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ISAsGuidance Notesfor ISA Managers

GUIDANCE NOTES FOR ISA MANAGERSThese notes provide general guidance for ISA managers on how to operate the ISAschemes. They replace all previous HM Revenue & Customs guidance.The notes are not binding and do not affect any person’s right of appeal. Nor are they afull statement of the law as it applies to ISA managers. ISA managers should refer to therelevant legislation where appropriate.07/20143

Updates07/20144

Contents1.INTRODUCTIONWhat is an ISA?What was a PEP?Who are the Guidance Notes for?HMRC contact addresses and phone numbersHow the ISA scheme worksThe legislationInvestor enquiries2.THE ISA MANAGERWho can manage ISAs?Applications for approval as an ISA managerCeasing to be a manager3.6.16.66.196.51STOCKS AND SHARES ISASQualifying investments for stocks and shares ISAsShares being brought to listingShares paid for in instalments07/20145.15.55.75.85.24ISA SUBSCRIPTIONSSubscription limitsCash subscriptionSubscription by transfer of sharesSubscriptions that do not count towards the annual subscription ING AN ISAWhen can an ISA be opened?CancellationWithdrawalCompletion of application formsApplying for an ISA on behalf of someone else6.3.43.143.173.21APPLICATIONS AND TERMS AND CONDITIONSApplications to subscribe to an ISAISA applications in writingISA applications not in writingApplications made through third partiesISA terms and conditionsEnquiries and further adviceImaging application forms and written declarationsModel application form (stocks and shares ISA)Model application form (cash ISA)Model telephone application script5.2.12.132.24THE INVESTORWho can subscribe to an ISA?The “one-ISA-of-each-type-a-tax-year” ruleInvestors’ tax returnsDeath of an investor4.1.11.21.31.51.111.181.197.17.567.605

ContentsChanges to investments held in a stocks and shares ISARights issues and other offers to shareholdersBonus issuesRecognised Stock ExchangesQualifying Security check flow chart8.CASH ISASQualifying investments for cash ISAsConnected accounts9.12.112.712.23ANNUAL RETURNS AND CLAIMSWhat managers can claimHow to claimInformation to be supplied before claims are madeBasis of annual return and claimsAssessments and recovery of tax and chargesChange in rate of tax credit and basic rate of tax07/201411.111.2011.3011.33CLOSING AN ISAWhen can an ISA be closed?Death of an investorRepair and 4710.47a10.4810.5610.59TRANSFERRING AN ISATransferring an ISAISA subscriptions after transferClaims for payment of taxCancellation of a transfer12.9.19.29.149.189.26MANAGING AN ISADelegation of the manager’s functionsInvestment rulesThe open market price ruleWithdrawals from an ISAUninvested cash held in a stocks and shares ISACompensating investorsBlankPre-funding UK income tax reclaimable from SSO to an ISAManager’s fees and chargesReimbursed fees and chargesUsing an ISA as security for a loanStock lendingChild Maintenance Deduction Orders11.8.18.6LIFE INSURANCE POLICIES IN ISAsQualifying investmentsPolicies of life insuranceConnected policiesLoansVoiding and removing policies of life insurance in 3.406

ContentsRepayment of foreign tax14.13.41RETURNS OF INFORMATIONThe requirement to make a returnWhat period must be covered?What must be returned?How to make returns of information14.114.314.414.6Submission of returnsPenalties14.1914.2215.ANNUAL RETURNS OF STATISTICAL INFORMATION (market value)The requirement to make a market value returnWhat period must be covered?What must be returned?How to make market value returns of statistical informationHow to complete form ISA14(Stats) and form ISA14a(Stats)Submission of annual returns of statistical informationPenalties16.ANNUAL RETURNS OF STATISTICAL INFORMATION (subscriptions)The requirement to make a returnWhat period must be covered?What must be returned?How to make annual returns of statistical information (subscriptions)How to complete form ISA25(Stats) and ISA14a(Stats)Submission of annual returns of statistical information (subscriptions)Penalties17.18.118.218.3TYPES OF JISACash and stocks and sharesMeans of payment of subscriptionsMinimum 3817.5817.6117.64JUNIOR ISA - INTRODUCTIONOverview of the JISAThe legislationWho can provide JISAs19.16.116.316.516.816.916.1016.12THE HM REVENUE & CUSTOMS INSPECTIONIntroductionBefore the inspectionThe inspectionAfter the inspectionBreaches in the ISA rulesStrict treatment of breaches in the ISA rulesSimplified voidingAudit protectionBreaches outside auditSimplified voiding flow 7

