The ISA Bulletin keeps ISA managers informed of any new developments relating to the ISA scheme. Please ensure the appropriate people in your organisation read it.
We suggest that you keep bulletins at the front of your copy of the Guidance Notes for ISA Managers.
This bulletin contains articles on:
Enquiries on this bulletin should be addressed to:
David Taylor
HM Revenue & Customs (SSO Liverpool)
Room 330
St John’s House
Merton Road
Liverpool, L75 1BB
Tel: 0151 472 6156
Email: David Taylor
ISA Bulletin 11 informed you that the ISA limit is to be raised to £10,200 on 6 October 2009, up to £5,100 of which can be saved in cash, for people aged 50 or over.
The draft regulations are to be amended so that people aged 50 or over on 5 April 2010 will be able to subscribe up to new limit from 6 October 2009. (In other words, people who become 50 between 6 October 2009 and 5 April 2010 will not have to wait until their 50th birthday before subscribing up to the new limit.)
Managers do not need to obtain fresh application forms from investors aged 50 or over before they subscribe the new higher limits.
Following the changes to the ISA subscription limits, the following changes should be made to the declarations in ISA application forms
The revised declarations do not include monetary limits. However, managers may, if they wish, include a reference to the current subscription limits in their declarations. For example, 'I have not subscribed and will not subscribe more than the overall subscription limit (currently £7,200) in total to a cash ISA and a stocks and shares ISA in the same tax year.'
ISA Bulletin 2 included the following guidance concerning ISA transfers:
ISAs do not have to be rejected simply because the personal information provided differs from that provided to the old manager
Some managers tell us that they reject transfers-in if the personal information provided to them differs from that provided to the old manager. We do not want managers to reject transfers and return the funds to the old manager unless absolutely necessary; we therefore suggest that they apply the following rules:
One common example is where the investor has given the old manager a different National Insurance number. Often they have transposed a couple of the numbers, something that is very easy to do. Another is where the date of birth differs. Such errors can normally be resolved by contacting the investor. So, a transfer should not be rejected if it’s clear that the correct ISA has being transferred, but some of the personal information given to new manager differs from that held by the old manager. Instead, the new manager should accept the transferred funds and resolve the discrepancy.
Applying these two rules should mean that managers reject transfers-in only where it’s clear that the wrong ISA was transferred – or the ISA was transferred in error.
This guidance is currently generating a number of queries from managers about what they are expected to do (if anything) about mismatched information. We would suggest that the following specific guidance should be adopted.
1. Nothing in this guidance should detract from the old manager’s absolute responsibility to ensure that the investor whose ISA he is transferring is one and the same person as the investor whose instructions to transfer he has received (usually on an ISA Transfer Authority form – or equivalent – forwarded by the new manager).
2. If there is a mismatch of information which raises a doubt, the old manager should resolve the discrepancy before initiating the transfer.
1. On receipt of the transfer from the old manager, the new manager should not reject the transfer unless he believes it to be the ISA of the wrong investor.
2. Where the addresses differ, the new manager can reasonably assume that the address he holds, taken from the Transfer Authority form (having been completed by the investor very recently), is the investor’s current permanent residential address account. In many cases, the new manager will be applying identity checks which will also serve to validate the address. In these circumstances, the manager need take no action (unless identity validation fails in which case money laundering prevention procedures will be followed).
3. Where there is a difference in the date of birth or National Insurance number, it cannot be assumed that the version given on the Transfer Authority form is the correct one. In such cases, the new manager should seek to resolve the discrepancy, usually by contacting the investor or checking with other non-ISA records he may hold.
4. The new manager should record in his system the information given on the Transfer Authority form until such time as he resolves any discrepancy and, if necessary, updates it. (This may mean that end-of-year returns of information to HM Revenue & Customs contain information which is subsequently found to be incorrect.)
In cases of difficulty or unusual circumstances, managers should refer to David Taylor for advice.
We have been asked to clarify the possible use of agency cross trades in relation to ISA transactions.
An agency cross is a security transaction where a broker matches the buy and sell orders of two of its clients directly, rather than going to a market-maker. The broker collects a commission from each client, just as it would if the orders had executed through the market; however it may be able to save clients the spread charged by a market-maker.
Agency cross trades are regulated in order to ensure brokers do not favour one client over the other - in particular to ensure that both clients get fair prices. The broker therefore normally uses the mid-market price on screen at the time or the trade.
Agency cross bargains therefore comply with the requirement of the ISA Regulations that all purchases and sales must be made at an open market price (see paragraph 10.7 of the Guidance Notes).
However, if an ISA Manager offers a Share Exchange service (see paragraph 6.14 of the Guidance Notes), he cannot use an agency cross trade to buy the shares from the investor (or the investor’s spouse) because this is specifically prohibited in the regulations.
The Guidance Notes will be amended in due course to incorporate this guidance.
Part of the purpose of the ISA Bulletins is to clarify areas of the Guidance
Notes for ISA Managers. If you feel that any aspect of the guidance is unclear
you should contact David Taylor. His telephone number is 0151 472 6156.
