The Individual Savings Account Regulations 1998

[F1 Qualifying investments for an innovative finance component U.K.

8A.— (1) This regulation specifies the kind of investments (“qualifying investments for an innovative finance component”) which may be purchased, made or held under an innovative finance account.

(2) Qualifying investments for an innovative finance component to which paragraph (1) refers are—

(a) payments by a borrower made under an article 36H agreement where the conditions in [F2 paragraphs (3) and (3A)] are met;

(b) payments by an assignee for the right to exercise the rights of the lender under an article 36H agreement where the conditions in [F3 paragraphs (3)(c) and (d) and (3A)] are met;

(c) payments by a novatee in respect of the novation of an article 36H agreement where the conditions in [F4 paragraphs (3)(c) and (d) and (3A)] are met;

[F5 (ca) debentures where the conditions in paragraph (4) are met;]

[F6 (cb) investments that meet the condition in paragraph (5) and—

(i) are qualifying investments under regulation 7(2)(f), or

(ii) would be qualifying investments under regulation 7(2)(g), but for the condition in paragraph (6) being met in respect of them;]

(d) cash deposited in accordance with regulation 6(4) to (6); and

(e) payments by way of compensation in respect of a matter described in regulation 5DD in relation to an investment specified in this regulation.

(3) The conditions in this paragraph are—

(a) the payment is a payment of interest [F7 , capital or profit, or any combination of these payments];

(b) the payment is made to the account manager of the account investor;

(c) the article 36H agreement is made on genuine commercial terms; and

(d) the article 36H agreement is not part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax.

[F8 (3A) The conditions in this paragraph are—

(a) the payment is not made to the lender by reason of that person’s or another person’s status, whether past, present or prospective, as an employee, director, partner, trustee or the holder of any office;

(b) the borrower is not connected with the lender, and for this purpose “connected” has the meaning given in section 170 of ITA 2007 with the omission of “in period A” in subsection (7); and

(c) the payment must not be connected with any other investment held outside an account by the account investor or any other person, and for this purpose an investment is to be treated as connected with another investment if—

(i) either investment was made with reference to the other or with a view to enabling the other investment to be made on particular terms; or

(ii) the terms on which either investment was made would have been significantly less favourable if the other investment had not been made.]

[F9 (4) The conditions in this paragraph are—

(a) the debenture is a transferable security issued by a company or a charity;

(b) the investment in the debenture is facilitated by a person carrying on an activity of the kind specified in article 25 of the Regulated Activities Order 2001 through an electronic system operated by that person in [F10 the United Kingdom or] an EEA State for such purpose;

(c) that person or another, acting under an arrangement with that person or at that person’s direction, in respect of the investment, treats the account investor as its client and undertakes on behalf of the account investor to—

(i) receive payments in respect of the debenture;

(ii) make payments, when due, in respect of the debenture to the account investor; and

(iii) exercise, or facilitate the exercise of, rights in respect of the debenture;

(d) the investment in the debenture is not part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax;

(e) the debenture is not made available to the account investor by reason of their or of another’s status, whether past, present or prospective, as an employee, director, partner, trustee or the holder of any office;

(f) the account investor is not connected with the issuer of the debenture, and for this purpose “connected” has the meaning given in section 170 of ITA 2007 with the omission of the reference to “in period A” in sub-section (7);

(g) the debenture must not be connected with any other investment held outside an account by the account investor or any other person, and for this purpose an investment is to be treated as connected with another if—

(i) either was made with reference to the other or with a view to enabling the other to be made on particular terms;

(ii) the terms on which either investment was made would have been significantly less favourable if the other investment had not been made; and

(h) the investment in the debenture is made on genuine commercial terms.]

[F11 (5) The condition in this paragraph is that the investments are subject to a notice period that would prevent the condition in regulation 4(7) from being met in respect of them if they were held in a stocks and shares account.

(6) The condition in this paragraph is that the instrument constituting the scheme provides for it to operate limited redemption arrangements in accordance with Rule 6.2.16(7) of COLL.]]

Textual Amendments

F1 Reg. 8A inserted (6.4.2016) by The Individual Savings Account (Amendment No. 2) Regulations 2016 (S.I. 2016/364), regs. 1, 12

F2 Words in reg. 8A(2)(a) substituted (6.4.2023) by The Individual Savings Account (Amendment) Regulations 2023 (S.I. 2023/264), regs. 1, 7(a)

F3 Words in reg. 8A(2)(b) substituted (6.4.2023) by The Individual Savings Account (Amendment) Regulations 2023 (S.I. 2023/264), regs. 1, 7(b)

F4 Words in reg. 8A(2)(c) substituted (6.4.2023) by The Individual Savings Account (Amendment) Regulations 2023 (S.I. 2023/264), regs. 1, 7(b)

F5 Reg. 8A(2)(ca) inserted (1.11.2016) by The Individual Savings Account (Amendment No. 3) Regulations 2016 (S.I. 2016/977), regs. 1, 7(a)

F6 Reg. 8A(2)(cb) inserted (6.4.2024) by The Individual Savings Account (Amendment) Regulations 2024 (S.I. 2024/350), regs. 1, 16(a)

F7 Words in reg. 8A(3)(a) substituted (6.4.2023) by The Individual Savings Account (Amendment) Regulations 2023 (S.I. 2023/264), regs. 1, 7(c)

F8 Reg. 8A(3A) inserted (6.4.2023) by The Individual Savings Account (Amendment) Regulations 2023 (S.I. 2023/264), regs. 1, 7(d)

F9 Reg. 8A(4) inserted (1.11.2016) by The Individual Savings Account (Amendment No. 3) Regulations 2016 (S.I. 2016/977), regs. 1, 7(b)

F10 Words in reg. 8A(4)(b) inserted (31.12.2020) by The Taxes (Amendments) (EU Exit) Regulations 2019 (S.I. 2019/689), regs. 1, 24(4) (with regs. 39-41); 2020 c. 1, Sch. 5 para. 1(1)

F11 Reg. 8A(5)(6) inserted (6.4.2024) by The Individual Savings Account (Amendment) Regulations 2024 (S.I. 2024/350), regs. 1, 16(b)