Cash ISA - Self Transfer Rule

ylesia

Another thread got me thinking about something, the below is an extract from the HMRC guidance on ISAs:

12.33
An cash ISA is closed for this purpose when
[FONT=Arial,Arial][FONT=Arial,Arial]all [/FONT][/FONT]the funds held in the ISA are withdrawn (including any subscriptions for earlier years) and no further subscriptions are made to the ISA in the same tax year.
[FONT=Arial,Arial][FONT=Arial,Arial]For Example [/FONT][/FONT][FONT=Arial,Arial][/FONT]
[FONT=Arial,Arial]

[/FONT]Mrs Cooper subscribes £3,000 to a cash ISA with Anybank plc on 20 April 2008. She closes it on 30 November 2008, then subscribes to a second cash ISA with Betterhomes Building Society on 3 December 2008. The subscriptions to the second cash ISA are valid.


My question:

Say you have an ISA with:

1. Previous years subscrptions of £20000
2. Current years subscriptions of £500

Would it be within the rules to transfer the £20000 elsewhere and then just close the ISA and withdraw the £500 and then open a new cash ISA somewhere else for current year subscriptions.

I am not in this position - just curious, I didn't even know you could close down an ISA and open a new one (only allowed once per year) until coming across it in the guidelines.

I guess this is good for people who open an ISA and then something much better comes along but just wandering if it also helps people who subscribe to their current ISA before realising there is a better ISA that doesn't accept transfers in.

Bank_Notes_2

ylesia wrote: »

Another thread got me thinking about something, the below is an extract from the HMRC guidance on ISAs:

12.33
An cash ISA is closed for this purpose when
[FONT=Arial,Arial][FONT=Arial,Arial]all [/FONT][/FONT]the funds held in the ISA are withdrawn (including any subscriptions for earlier years) and no further subscriptions are made to the ISA in the same tax year.
[FONT=Arial,Arial][FONT=Arial,Arial]For Example [/FONT][/FONT]
[FONT=Arial,Arial]

[/FONT]Mrs Cooper subscribes £3,000 to a cash ISA with Anybank plc on 20 April 2008. She closes it on 30 November 2008, then subscribes to a second cash ISA with Betterhomes Building Society on 3 December 2008. The subscriptions to the second cash ISA are valid.


My question:

Say you have an ISA with:

1. Previous years subscrptions of £20000
2. Current years subscriptions of £500

Would it be within the rules to transfer the £20000 elsewhere and then just close the ISA and withdraw the £500 and then open a new cash ISA somewhere else for current year subscriptions.

I am not in this position - just curious, I didn't even know you could close down an ISA and open a new one (only allowed once per year) until coming across it in the guidelines.

I guess this is good for people who open an ISA and then something much better comes along but just wandering if it also helps people who subscribe to their current ISA before realising there is a better ISA that doesn't accept transfers in.

Dear ylesia,

Than you for you post.

I can confirm that is is within the rules to do what you want.

You can open as many ISAs as you like as long as you only Pay In (with new money) to one ISA per tax year.

If you wish to find out more just ask.

Mikeyorks

ylesia wrote: »

Would it be within the rules to transfer the £20000 elsewhere and then just close the ISA and withdraw the £500 and then open a new cash ISA somewhere else for current year subscriptions.

Yes you can do that. But it begs the question - why not simply transfer the whole £20500 in the first place? As one assumes the target of the £20000 is an account you prefer. And -yes - I realise there are options around better paying accounts that don't accept transfer in etc!

The self transfer rule was primarily introduced to give some help to people who accidentally drew the funds out of their ISA. It's limited in scope as you can clearly only re-input money to the extent of the current year allowance.

thenudeone

The above extract from http://www.hmrc.gov.uk/isa/isa-guidance-notes.pdf is an extra-statutory concession [EDIT - no it's not] and limited to one per tax year.

The total subscriptions must still not exceed the total annual limit.
However, it's meant to be due to cases of accidental mistakes, not deliberate planning.

It can only occur if you've lied on the application for for the second ISA (when stating - "I haven't subscribed this year").

