if platforms are not administering IFISAs to the standards HMRC expects.”

HMRC insists its figures are accurate and says they are based on figures that ISA managers provide when they submit returns to the taxman in June.

“HMRC is committed to publishing accurate information, if we receive any updates from ISA providers, we will revise these statistics as quickly as possible,” an HMRC spokesperson said.

Read more: IFISA investments ‘to take off’ in 2018