ContentsCharges20.JISA APPLICATIONSApplications to open a JISAJISA applications in writingPersonal informationDeclarationAuthorityThe management agreementJISA applications not in writingApplications made through third partiesJISA terms and conditionsEnquiries and further adviceCompletion of applicationsImaging application forms and written declarationsExample of written application formPhone applications21.23.1MANAGEMENT OF THE JISACommon management rulesRepairing JISAsRepairs – removal of excess subscriptionsRepair – incomplete or incorrect application formRepair – non-qualifying investmentsUsing a JISA as security for a loanJISA rollover at age G INVESTMENTS FOR THE JISAQualifying investments for the NS TO A JISAWho can subscribe to a JISA?When can subscriptions to a JISA be accepted?Subscription yearFeeder accountsSubscriptions between ages 16 and age 18Direct debit indemnity schemeGeneration of a cash subscription by disposal of existing investmentsBuilding Society bonus 020.1120.1220.1320.14THE REGISTERED CONTACTThe registered contactApplying to be the registered contactApplying to be the registered contactNon-written applications to be the registered contactImaging registered contact applicationsChange of registered contact – existing registered contactApplication to be a registered contactPhone application to be a registered contact22.19.424.124.224.324.424.524.624.78

Contents25.TRANSFERRING A JISAGeneralInternal transferExternal transferExternal transfer formsCancellation of a transferRefusal to accept an external transferExample of written external transfer applicationExternal transfer phone applicationsJISA external transfer form26.WITHDRAWALS FROM A JISAWhen can investments be withdrawn from a JISA?Closure of the JISADeath of the childChild’s 18th birthdayVoid JISAsVoid life insurance policies and chargeable eventsTerminal illness27.28.128.2ANNUAL STATISTICAL RETURNSAnnual statistical returns30.27.1RETURNS OF INFORMATIONOverviewReporting at age 1829.26.126.226.326.426.526.626.7ANNUAL RETURN AND CLAIMAnnual return and DITAudit30.1APPENDICESAppendix AAppendix BAppendix CAppendix D07/2014BlankCash ISA to cash ISA transfers – suggested best practiceSample S975 ITA 2007 certificateBlank9

Chapter 1IntroductionCHAPTER 1INTRODUCTIONWhat is an ISA?1.1What was a PEP?1.2Who are the Guidance Notes for?1.3 to 1.4HMRC contact addresses and phone numbers1.5 to 1.7How the ISA scheme works1.11 to 1.17The legislation1.18Investor enquiries1.19 to 1.2007/201411

Chapter 1IntroductionWhat is an ISA?1.1ISA stands for Individual Savings Account. ISAs first became available on 6th April1999. Guidance of the ‘Junior ISA’, which became available from 1 November2011 is at Chapters 18 – 30.What was a PEP?1.2PEP stands for Personal Equity Plan. PEPs first became available in January1987. The last date on which an investor could subscribe to a PEP was 5 April1999, but PEPs in existence at that date were allowed to continue. PEPs inexistence at 5 April 2008 were reclassified as stocks and shares ISAs.Who are the Guidance Notes for?1.3The Guidance Notes are for ISA managers. They provide guidance on how tooperate the ISA scheme. They replace all guidance given in previous editions ofthe Guidance Notes for ISA Managers, the Guidance Notes for PEP Managers,and PEP and ISA Bulletins and all other guidance issued before July 2014.Former PEP managers may wish to retain their Guidance Notes for PEP Managersbecause aspects of PEPs prior to 6th April 2001 have not been reproduced in thesenotes.1.4BlankHMRC contact address and phone numbers1.5HMRC administers the ISA scheme through its Savings Schemes Office (SSO)office at St John’s House, Liverpool.If you have any queries about the operation of the ISA scheme, you can write to:HMRCSpecialist Personal TaxSavings Schemes Office S0708PO Box 201BootleL69 9AJ1.61.707/2014The telephone and fax numbers areClaimsTelephone03000 54717103000 547067Fax03000 547377Returns of individual information(Permitted returns media)03000 582 41303000 582 413Returns of statistical information03000 54717103000 547377All other enquiries03000 54656803000 547377The e-mail address [email protected]

