We're reading confusing reports from the Ministry of Mixed Messages (a.k.a. the Whitehall Civil Service) this morning. The taxman is wondering how to tax interest on peer-to-peer to lending, and could impose costly system changes on platorms. HM Treasury meanwhile, is wondering what to do about encouraging savers to put more money into IFISAs
Money International reports that HM Revenue and Customs (HMRC) wants to allow tax deductions at source on interest earned by lenders on peer-to-peer platforms. There are only two problems: it's not provided for by law, and even it were, it would be hellishly complex for lending platforms to work out, since the money an investor deposits with the platform will often be split up beween borrowers who pay different interest rates.
On the same day in a different government department, so FT Adviser tells us, the Treasury’s head of business lending has admitted that interest in the Innovative Finance ISA (IFISA), which was launched on 6th April, has been limited.
"Speaking during a conference hosted by the Tax Incentivised Savings Association", (FT Adviser's correspondent reports) "HM Treasury’s Fayyaz Muneer admitted with such a large number of firms still waiting for approval, the Isa has 'not exploded' in the way the industry thought it would."
Well, no tax, Sherlock.
It's true that our industry did predict IFISAs would prove very popular, but we did assume that customers would have plenty of IFISA products to choose from. Another Crowd estimates that only three firms had had their IFISA licences approved in time for the launch date. We've has been telling our readers for four or five weeks to hold on to their cash until they have a better range of IFISAs to choose from.
We think HM Treasury should be able to join the dots between the demand for a savings product, and the supply of the same savings product, when you haven't got around to approving the suppliers who want to sell it.
Also, the Treasury of all people ought to understand the significance of the Tax Year. Qualifying investors have from now until 5th April to use their savings allowances. Kapish? as our accountant likes to say.
We suppose that it's just imaginable that introducing a costly-to-administer tax collection measure might encourage us all to take advantage of a tax-free saving scheme (that is also costly to administer) but surely, not even Sir Humphrey Appleby would uphold the logic of that arrangement... would he?