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
Telephone: 0151 472 6156
Email: Savings Audit
HM Revenue & Customs (HMRC) issued guidance (PDF 41K) for Keydata ISA investors on 13 November 2009. All of the ISAs affected are stocks and shares ISAs. Investors whose capital has been misappropriated will be issued with a certificate showing the amount of their original investment with Keydata. This may include sums transferred in from other ISA managers. The investor will be able to subscribe up to the amount shown in the certificate in a single transaction with another stocks and shares ISA manager. This is in addition to the annual subscription limits. A manager accepting such a sum should not report it as a subscription for the year but must treat it as a transfer in. If the investor has funds available he can subscribe any time after he has received the certificate. He does not need to wait for the Financial Services Compensation Scheme to pay compensation. The final date to make the subscription is 5 April 2011.
We will provide further details and a copy of the certificate in a later Bulletin when they are available, and the ISA Regulations will be amended soon.
It is, of course, up to the ISA manager whether or not they want to accept sums in these circumstances.
We have been having some difficulty in reconciling the annual claims made by some ISA managers. Apparently they are including tax overclaimed from this office - and/or flat rate charge deducted from interest paid on uninvested cash in stocks and shares ISAs - on their CT61 Returns to HMRC. This is not the correct way of accounting for the payment due; it must be sent to SSO Liverpool in accordance with the guidance at paragraph 13.29 of the Guidance Notes.
We will not be asking for any past mistakes to be corrected, but any annual claims that are received after today, and that show a payment due to HM Revenue & Customs (HMRC), must be accompanied by a cheque for the payment due.
The guidance for ISA managers on how to submit annual returns of information on magnetic media has been updated. The changes are as follows:
The revised ISA Magnetic Media Specification has been placed on the HMRC website the changes are highlighted in yellow.
Only persons approved by Savings Schemes Office can manage ISAs. To obtain approval a person must be eligible to manage an ISA and must make an application to Savings Schemes Office. The application form has been revised. You can view the revised form - and download a copy if needed - at Applications for approval as an ISA manager
The Child Support Collection and Enforcement (Deduction Orders) Amendment Regulations 2009) (opens new window), which came in force on 3 August 2009, enable the CSA to claim money from the accounts of customers who have outstanding debts with them. The CSA will instruct financial institutions to freeze a lump sum for a 21-day appeal period. After this period the money will either be paid over to the CSA or, if the appeal was successful, the freezing order will be cancelled.
We have been asked whether there are any ISA implications if an enforcement order is attached to an ISA account.
The funds will remain in the beneficial ownership of the investor during the period that the account is frozen. The 'frozen' funds may therefore remain in the account and the account will remain an ISA. If the manager transfers the sum covered by the enforcement order to a suspense account pending resolution of the appeal, that sum can be paid back into the ISA without counting as a fresh subscription if the appeal is successful and the freezing order is cancelled.
We are receiving an increasing number of enquiries from savers who have withdrawn money from an online ISA in error. Typically, the saver transposes the account numbers of the ISA and the linked current account. As a result, the investor withdraws, say, £3,600 from his ISA instead of (as intended) subscribing £3,600. And once the money has been withdrawn, the only way in which it can be put back into the ISA is by way of a fresh subscription that counts towards the annual subscription limit.
When savers contact us, they often say that the manager's website was poorly designed and did not warn them that they were withdrawing money from their ISA. If it had, they say, they would have cancelled the transaction and correctly paid money into their ISA instead.
We therefore recommend that managers review their online procedures to see what could be done to prevent savers from withdrawing funds from their ISAs in error. One solution might be a pop-up that contains the following message (or something similar)
Warning!
You are attempting to remove money from your tax-free ISA.
Is this what you want to do?
The screen could be provided with Yes and No buttons, which would enable the saver to continue with the transaction or to cancel it.
The London Stock Exchange (LSE) have confirmed that it is possible for the shares of a company to appear in their own right on the official UK list as maintained by the FSA in their role as the UK Listing Authority and then to be traded as a Depositary Interest (DI) on the LSE.
This occurs where the company is an overseas company – because shares in overseas companies are not able to settle in CREST. The company therefore creates a DI in order to enable it to settle in CREST and it is these DIs that are traded on the LSE.
The key point is that the shares are included on the official UK list maintained by the Financial Services Authority (in its capacity as the UK Listing Authority). That being the case, the shares will be a qualifying shares for stocks and shares ISAs (provided that, if acquired after 6 October 2005, the 5 per cent test is satisfied - see paragraph 7.39 of the Guidance Notes).
We therefore recommend that ISA managers should look at what is included in the official UK list. If the underlying investment of a DI traded on the LSE is a share that is included in the official UK list - and that share has the same ISIN as the DI traded on the LSE - the DI is a qualifying investment. (The underlying investment [the share] is a qualifying investment because it is included in the official UK list as maintained by the FSA).
We have been asked whether securities issued by the European Investment Bank (EIB) are qualifying securities.
The European Investment Bank (Banque Européenne d'Investissement) was established in 1958 under the Treaty of Rome. We accept that - for the purpose of the ISA legislation - the EIB can be considered a body corporate with share capital. The normal rules on qualifying securities (see paragraphs 7.7-7.15 of the Guidance Notes) therefore apply to securities issued by the bank.
The Cyprus Stock Exchange has been designated as a Recognised Stock Exchange (RSE) with effect from 22 June 2009. The list of Recognised Stock Exchanges has been updated accordingly.
Securities admitted to trading and listed on the EU regulated markets of the Cyprus Stock Exchange (those regulated under Title III of the Markets in Financial Instruments Directive (MiFID) will meet the HMRC interpretation of 'listed' as set out in section 1005 (3) (a) and (3) (b) Income Tax Act 2007. However, securities traded on the Emerging Companies Market (a multi-lateral trading facility) will not meet the HMRC definition of 'listed'.
NYSE Amex meets the HMRC definition of a recognised stock exchange because it is now shown as a US National Securities Exchange in its own right.
On that basis we have concluded that securities listed on the Equity Market of NYSE Amex would meet the HMRC definition of 'listed' as set out in section 1005 Income Tax Act 2007.
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.
