ISA Bulletin Number June 2014

Transcription

1 Savings Schemes Office ISA Bulletin Number June 2014 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 ISA regulations budget amendments Stocks and shares to cash ISA transfers Reporting ISA transfers Holding cash in a stocks and shares ISA from 1 July ISA repayment claims Interest arising on cash held in a stocks and shares ISA deceased investor ISA repairs and voids ISA transfers Enquiries on this bulletin should be addressed to savings.audit@hmrc.gsi.gov.uk

2 ISA regulations budget amendments The ISA regulations have been amended to bring in the ISA changes announced at Budget The changes take effect from 1 July The amending regulations can be found at The main changes: Increase the annual ISA subscription limit to 15,000, which can split between one cash and one stocks and shares ISA as the investor wishes. Increase the Junior ISA limit to 4,000. Relax the eligibility rules around securities that qualify for investment so that certain securities with less than five years before maturity can be placed in a stocks and shares ISA. Remove the 5% cash-like test for certain investments in a stocks and shares ISA. Remove the flat rate charge which applies to interest paid on uninvested cash in a stocks and shares ISA, as well as other restrictions on holding cash within stocks and shares ISAs. Add certain Core Capital Deferred Shares issued by building societies to the investments that can be held in a stocks and shares ISA. Add Money Market Funds and Short Term Money Market Funds (as defined in COLL) to the investments that can be held in a cash ISA. Permit transfers from a stocks and shares ISA to a cash ISA. Updated Guidance Notes will be available on the website shortly. We will issue a Bulletin when they are on line. Stocks and shares to cash ISA transfers From 1 July, savings held in a stocks and shares ISA can be transferred to a cash ISA. The time allowed for the transfer is a maximum of 30 days from the receipt of an appropriate instruction. Cash ISA managers accepting a transfer from a stocks and shares ISA should be aware that small follow on payments may be received after the date of the transfer (for example, where the old manager receives a dividend payment in relation to former investments). Such payments can be added to the cash ISA as part of the transfer proceeds. ISA manager representative bodies have prepared transfer guidelines and a model transfer authority which are available at to Cash ISA Transfer Industry Guidelines June 2014.PDF to Cash Model ISA Transfer Authority June 2014.PDF Theses will be added as an appendix to the ISA Guidance Notes.

3 Reporting ISA transfers When an ISA is transferred in full, the old manager ceases to have reporting responsibility for that account. A number of manager returns for included details of ISAs that the relevant manager transferred out during the period covered by the return. This meant that the same account was reported by both the old and the new manager, resulting in HMRC contacting the investor for clarification. Where in response to such a request, an investor advises that there has been a reporting error, we ask them to provide evidence from the old manager. This causes extra work for the investor, the old manager and HMRC. ISA managers are urged to check their systems and procedures to ensure their annual returns do not include details of ISAs that they have transferred out during the relevant year. Holding cash in a stocks and shares ISA from 1 July The FCA have launched a consultation about the way uninvested cash is held in a stocks and shares ISA. The consultation is available at and responses should be made to the FCA. ISA repayment claims We are experiencing an increase in the number of interim claims made at the end of each month. Because of the need to carry out the appropriate checks, this means some claims may not be paid on the 17 th of the following month. Repayments missing this date will be paid on the 17 th of the subsequent month. The ISA Guidance will be amended at paragraphs 13.7 and as follows: 13.7 Where claims are received by SSO on or before the last working day of a calendar month SSO will aim to pay them on the 17th of the following month. Where the 17th falls on a weekend or public holiday SSO will make payment on the next working day. Any claims not processed in time for payment on 17 th of the month will be paid on 17 th of the next month Where an annual claim exceeds the amounts paid on interim claims for that tax year and SSO is satisfied with the claim, they will aim to pay the balance on the 17th of the month following the month in which the annual return and claim form is received. Interest arising on cash held in a stocks and shares ISA deceased investor From 1 July, any interest on uninvested cash held in a stocks and shares ISA (which must be held with a deposit-taker), is treated in the same way as interest from a cash ISA. This means that where the investor dies, this interest can be apportioned to the date of death. While any interest covering the period prior to death will not be liable to tax,

4 any interest relating to a period after date of death should have tax deducted in the normal way. The treatment of all other investments held at death remains unchanged. ISA repairs and voids From 1 July, where an ISA is repaired/voided, managers should proceed as follows: a) Interest earned on cash (whether arising in a cash or a stocks and shares ISA) up to the date of repair / voiding must be taxed before it is paid out (so the investor receives it net) and the tax must be paid to HMRC (b) Where the manager has received net income and has claimed tax back from HMRC, they must repay the tax to HMRC and pay income net to the investor (c) Where the manager received gross income, they should pay the income out gross to the investor. In all cases investors must be made aware that there may be more tax to pay. In the case of (c) above, the total amount of tax due will depend on the investor s tax rate. In the case of (a) and (b), additional tax will only be due if the investor is liable to pay tax at the higher (40 per cent) or additional (45 per cent) rate of tax. ISA transfers TISA maintains a Transfer Database which holds contact details for ISA managers. This can be used for follow-up queries that arise from ISA transfers. ISA managers who do not currently use the Transfers Database can sign up and TISA will provide them with passwords so they can access the information. The 2 parts to the database: (i) provide a contact for day to day transfer issues, and (ii) provide an escalation route for cases that are sticking. The information held is shown below. It would be very helpful if all managers who use the database ensure that their postal addresses for transfer requests is included along with contact name / number / addresses and that all of the details are up to date and correct. Details to be added / amended should go to isatransfers@tisa.uk.com. Database 1 For the day to day contacts (database 1) please provide as much of the following information as is relevant to your organisation. Brand / Name (Additional details / information if relevant): Postal address for transfer requests: Alternative postal address for couriers: Contact names: Contact numbers: Contact s: Working hours:

5 Will accept residual income payments: yes / no Residual income minimum payment accepted: Partial transfers allowed: yes / no Specie transfers allowed: yes / no Additional information (e.g. product restrictions): Database 2 For the senior contacts database (database 2), please provide contact name, numbers and s for senior (escalation) contacts.