Saving MY money in someone elses ISA

Canny_mal

Hi there

I'm very keen to get some of my savings into an A+L 8.1% ISA but I already have a A+L current account so I can't apply for this ISA.

To get round this I'm considering getting my mother to open a A+L current account in her name and giving her £6000 to invest for me in the ISA that goes with it (£3000 before this tax year ends and another £3000 after 5th Apr). She has never had a A+L current account before nor has she ever opened an ISA.

Are there any potential pitfalls in doing this?

Any advice would be greatly appreciated.

cheerfulcat

Are there any potential pitfalls in doing this?

Yes, technically the money becomes your mother's.

Canny_mal

cheerfulcat wrote: »

Yes, technically the money becomes your mother's.

But assuming I trust her to give me it back next May and not run off with it in the meantime that isn't a major problem, or is it??

cheerfulcat

It's not so much whether you trust her - it would be unfortunate if you couldn't trust your own mother! - but that in the event of her getting into financial difficulties, or, God forbid, dying, there could be problems. In the former case, creditors would go after the money and in the latter it would form part of her estate.

I'm not saying " don't do it ", just be aware of the possible problems. And be aware, too, that technically what you are suggesting is fraud ( though, as you don't appear to propose opening another cash ISA in your own name, perhaps not...)

Canny_mal

Thanks for your replies cheerfulcat. I'm really annoyed with A+L for only making this new ISA available to new current account applicants. In effect I'm being penalised for being loyal to them for the past 4 years.

The word fraud is not one I'm comfortable with. Is what I'm proposing really fraudulant? The only thing stopping me from opening one of these ISA's myself is A+L terms and conditions. I haven't opened or contributed to another ISA myself this tax year so if this 8.1% ISA was open to all there would be no inland revenue regulations which would have prevented me from opening one.

All I'm really doing is loaning my mother £6000. If she used it to buy a car surely you couldn't say that was fradulent so why should putting it in a savings account be any different?

cheerfulcat

All I'm really doing is loaning my mother £6000. If she used it to buy a car surely you couldn't say that was fradulent so why should putting it in a savings account be any different?

Because you are expecting to benefit from the tax-free interest?

But as you are not using your own ISA allowance as well, this may not be the case. TBH I would be more worried about the other possibilities.

Canny_mal

cheerfulcat wrote: »

Because you are expecting to benefit from the tax-free interest?

But this isn't a case of me getting a non-tax payer to save my money to avoid me paying tax. This is a tax free product open to tax payers and non tax payers alike. As I said in an earlier post, no inland revenue rules are preventing me from opening one of these ISA's myself, only A+L's terms and conditions.

I'm not having a go at you here by the way cheerfulcat. In fact, talking it through like this is helping me make an informed decision about whether to do it or not.

masonic

How are you planning to get this money back? Surely you are not going to be able to transfer it into an ISA in your name, so would you not have to withdraw it and thus lose its tax-free status at some point in the future?

cheerfulcat

That's OK, Canny_mal, the tone of your posts is perfectly reasonable and I hadn't suspected any digs!

I really don't think that it is a problem from the tax point of view; I just brought the fraud thing up as a possibility. I know what you're saying, that you are only intending to use your mother's status as a new customer with A&L, and I agree that there is nothing underhand about it as you are not using your own ISA allowance.

In any case, it's not likely to come to anyone's attention unless there is a question at some point about the ownership of the money. I was really just pointing out a possible problem...

Biggles

It seems a whole lot of trouble to go to for the sake of what boils down to not much more than £100 over and above other ISAs that are available to you, and that's without considering how much you would lose while the money is 'in transit' (from you to your mother, from your mother to A&L, back to your mother in May 08 and then back to you).

It's hardly worth using an ISA if you plan to close it after 12 months; the big gain from using ISAs is to build up your tax-free tavings pot.

Plus, I don't know how old your mother is, but if she should die that money would form part of her estate, not much use then in jumping up and saying, 'oh, it's OK, we were running a scam, that money's really mine'.

I think the fact that's it's A&L's rules that prevent you opening this particular account are by-the-by. The fact is, you are gaining a tax advantage under someone else's name.

cheerfulcat

you are gaining a tax advantage under someone else's name.

That's what I was getting at, only you have put it more elegantly, Biggles.