Chapter 11.8 to1.10IntroductionBlankHow the ISA scheme works1.11An ISA is a scheme of investment managed in accordance with the ISA regulationsunder terms agreed between the ISA manager and the investor. The ISA managerholds investments and claims repayment of income tax deducted at source, bysubmitting claims to SSO Services Team 1. Claims in respect of insuranceproducts are made by the insurer providing insurance cover (who may be differentto the ISA manager)1.12Investors apply to subscribe to an ISA. The investor can subscribe to two types ofISA. The two types are designated as cash ISAs, and stocks and shares ISAs1.13 to1.16Blank1.17Investors do not pay any tax on any of the income they receive from ISA savingsand investments. Nor do they pay any tax on capital gains arising on ISAinvestments. (However, losses on ISA investments cannot be allowed for CapitalGains Tax purposes against capital gains outside an ISA).The legislation1.18The main legislation is in Sections 694, to 701 Income Tax (Trading and Other Income) Act 2005, and Section 151 Taxation of Chargeable Gains Act 1992.The detailed rules are contained in the Individual Savings Account Regulations1998 (SI 1998 No.1870) as amended.Investor enquiries1.19Managers should initially direct investors who have questions about ISAs to theISA helpline – 0300 200 3312.The Helpline is open from 8.00am to 8.00pm Monday to Friday; and 8.00am to4.00pm on Saturdays and Bank Holidays.1.2007/2014Investors can also find further guidance on the HMRC website athttp://www.hmrc.gov.uk/isa/faqs.htm13

Chapter 2The ISA ManagerCHAPTER 2THE ISA MANAGERWho can manage ISAs?2.1Eligibility to manage an ISA2.3Definitions2.4Exclusions2.5 to 2.9Tax representatives2.10 to 2.12Applications for approval as an ISA managerList of approved ISA managers2.13 to 2.182.19Subsequent changes to information provided in application2.20 to 2.23Ceasing to be a manager2.2407/2014Withdrawal of approval by SSO2.25 to 2.26Voluntary cessation2.27Involuntary cessation2.28 to 2.29Returns required on cessation as a manager2.30 to 2.3115

Chapter 2The ISA ManagerWho can manage ISAs?2.1Only persons (including companies) approved by SSO can manage ISAs.To obtain approval to manage an ISA a person2.2 must be eligible to manage an ISA (see paragraph 2.3) and must make an application to SSO (see paragraph 2.13)BlankEligibility to manage an ISA2.3The following are eligible to manage either type of ISA depending on their FCApermissions. an authorised person within the meaning of section 31(1)(a) or (c) of, orSchedule 5 to, the Financial Services and Markets Act 2000 who haspermission to carry on one or more of the activities specified in Articles 14, 21,25, 37, 40, 45, 51 and 53 and, insofar as it applies to any of those activities,Article 64 of the Financial Services and Markets Act 2000 (RegulatedActivities) Order 2000, or a European institution that carries on one or more of those activities a credit union that is authorised person within the meaning of section 31(1)(a)of the Financial Services and Markets Act 2000 who has permission to carry onone or more of the activities specified in Article 5 of the Financial Services andMarkets Act 2000 (Regulated Activities) Order 2001 the Director of Savings a building society a person falling within section 991(2)(b) or (c) of Income Tax Act 2007 (abank), an insurance company within the meaning given by section 431(2)Income and Corporation Taxes Act 1988 an incorporated friendly society a registered friendly society, and an assurance undertaking that is not an insurance company within themeaning given by section 431(2) Income and Corporation Taxes Act 1988, anincorporated friendly society, or a registered friendly societyDefinitions2.407/2014"European institution" means an EEA firm of the kind mentioned in paragraph5(a) to (d) (f) and (h) of Schedule 3 to the Financial Services and Markets Act 2000which is an authorised person for the purposes of that Act as a result of qualifyingfor authorisation under paragraph 12(1) to (4), (6) and (7) of that Schedule16

Chapter 2The ISA Manager"Credit union" means a society registered as a credit union under the Industrialand Provident Societies Act 1965 or the Credit Unions (Northern Ireland) Order1985“The Director of Savings” has the same meaning as in the National Debt Act1972“Building society” means a building society within the meaning of the BuildingSocieties Act 1986, or the Irish Building Societies Act 1989"Insurance company within the meaning given by section 431(2) Income andCorporation Taxes Act 1988" includes an insurance company that is authorised by the Treasury insurance Directorateto carry out insurance business within the UK an insurance company that is incorporated in, or formed under the law of, anEEA member state other than the UK, whose head office is in a member state,which is authorised in accordance with Article 6 of the First Long TermInsurance Directive, and is carrying on an insurance business in the UKthrough a branch or agency in the UK"Incorporated friendly society" means a society incorporated under the FriendlySocieties Act 1992."Registered friendly society" means a society within the meaning of the FriendlySocieties Act 1992. It includes a society treated as a registered friendly society byvirtue of section 96(2) of that Act.“Assurance undertaking” means an assurance undertaking within the meaning ofArticle 2 of the Council Directive of 5th November 2002 concerning life assurance(No. 2002/83)Exclusions2.5Managers must not be prevented from acting as such by any requirement imposed under section 43 of the Financial Services andMarkets Act 2000, or any prohibition imposed by, or under any rules made by the Financial ServicesAuthority under that Act2.6It is not possible for individuals to manage their own ISAs, even if they wouldotherwise be eligible as an ISA manager.2.7 to2.9BlankTax representatives2.10A manager who is approved as 07/2014a European institution or a relevant authorised person and who does not havea branch or business establishment in the UK, or17

