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I have spread this to a few UK investment groups
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Done, cheers
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Wonāt it seem a little odd/aggressive/contrived for them to get the same long message over and over? To be clear, the message is extremely clear and well written. Also Iām pretty sure they wouldnāt have understood what this was about without your explanation! But I wonder if by now a shorter or just generally adapted version of your shared google doc might be a good idea?
Iāve tweaked mine and trimmed slightly.
I didnāt know about this method for updating HMRC with legalisation.
On that note, I also think itās worth noting that they think parents should pay tax on income arriving from their 16 or 17 year old kidās ISA (not a JISA) if this money that is invested was gifted to the kid and once it passes Ā£100 in gain. Iāve no idea of an ISA provider that can provide the details of a widely distributed index fund, complete with reinvested dividends moving a constant flurry of different S104 averages around etc!
https://community.hmrc.gov.uk/customerforums/pt/cf94aee9-4f2d-ee11-a81c-000d3a0d1621
Clever move by Freetrade. Other platforms should follow suit. All that can should mention this on social media to.
ETFās are allowed in ISA shares accounts. When you buy an ETF, you are essentially buying a fractional share of each of the companies in the index. There is no good reason why fractional shares should not be allowed in ISA.
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Since nobody has asked yet, what happens to our ISAs if we hold fractional shares in there and HMRC clarifies that theyāre against the rules?
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My guess is that freetrade/we will be forced to sell our fractional shares straight away
That is clear. They will be removed from your ISA account. Furthermore you will be liable for any capital gains tax due.
The issue, I believe relates to the legal status of fractional shares. In law these are not āsecuritiesā but rather āshares of equity interestā.
Now, there are consequential ramifications of this. I am only guessing here that the HMRC is taking a strict stance on it. It is also obvious that the HMRC has already told brokers to sort out client ISAs hence the message from Freetrade that they are āresistingā. Other relevant industry players are also resisting.
There needs to be legislative changes for the matter to be resolved one way or the other.
Or Freetrade will pick that cost up: āWe want to reassure customers that Freetrade would be responsible for settling any tax liabilities due on fractional shares in our customersā ISAsā Freetrade in the news šļø - #1278
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To be clear the liability, if exists, is the account holders.Additionally Freetrade may also have other costs and ISA irregularity fines to deal with.
Sure Freetrade may compensate you for tax liabilities, that is not a legal obligation. Furthermore, it is IMHO unlikely to compensate you for any material losses incurred in any forced sale. Though, I donāt imagine that forced sales will be necessary (or needed) just a straightforward move from ISA to GIA.
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So either way would mean either potentially forced to sell fractional shares at a loss in ISA. Or now liable for dividend tax and capital gains if forced to move to my GIA as well as losing tax free capital that Iād built up.
Personally am not pleased that not having had the option to buy whole shares in the ISA I am now potentially penalised.
My question is how could fractionals have been offered in the first place had they not technically been allowed?
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There appears to have been a presumption across various platforms that they were actually allowed so not seen as an issue until it recently arose.
If thatās the case, a āpresumptionā is not reassuring. But on the other hand, arenāt there strict regulations/approvals in place that would have spotted this when they applied for a licence?
You can buy whole shares using a limit order. My guess is that this will be sorted out between the various industry figure heads / industry spokes people and HMRC. It would be a very poor look given fractional trading is one key drivers of UK Fintech, a sector the government have supported and championed
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Survey complete / Letter sent. Iāve also flagged this to my MP. 
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Thank you, I was not aware whole shares only via limit orders. Not perfect as I guess you then have to always hold more cash in the account to cover the eventuality? And in worst case scenario, if I already have fractionals in a stock, adding more with limit orders isnāt going to make a difference.
You could always try to make up fractional shares to whole shares but that solution is a bit annoying
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Done, hopefully they will see sense on this.
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