I occasionally get asked, how do I create an ISA offering for my investors? – It’s a simple question, with a complex answer…
The Individual Savings Account is a UK-specific tax saving wrapper authorised by HMRC, allowing lenders to benefit from tax-free savings. The Innovative Finance ISA (IF ISA) allows for peer-to-peer loans, and crowdfunding debentures as qualifying investments.
Only regulated platforms can offer the IF ISA, though there are various ways to ‘offer’ a ‘White Label ISA’, which we’ll explore.
What does it mean to be an ISA Manager?…
Being an ISA Manager involves a lot of work. HMRC stipulates specific requirements for onboarding, administration, transfers, and reporting for ISA accounts. Our technology supports these processes, including the exception handling of ISA repairs, merging, and more. So, you need advanced systems to manage the various processes to comply with HMRC rules. These features are part of the WLCF tech.
Having been through an ISA audit, I know these processes are significant, and failing to comply can result in a fine and the loss of the ISA Manager status. Many directly regulated companies choose to outsource the operations of ISA management to specialist third parties, who help to ease the workload.
Direct Authorisation
The most common way of offering an ISA is to become directly authorised and apply to HMRC to become an ISA manager. However, we have experience working with an Appointed Representative to offer the IF ISA to customers.
Working with an existing Authorised firm
One way, to start offering an ISA to your lenders is to become a borrower with a regulated platform, like rebuildingsociety.com. In this situation, you may refer people to the platform, where your investment opportunity is listed with a regulated firm. Borrowers with an approved listing can do this, subject to the financial promotion rules, meaning that any promotion promising a financial return must be approved and authorised by the firm before distribution.
Exclusive Financial Promotions
To exclusively promote your an IF ISA, you can use Direct Offer Financial Promotions if you become an Introducer Appointed Representative (IAR). This will allow you to directly promote your IF ISA offering on the rebuildingsociety.com platform, where customers may onboard directly. It will be clear to lenders that rebuildingsociety.com is the ISA Manager. ISA transfers are processed to rebuildingsociety and deposits are made to a client account in the name of rebuildingsociety.com ltd.
Onboarding your own customers
Taking things a step further, you can upgrade to become an Appointed Representative (AR), this will allow you to offer the IF ISA on your own website, where customers may undergo a bespoke onboarding journey, that includes the onboarding friction as described required by the FCA’s High-Risk Investments regime. This involves a more intricate setup and oversight process that involves the creation of various policies and procedures. You will still need to work with a HMRC-approved ISA Manager, this could be rebuildingsociety, a third party, or you could apply to HMRC to be recognised as an ISA Manager.
Please be aware
Becoming an IAR or AR is subject to an application and setup process and FCA approval.
As an AR to rebuildingsociety, a dedicated client account is set up, however, this account is in the name of rebuildingsociety.com and customers need to be appropriately informed, in the T&Cs who the ISA Manager is. While it is possible to work with a third-party ISA Manager, it is not possible to ‘white label’ a client account on behalf of another firm.
Conclusion – Taking a staged approach
Think of it as a journey towards having your ‘own ISA’. With each stage, you can take more responsibility and get closer towards having your own offering. With our partners at rebuildingsociety, we can support you in this process.
- as an IAR to prove your product & ability to promote it,
- as an AR where you take on more compliance oversight and ISA administration,
- becoming directly authorised.
Working with rebuildingsociety, we have assisted a client through a similar staged process and would be happy to discuss how we could do the same for you.
