Transfered ISA without using the bank form!!!!?

ENC

I have been using an ISA for a number of years, but sometimes get confused by the procedure laid out for transferring funds between accounts.

Last week I opened a new ISA for 2012-13 and mistakenly transferred the balance from last years account to the new 2012-13 account without using a form suggested by the bank. The funds were returned to me by cheque, as my 2012-13 account rejected the transaction due the magnitude, however now it seems I may have inadvertently lost my entire tax free saving allowance which goes back a number of years.

Bearing in mind this was a simple error, is there anyway I can still retain my tax free saving allowance for the last 4 years?

Please help!!!!

Gromitt

Well, you can always ask the bank, but I would say it was doubtful as it seems they have already closed the account as they have sent you a cheque.

ylesia

Hi

I don't have any personal experience but I am guessing you may have to beg to the hmrc? How did you close the account? Whatever method you used then you should have received a warning explaining what you were doing and what it meant.

If you didn't receive proper warning then you may be able to use that as a defence but I think you will be lucky.

Sorry not better news - good luck.

xylophone

http://www.hmrc.gov.uk/isa/welcome.htm You might try here but you appear to have broken the ISA transfer rule by not asking your new provider to arrange the transfer?
"Your ISA must be transferred directly between the two managers. You cannot transfer your ISA by closing it and opening a new ISA with the new ISA manager."

DragonQ

ENC wrote: »

I have been using an ISA for a number of years, but sometimes get confused by the procedure laid out for transferring funds between accounts.

How? The procedure is always the same (and presumably what you did over the past few years). Print out or request a transfer form from your new bank, fill it out and send it back to them.

AirlieBird

I am afraid once ISA money leaves an ISA it cannot be put back unless it was an error by the bank.

However, it's not clear to me whether your "transfer" was with the same bank, or whether you made an instruction online to move money directly from one ISA to the other (as opposed to old ISA to another account to new ISA).

If it was the same bank, and you transferred directly from one ISA to the other without it going through a non-ISA account I would try two prongs of attack.

Firstly, and assuming you transferred directly between the two ISAs, argue with the bank that the money did not leave your ISA wrapper and you were merely reorganising your money between accounts within the ISA wrapper. Technically, this is valid as the ISA is a wrapper in which a single or multiple accounts can be placed. So strictly speaking you could argue that the money remained with the same ISA manager and so was not a transfer, just a reorganisation. But most banks do not operate their ISAs in this way and you may want to try the next prong of attack first.

If this doesn't work, and again, assuming it was with the same bank and you transferred directly from one ISA to another make a complaint that their banking systems allowed an invalid ISA transaction and therefore the error was on the part of the bank and the money should be reinstated to the old ISA. If reinstatement doesn't work then I would argue for compensation for lost interest.

If the bank doesn't accept either of these arguments, then complain to HMRC and the Financial Ombudsman that the bank's systems allow an invalid ISA transaction without warnings, that you never withdrew the money from the ISA system and that the money remained with the same ISA manager throughout.

I am not saying that any of these methods will work, but I think they are worth a shot and are what I would try if I were in your situation. Again, I emphasise that you can only try this if you remained with the same bank and you did a direct ISA-to-ISA transfer without involvement of any non-ISA account.

psychic_teabag

It sounds like you tried to do an internal transfer between two accounts, but the transfer was rejected (correctly) since you were attempting to add more than your allowance to the account.

Perhaps you can argue that if the transfer didn't take place, it should have been left in the previous state, with no net effect. Did you ask them to send you a cheque with the money instead ? Did you ask them to close the original account ? If not, you could try arguing that this was the bank's error.

rpc

AirlieBird wrote: »

If this doesn't work, and again, assuming it was with the same bank and you transferred directly from one ISA to another make a complaint that their banking systems allowed an invalid ISA transaction and therefore the error was on the part of the bank and the money should be reinstated to the old ISA. If reinstatement doesn't work then I would argue for compensation for lost interest.

Their systems didn't permit an invalid transaction. HMRC have a guidance note on this and it sounds like the OP is out of luck. They suggest that banks may like to consider having a warning dialogue as an extra step on any ISA withdrawal, but they don't consider that a mistaken withdrawl can be unwound within ISA rules (assuming the mistake was on the part of the consumer). HMRC don't hold lack of a warning to justify a mistake.

Your first argument is the only one that would hold water, but it sounds as if the ISAs were with different banks. OP asked for a withdrawal from one and a deposit into another. The deposit failed, the withdrawl did not. The bank told the OP not to do it like this, but they did anyway.

The FOS is unable to demand any action from banks that would break HMRC rules so they wouldn't be able to help.

edit: guidance note at http://www.hmrc.gov.uk/isa/isa-guidance-notes.pdf look for para 10.31. The circumstances where reinstatement is permitted are clearly spelled out and this is not one of them.

AirlieBird

rpc wrote: »

Their systems didn't permit an invalid transaction. HMRC have a guidance note on this and it sounds like the OP is out of luck. They suggest that banks may like to consider having a warning dialogue as an extra step on any ISA withdrawal, but they don't consider that a mistaken withdrawl can be unwound within ISA rules (assuming the mistake was on the part of the consumer). HMRC don't hold lack of a warning to justify a mistake.

I'm sorry, but I disagree. If the bank does not operate with multiple accounts in a single ISA wrapper then I do not think it is unreasonable for the bank's systems to prevent the account holder to conduct an ISA to ISA transfer, especially when the amount being moved between accounts is more than the annual ISA allowance. Neither do I think HMRC's guidance covers this, as that is specific to withdrawing from an ISA into a non-ISA account. The OP may have transferred ISA-to-ISA and therefore no withdrawal from the ISA system took place and an audit trail exists to prove that it came from an ISA. It's why I've explicity stated that my argument only holds water if it was a direct ISA to ISA movement with the same ISA manager.

Chrisesa

The OP (ENC) seems to have abandoned this and gone off into a terminal decline...

I think it's odd you didn't use the banks "suggested" form, especially as you're not that new to ISAs. However the outgoing account must surely be partly to blame if their own procedure wasn't followed. Not enough detail has been given by the OP for the knowledgeable members here to give much definitive help. I'd agree that contacting your own bank first would be best and hope it goes well after that.

pqrdef

DragonQ wrote: »

The procedure is always the same

Unfortunately it isn't. Some banks do support an internal ISA transfer without using a transfer form. In that case, they may or may not treat the transaction as a transfer in the HMRC sense.

Worse, some banks support a simple funds transfer between ISAs, which counts as a withdrawal/resubscription. This can be a reasonable option for savers who're unlikely to go near their annual limit.

It's a mess. They should have said that a transfer form is only needed when moving to a new provider. Instead, they tried to go the other way, new account number = new ISA, but they haven't been able to hold that line.