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Advisers lobby to protect tax wrapper on non-Isa compliant Keydata plans

AWD Chase de Vere will be lobbying HM Revenue & Customs to protect the tax position of clients who invested in non-Isa compliant Keydata plans.

AWD Chase de Vere senior manager Jason Walker says it would be unfair for affected clients to lose their Isa tax wrapper as the Keydata plans were marketed as legitimate tax efficient investments.

He says: “Our point of view would be if HMRC are going to reclaim tax on affected products, they will be gaining from clients’ investments when it was not clients’ fault and they were going into the products in good faith.

“We will be looking to put across our views to the Government, to the regulator and to HMRC.”

On July 22, administrator PricewaterhouseCoopers said Keydata or Lifemark products invested with Lifemark S.A have been identified as non-Isa eligible.

PwC said income for these products in which over £350m is invested, will be paid gross and clients will need to declare all income paid by the administrators on their personal income tax return.

It added that no early redemptions are possible on the product and said it will be obliged to notify HMRC of such payments.

Walker says: “The biggest loss would be losing the whole Isa status. While it would not be ideal for clients to pay tax on the income, that is a short-term issue.

“Our concern is that if PwC are saying clients will need to pay tax during the lifetime of the investment that would imply that HMRC doesn’t recognise it as a Isa qualifying investment and therefore at maturity our concern is that they would say no, it’s not an Isa. The funds could be moved elsewhere but you would not get the benefits.”

In an update on June 12, PwC said normal HMRC practice is to seek recovery of any tax liability from the Isa manager rather than from individual investors.

But earlier this week PwC joint administrator and partner Dan Schwarzmann could not confirm whether affected plans would retain their Isa status at maturity.

He said: “We have concentrated on the income issues and we will address redemption in due course.”

HMRC would not comment specifically on tax liability but says it will continue to work with the administrators who are working to secure the best outcome for investors.

RK Shipman adviser Christopher Marsham has written twice to local MP Richard Younger-Ross as well as the Prime Minister detailing Keydata events and calling for action.

He says: “My issue is the fact that Keydata has been marketing products as Isas and now it seems they are not. Heads need to roll here, these plans have in place since 2005, who has been regulating them and overseeing what is going on?”


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