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)
3rd Floor, St John’s House
Merton Road
Liverpool
L75 1BB
Tel: 0151 472 6156
Email: David Taylor
All PEPs became stocks and shares ISAs and the Annual Return of Information for 2008-09 will report former PEPs as ISAs using the ISA reporting format (see chapter 14 of the Guidance Notes). This means that managers must report the investors’ date of birth (paragraph 14.16).
Investors who applied to open a PEP before 1993 were not required to supply their dates of birth. PEP and ISA Bulletin 41 therefore advised managers who held pre-1993 PEPs to check their records to see whether they hold the investor’s date of birth – and where a date of birth is not held, to contact the customer requesting it. We have now been asked what managers should do if, despite their best efforts, they have been unable to obtain the investor’s date of birth.
Where a manager has been unable to obtain an investor’s date of birth, the Date of Birth field on the Annual Return of Information should be left blank.
The revised form ISACOM100(OCR), for use for 2008-09 and later years, is now available. A specimen copy will be placed on the website (at Annual Returns of Information for ISA managers) within the next fortnight.
We have had a fresh look at the guidance we have issued at paragraph 10.47 about the treatment of fees/charges rebated by managers to ISA clients. There are three scenarios we have been asked to consider. Hopefully these cover the way the industry operates in practice.
In many cases a Management Company will pay a percentage of their AMF (annual management fee) to the introducing agent/IFA. This payment is a payment made to the IFA for the retention of the business. There is no agreement with the investor for a fee reduction.
These monies are not considered to be the investors funds and therefore not a permitted credit to the ISA other than by way of a subscription. The rebate is being paid outside the ISA to a third party. If the third party decides to pass some or all of the rebate back to the investor it can only go into the ISA as a fresh subscription. This is in line with the current published guidance.
This occurs when the Fund Manager has an agreement with the ISA manager, who in turn has an agreement with the Investor, to charge a reduced AMF on a fund where, for administration purposes, only a single AMF charging facility exists.
The Fund Manager will therefore make a payment reflecting the overcharge to the ISA manager for the benefit of the investors ISA or issue additional units/shares to the investors ISA. The rebate will not count against the annual subscription limit.
For example, the fund has a fixed fee of 3 per cent but the manager negotiates either a reduced fee of 2 per cent or ‘such reduction as he can negotiate’. The agreement with the investor is for a 2 per cent fee or such reduced fee as can be negotiated. The rebate can go into the ISA without counting as a fresh subscription.
Where the investor holds several different investment types, including an ISA, on a WRAP platform and the WRAP platform contains a CASH account, the rebate of the over charged AMF may be paid into the CASH account (which does not affect the ISA) or (if the rebate is paid in respect of an ISA investment) directly into the ISA account, in which case it does not count as a fresh subscription.
If the rebate is paid into the CASH account, the WRAP manager may then transfer that part of the rebate that relates to an ISA investment to the ISA account. If he does, the transferred rebate will not count as a fresh subscription.
We will update the Guidance Notes but before we do we would like to check whether there are any scenarios that are not covered by the examples above. The principle we will apply in all these cases is to establish whether there is a contractual right for the investor to receive the rebate (as in scenarios 2 & 3, thereby allowing it to be paid into the ISA without counting as a fresh subscription) or not (as in scenario 1 where any rebate paid into the ISA would count as additional subscription). This is the approach we would also take in any cases where a rebate/discount of an initial charge is made.
It would be helpful if managers could let us know by the end of February of any different systems they operate that are not covered by this bulletin.
The two cash ISA transfers databases launched as a result of ISA Bulletin 3 back in August 2008 have now successfully been up and running for some time. TISA maintain these web-based databases for ALL ISA managers (not just those who are TISA members).
Database 1 provides contact details for normal day-to-day enquiries/chases as per steps 3 or 4 of the guidelines. (These may be the same contact details as provided at the bottom of the Client Transfer Authority form.)
Database 2 is strictly for use only in instances where an issue needs to be escalated to a senior manager (for example, frequent or systemic delays).
Each database contains the following information fields:
(Postal addresses have been recently added as a response to demand from the industry.)
In order to ensure that the databases are accessed only by ISA Managers, for the purpose of escalating and resolving transfer issues, the database web addresses and the passwords (which are changed on a quarterly basis) are provided only to those managers listed on the database.
The Information Commissioner’s Office have recognised that ISA managers need to share information as appropriate and that to assist in firms reassuring themselves as to the security of the data, they use the ISA Secure Database to verify the identity of the firm they are speaking to.
As a security aid, therefore, TISA allocate a code (which is also changed on a quarterly basis) to each ISA manager listed on the databases. If the person calling a manager can provide the correct code, the manager can be assured that the call is from a genuine source.
In order for the system to be of use to the industry as a whole, we encourage all managers to send the appropriate contact details for their firm for each of the databases, including an appropriate postal address, to ISA Transfers if they have not yet done so. (If a manager only wants phone numbers to be included on the database, TISA must be notified of a contact email address so that the manager can be informed of the web address and password.)
It is also important that managers notify TISA of any changes in their contact details at the earliest opportunity so that the database remains relevant.
The current ISA transfer forms, which can be downloaded from the HMRC website at Transferring an ISA , will be updated in the next fortnight and renamed transfer history forms in order to comply with the guidance in ISA Bulletin 3.
The form will also be updated to delete the line 'Any income receivable after the date of transfer will be forwarded' and the associated tick box.
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.
