Overpayment into a stocks and shares ISA.

jh2009

My dad has paid his full cash isa of £5100 (hes over 50) into a building society 2 year bond.

A week later he bed and ISA'd £5000 of stock into his Hargreaves Lansdown account. But in the process of doing this, it gained £160 in value, going £60 above his £5100 limit.

So his total ISA for the year is £10,260.

H-L not realising he had a cash isa thought he had scope and so when they sold his unit trusts, bought £5160 of Stocks and Shares ISA.

My dads now terrified this extra £60 will cancel out his entire isa savings for the year and has contacted H-L asking them to sell the £60 and either cash it or pay into my mothers ISA (who has about £200 of scope).

H-L seem not to bothered about this but have said they will fix it. A month later and despite many calls its yet to be resolved.

He doesnt want to take it out of his bond, as it would mean cancelling the bond and losing a few weeks interest. Plus the rate of the bond has been closed to new savers.

Am i right in assuming that if H-L do nothing, his £5100 is safe in his stocks and shares isa, and cash isa? But:

* His £60 excess in stocks and shares could potentially cause a tax bill if he ever sold this part one day for a gain.

OR

* £60 from his cash isa interest could be assessible to tax.

Aegis

Just get him to call HMRC to discuss the matter. For £60 they'll probably just ask him nicely not to do it again, but at worst they might ask him to sell and withdraw £60 from the ISA. They'll probably be quite reasonable about it.

masonic

Quite a few stories similar to this have been posted to this forum. From past experiences of other people HMRC operate a policy whereby you just get a warning letter for your first oversubscription. Worst case scenario, your dad will get a letter telling him to be more careful in future. However, being upfront with HMRC as Aegis has suggested will certainly not hurt.

Edit: Just to expand on this, if this were to be sorted out by the book, H-L would not be able to do what is known as a 'repair' (where they can just correct a mistake arising from a misinterpretartion of your dad's instructions, or an error on their part). This is more an unforseen consequence of the bed & ISA, so HMRC would have to be involved in the situation whatever happens, so H-L are not going to be able to simply sort this out on their own.

jh2009

Thanks for both your answers on this. Il explain this to my Dad. Really helpful advice about notifying HMRC or maybe waiting and seeing if he gets a warning letter/order to sell £60 of his investment.

jamesd

If he hadn't already told HL I'd write:

Just call the HMRC helpline. The worst case is that they will tell HL to sell £60 of investments and return that £60 to him. No big deal.

Since he has told HL and they have said that they will fix it, give them a couple of months beyond the end of the ISA season, maybe until the end of June. No point in asking them to do non-critical work while they are at their busiest. In theory HL aren't supposed to do anything about this themselves, but should have told him to call HMRC and then waited for HMRC to tell them what, if anything, to do.

It's definitely not a major problem and definitely won't invalidate anything more than the amount he went over the limit by. He should relax and let time pass, nothing really bad is going to happen. Even if HL gets it wrong all that will happen is that HMRC will notice when they reconcile the reports from all ISA providers and then they will either ignore it, send a naughty, don't do it again letter or tell HL to withdraw £60 and any growth on it.