Fintech firms react to HMRC clampdown on ISA eMoney deposits

By Roger Baird on Thursday 24 January 2019

Savings and Investment

The UK’s customs and tax body warned firms against flouting rules on how investor’s cash should be held.

Peer-to-peer lenders will “struggle” to find traditional banks able hold eMoney on behalf of ISA investors following a HMRC warning, said a specialist direct lending platform.

Goji said investor’s eMoney currently held in eWallets by investment firms and peer-to-peer lenders allows them to offer sophisticated consumer services such as application programming interface (API) access, allowing users to switch between accounts, as well as real time updates.    

But direct lending investment manager Goji added that fintech firms “may struggle to find a traditional banking provider that offers analogous functionality”, after a warning about how eMoney should be held was issued by HMRC this week.

Investor cash should be held in deposits with specific controls, and oversight and must be subject to the review of an external auditor, said the government body in its  ISA Bulletin 78, published on 23 January.

These rules comply with the Income Tax Act 2007, and are set out in the Financial Conduct Authority’s (FCA) Client Assets Handbook, it added.

But the UK’s customs and tax body said: “HMRC does not consider subscriptions held in e-money wallets to meet these requirements. ISA managers must ensure that cash subscriptions and other investor funds are held in accordance with the ISA regulations.”

However, some fintech firms argue that their business models provide new services as well as customer security.

Goji chief technology officer David Genn said his firm provided, “a sophisticated technology base to offer both ISA and general investment accounts”.

Genn added: “Our platform incorporates an FCA compliant client money account with real-time API-based access to investors’ funds, ISA management, automated know your customer and online ISA transfers. As such, despite these industry changes, we are seeing an increased speed of adoption onto our platform.”

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