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Revenue says kick-outs do qualify for Isas

HM Revenue &Customs has U-turned in its guidelines on kick-out structured products, confirming that they do qualify for Isa investment.

Last week, HMRC issued an update to Isa managers confirming that kick-out plans, where the trigger event is conditional on a financial index reaching a pre-determined point, are Isa-eligible.

In an industry bulletin in April, HMRC warned that certain kick-out plans did not meet the requirements of Isa regulation and told managers offering them to get in touch.

HMRC would not reveal the implications for the tax status of any investments in these plans, prompting many providers to put Isa options for new launches on hold.

After several representations from the industry , HMRC called for no action from managers until it had completed its review.

In its latest bulletin on May 20, HMRC says: “We have now reconsidered and can confirm that kick-out plans, where the trigger event is conditional on a financial index reaching a pre-determined point, are within regulations and are therefore qualifying investments for the stocks and shares Isa.”

Barclays Wealth managing director Colin Dickie says: “We very much welcome the latest news from HMRC regarding kick-out products. Obviously we continued with our regular issuance as our products were not affected by the issue but there is no doubt that the Isa eligibility issue created a degree of uncertainty and to have this now removed is most welcome.”

Meteor Asset Management is reinstating Isa options for new kick-out launches following the clarification.

Managing director Graham Devile says: “We are delighted that HMRC has brought this issue to a speedy conclusion and confirmed there is no question mark over the eligibility of kick-out products being held within an Isa, as we have always believed.”

Baronworth Investment Services director Colin Jackson says: “It is great news but if they had made the right decision at the start, we would not have had a U-turn. It was very unsettling for a lot of investors.”


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