Chapter 2The ISA Manager a European institution or a relevant authorised person and who does have abranch or business establishment in the UK, but does not intend to carry out allhis functions as a manager at that branch or business establishment, or an assurance undertaking falling in the final bullet point of paragraph 2.4must either appoint a tax representative make arrangements with SSO for some other person to ensure that his dutiesas a manager are met, or make other arrangements with SSO to ensure that his duties are met2.112.12A tax representative must be an individual who is resident in the UK or a company that has a businessestablishment in the UK entitled to act on behalf of the manager in relation to the duties prescribedunder the regulations responsible for ensuring that the manager meets the duties prescribed underthe regulations, and personally liable where the manager fails to meet the prescribed duties, as ifthe duties imposed on the manager were jointly and severally imposed on himand the managerThe appointment of a tax representative is treated as terminated where SSO hasreason to believe that the tax representative has failed to ensure that the manager met his prescribed duties, or does not have adequate resources to ensure that the duties are met.SSO will notify the manager of the termination, specifying the date on which thetermination is effective.Applications for approval as an ISA manager2.13A person who wishes to be an ISA manager must apply to SSO for approval.Application forms can be downloaded from the HMRC website .The forms also have theaddress to which the application should be submitted.2.14The applicant must provide07/2014 his full registered name or legal title his full address, including postcode, to which all communications should besent the nature of his business18

Chapter 2The ISA Manager the capacity in which eligibility is claimed (see paragraphs 2.3 – 2.5) the tax district and reference number to which he submits tax returns oraccounts the name telephone number and e-mail address of one or more individualsappointed to act as liaison officers, to provide day-to-day contact with SSO details of the form in which returns of information will be submitted (seeparagraph 14.6) details of the types of ISA to be offered, and confirmation that the FCA have granted the necessary authorisations.2.15UK insurers should send a copy of their notice of authorisation from the TreasuryInsurance Directorate or the Friendly Societies Commission. Foreign insurersshould send a copy of their authorisation under Article 6 of the First Long TermInsurance Directive.2.16SSO will normally respond to any application for approval within 14 calendar daysand will notify successful applicants in writing allocate a reference number for use in all future communications, and include the new ISA manager in the next edition of the list of approved ISAmanagers (see paragraph 2.19)2.17The terms of approval may include conditions designed to ensure that theprovisions of the ISA regulations are satisfied. Approval is valid from the date ofthe notice issued by SSO. Where SSO decide not to approve a person they willexplain the reasons in writing.2.18Managers must provide the information in paragraph 13.8 before their first claim toSSO.List of approved ISA managers2.19The HMRC website contains a list of approved ISA managers (athttp://www.hmrc.gov.uk/isa/isa-managers.pdfThe list is updated quarterly.Subsequent changes information provided in the application2.20Where any of the information provided on the application subsequently changes,managers should inform SSO in writing as soon as possible. If the manager isincorporated, and changes his name, then a copy of the certificate of incorporationon change of name should be sent to SSO. A pdf copy can be emailed [email protected] must also be informed of any change of liaison officer, either by the retiringliaison officer, or by an authorised signatory.2.21An ISA manager approved for one type of ISA only must notify SSO in writingbefore they can manage the other type of ISA.07/201419

Chapter 2The ISA ManagerFor ExampleABC Ltd has applied for, and received approval, to manage the cash ISA.If they decide to offer a stocks and shares ISA they must first notify SSO.2.22 to2.23BlankCeasing to be a manager2.24A person will cease as a manager where SSO withdraw approval (see paragraph 2.25) he voluntarily ceases (see paragraph 2.27), or he no longer qualifies as a manager (see paragraph 2.28)Withdrawal of approval by SSO2.252.26SSO may withdraw approval from an ISA manager if they have reason to believethat he is failing, or has failed to manage h

Change in rate of tax credit and basic rate of tax . 13.40 . Contents 07/2014 7 Repayment of foreign tax . 13.41 . 14. RETURNS OF INFORMATION . The requirement to make a return . 14.1 . What period must be covered? 14.3 . What must be returned? 14.4 . How to make returns of information . 14.6 . Submission of returns . 14.19 . Penalties . 14.22 . 15. ANNUAL RETURNS OF STATISTICAL INFORMATION ...