I suspect that if HMRC allow you this concession one tax year, and made you aware of the rules, they may refuse to allow it again in the next tax year, which means the second ISA opened in that year could be voided.

ylesia

thenudeone wrote: »

The above extract from http://www.hmrc.gov.uk/isa/isa-guidance-notes.pdf is an extra-statutory concession and limited to one per tax year.

The total subscriptions must still not exceed the total annual limit.
However, it's meant to be due to cases of accidental mistakes, not deliberate planning.

It can only occur if you've lied on the application for for the second ISA (when stating - "I haven't subscribed this year").

I suspect that if HMRC allow you this concession one tax year, and made you aware of the rules, they may refuse to allow it again in the next tax year, which means the second ISA opened in that year could be voided.

Interesting - I didn't read the whole document so must have missed the context. I thought it looked like something that was allowed once per year without punity. I did wonder about the total subscriptions as I couldn't find that in the document.

As I said I am not asking the question for me, just curious after reading someones thread.

Mikeyorks

thenudeone wrote: »

The above extract from http://www.hmrc.gov.uk/isa/isa-guidance-notes.pdf is an extra-statutory concession and limited to one per tax year.

It isn't an ESC ....... the ISA Regulations were changed back in 2002 to permit this :-

http://www.legislation.gov.uk/uksi/2002/3158/regulation/4/made

It can only occur if you've lied on the application for for the second ISA (when stating - "I haven't subscribed this year").

There is no lie. Just as happens when you transfer current year cash ISA funds to an S&S ISA ........ it's considered the first subscription to the cash ISA never happened.

Mikeyorks

ylesia wrote: »

I did wonder about the total subscriptions as I couldn't find that in the document.
.

Post #3 - final sentence?

You can use this facility once per tax year - although that was never intended. But it's nothing to do with HMRC largesse or permission as suggested - it's enshrined in legislation.

thenudeone

Mikeyorks wrote: »

It isn't an ESC ....... the ISA Regulations were changed back in 2002 to permit this :-

http://www.legislation.gov.uk/uksi/2002/3158/regulation/4/made

Fair enough, but I believe that it's intended for accidental duplicates, even if the legislation doesn't state that.

Mikeyorks wrote: »

There is no lie.

Well I picked the first link on a google search for Cash ISAs (ING Direct) and about the third question is this:

Have you deposited in a cash ISA in the current tax year? i.e. - 2012/2013 No Yes

If you click YES, the following message appears:

As you have already invested in a cash ISA in the current tax year, it will not be possible to apply for another cash ISA until the next tax year, i.e. 2013/2014. If you would like to leave your details please click on the "Leave Details" button and we will contact you nearer the time.

I would think that every ISA provider has similar conditions, so the ONLY way you can use this concession is to lie to your bank. This is not something I would recommend to anyone.

ylesia

thenudeone wrote: »

Fair enough, but I believe that it's intended for accidental duplicates, even if the legislation doesn't state that.



Well I picked the first link on a google search for Cash ISAs (ING Direct) and about the third question is this:

Have you deposited in a cash ISA in the current tax year? i.e. - 2012/2013 No Yes

If you click YES, the following message appears:

As you have already invested in a cash ISA in the current tax year, it will not be possible to apply for another cash ISA until the next tax year, i.e. 2013/2014. If you would like to leave your details please click on the "Leave Details" button and we will contact you nearer the time.

I would think that every ISA provider has similar conditions, so the ONLY way you can use this concession is to lie to your bank. This is not something I would recommend to anyone.

Just thinking about this and surely lots of people end up saying no to this when the answer is in fact yes ie. when they are opening up an ISA just to transfer an existing one?

For example I opened a Nationwide ISA on 7th April and deposited in my 2012/2013 allowance.

I then opened a Santander Fixed 3.5% ISA to transfer my previous years ISA from halifax. I remember having to agree to the whole "haven't subscribed this year ...." but there was no choice but to agree or I wouldn't have been able to open the ISA.

I just ignored it as I knew I wouldn't be breaking any rules - surely lots of people must do the same?

Mikeyorks

thenudeone wrote: »

I would think that every ISA provider has similar conditions, so the ONLY way you can use this concession is to lie to your bank. This is not something I would recommend to anyone.

I can't say it any more clearly than on my previous post :

There is no lie. Just as happens when you transfer current year cash ISA funds to an S&S ISA ........ it's considered the first subscription to the cash ISA never happened.