This past week, HMRC released numbers on the relatively new Innovative Finance ISA (IFISA) that enables savers to invest in debt based crowdfunding offerings. The UK government indicated that IFISA participation had topped £290 million during the 2017/18 tax year, or 8 times more than the 2016 / 17 figure of £36 million.
The UK Crowdfunding Association (UKFCA) issued a statement on the IFISA report stating;
“The rapidly expanding take up of the IFISA by the public is great news for both investors and the UK economy. Investors choosing IFISA can diversify their investments across a range of different businesses and projects. Their money goes to work creating jobs and sustainable growth. The UKCFA represents a range of platforms investing in both bonds or loans from high to low risk, inflation beating returns and short to long term investments. All platforms have seen strong growth this year reflected in a big proportion of the more than £290 million invested in IFISA last tax year.”
Bruce Davis, the Director of the UKCFA and co-founder / Joint MD of Abundance investment, shared some additional insight into the IFISA progress. Davis told CI that the IFISA was having no discernible impact on equity crowdfunding platforms (which may also offer debt based securities).
“Equity investing and debt / loans are very different investments in terms of financial need and investor profile,” said Davis – noting that equity crowdfunding is not eligible for inclusion in an IFISA – but it already has generous tax incentives through EIS etc. “
Asked if the forthcoming regulatory changes in loan based crowdfunding will impact the IFISA, Davis said they don’t expect any impact at all.
“… we welcome the introduction of effective methods for platforms to ensure people understand the risks and can access all the relevant information about their investment in a straightforward and transparent way,” Davis added.
Davis believes that better messaging will help educate the population on the benefits of the IFISA;
“The main platforms are talking about the benefits of their investments in terms of returns and positive impact on the real economy versus other forms of investing,” Davis stated.
He added that more could be done to explain how IFISA fits within a portfolio of ISA account investments in terms of risk, return and diversification.
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