3rd December 2013
Following the decision to allow Aim shares to be held within an Isa wrapper it has been forecast that savers may soon be allowed to include loan-based crowdfunding too writes Philip Scott.
There is widespread anticipation that the Chancellor George Osborne will unveil a consultation on the issue at this Thursday’s Autumn Statement.
The Treasury is understood to be generally supportive of increasing the range of qualifying investments, potentially including crowdfunding, into ISAs.
Loan-based crowdfunding, including peer-to-peer lenders, such as Zopa and Ratesetter, and platforms like Abundance Generation, Buzzbnk and Lendinvest have already generated more than £1bn for UK small and medium sized businesses.
The popularity of peer-to-peer lending websites has risen dramatically in recent years as lenders can earn interest of circa 6%, well ahead of the rate of inflation. These businesses cut out banks and building societies and put savers and borrowers in touch with eachother but to date any interest earned has been taxable.
Equity-based crowdfunds, where investors take a stake in a start-up, already benefit from Enterprise Investment Scheme reliefs but could be considered too risky for ISA status.
But Julia Groves, managing director at Trillion Fund believes that including loan-based crowdfunds would be a win for investors who want to save tax and diversify and for businesses, boosting returns for investors and driving up the amount invested in SMEs through alternative finance.
“If the Chancellor is serious about stimulating investment and growth, then better tax treatment for crowdfunding is a complete no-brainer. There is a huge appetite among investors for direct, transparent, uncorrelated investments that beat high street returns, such as crowdfunding. And there is huge demand from cash-starved businesses for better ways to raise funds.”
Speaking to The Telegraph, Rhydian Lewis, chief executive of RateSetter, said: “If, as The Telegraph suggests, P2P Isas are in the statement, then it will be a game-changer for our industry.
“Over the last few years RateSetter and others in the space have proved themselves to be safe, transparent, and highly-competitive vehicles for savers. It would absolutely right to get recognition of this from Government.”