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£5M Isa tax bill led to Keydata collapse

Keydata Investment Services went into administration this week after a tax bill of at least £5m led the firm to be declared insolvent.

Administrator PricewaterhouseCoopers says, on the basis of current information, it believes the £3bn of clients’ funds have been held in secure custody accounts and will look to confirm as soon as possible that assets are secure.

Blue Sky Asset Management, whose plans are administered through KIS, believes client assets will be safe as they are held via Keydata Product Nominees Ltd, which has no liabilities and is not dependent on the solvency of KIS. Keydata’s VCTs are unaffected as they are separate entities.

Moneymarketing.co.uk revealed the company was subject to a tax bill of at least £5m relating to a number of original issues of its defined income plan which were not properly incorporated in Luxemburg five years ago and sold through Isas.

PwC has confirmed that a number of Keydata products may not comply with Isa regulations, highlighting the firm’s Secure Income Bonds issues 1-3 and Defined Income Plans 1-8. It says tax liabilities associated with these products are one factor that led to the administration.

It is understood Keydata was in talks with HMRC on how to pay the bill when the FSA stepped in and applied to the Royal Courts of Justice for the firm to be put into administration on the grounds of insolvency.

Keydata is understood to have offered an alternative plan to the FSA which was rejected. A source close to the firm says: “Had it not been for the FSA’s actions, there would not have been this present uncertainty to consumers.”

Jubilee Financial Products and NDFA have both contacted PwC to declare an interest in KIS, with other bidders likely. Jubilee chief executive Adam Habib says: “I know quite a few institutions used Keydata for administration and it is really the detail of those agreements which will determine how much of the business will remain.

“PwC will have to go through each legal agreement in detail to find out what was paid when, then track records to confirm that cashflows have been made and whether there is more due and then come up with an agreement for each entity that is using Keydata’s administration services.”

The FSA and HMRC refused to comment.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Ned Naylor - IFA 15th June 2009 at 9:56 am

    The Keydata situation STINKS
    I have contacted the FSA today and ascertained that there is no procedure for an investment firm to have any new product checked independently to ensure that the products construction complies with relevant rules and legislation.

    As it is HMRC who have deemed the KIS products NOT compliant with ISA and other rules, the question needs to be asked, DID Keydata get the products checked out by HMRC or independently before they started to market them to us and the public?

    IF NOT why the hell didn’t they and the second part of the same question, why is there no independent checking procedure for financial products?

  2. RE: Bull run!
    I just think that it is absolutely diabolical that companies can set themselves up offering investments and that there is no regulation on whether their products fall within the legal guidelines. I am totally disgusted at the situation we investors have found ourselves in.

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