Transferring ISAs - Can anyone confirm if this scenario is allowed?

vacheron

Hi all.

Can anyone confirm if this scenario is prohibited/allowed under the current ISA rules?

• 2010: I open a Cash ISA with Barclays which allows transfers in and move my existing ISAs from a few different providers into it.

• 2012: I open a Cash ISA with NatWest which allows transfers in and transfer the Barclays ISA (except for a few pounds) to NatWest, leaving the original Barclays ISA dormant.

• 2013: I open a new Cash ISA with Barclays which allows transfers in. Max it out with my 2013-14 "new money" allowance and then transfer the entirety of the Natwest ISA back to this NEW Barclays ISA.

The Problem:

I then wanted to transfer part of the my new Barclays Cash ISA into the original (dormant) Barclays Cash ISA, however the guy at the Barclays help-desk was adamant that would not be allowed under the current ISA rules. I am now a bit confused because in my understanding, there is no new money being added?

Opinions?

westy22

Your first scenario is fine and no issues there.

The Barclays help-desk is correct - you cannot transfer money into an ISA that is no longer on offer. Each year Barclays introduced an ISA issue with a new name i.e. Golden ISA, Tax Haven ISA etc. These ISAs closed to new business during the tax year and therefore became obsolete although you could keep existing money in them.

Wouldn't it be wonderful if I was able to transfer funds back into 6%pa ISAs that were around a few years ago!

vacheron

Hi Westy22.

Thanks for your reply.

I appreciate what you are saying, but the original ISA I want to transfer into is not a "Golden ISA issue"x" with a leading promotional offer, it is the Barclays "bog standard, catch all, bare minimum" cash ISA currently paying 0.1% which, according to Barclays, still accepts transfers in.

The problem is that the Barclays advisor was adamant that it was the ISA rules which were preventing me from doing this, not the account conditions, which is the part that is confusing me?

westy22

I am sure you have your own good reasons, but why would you want to transfer money from a 2.1% rate account to an account with a 0.1% rate?

vacheron

westy22 wrote: »

I am sure you have your own good reasons, but why would you want to transfer money from a 2.1% rate account to an account with a 0.1% rate?

I'm glad you asked as I didn't mention it earlier and people must be looking at me a bit :think:.

The reason is that both Barclays ISAs can be linked to my offset mortgage which has a 3.49% rate. However, If I offset my entire new ISA against my mortgage it will be more than 100% offset to the tune of approximately 35K which means that I would earn 0% on this positive balance (and miss out on approximately £800 p.a. interest).

I therefore hoped to be able to move just enough (about 30K) into the 0.1% ISA to 100% offset the mortgage (effectively making it into a 3.49% ISA) and leave the remainder in the new ISA which be unlinked from the mortgage and would thereby earn me 2.3% "real" interest which would be compounded inside that ISA wrapper.

Then, if I drew or deposited any money to/from my offset mortgage accounts I could use taxable savings but then make an ISA transfer between the two ISAs to redress the balance without withdrawing any funds held in my ISA wrappers.

Hope this makes sense..... now!

westy22

Thanks - I can see now what you are trying to do; I knew there must be a good reason:)

However, if Barclays say you can't do it then you may have to look at alternatives. I don't suppose Barclays would let you open an additional 2013-14 ISA just to receive a transfer-in (no new money in 13-14)? Alternatively, you could look at doing a further transfer to a new provider and leave just £30k in the Barclays one, linked to the offset?

thenudeone

The HMRC rule on transfers is that if you have contributed money to an ISA in the current tax year, all of the money from the current tax year must be kept together. You cannot split current year subscriptions between accounts.

If you wish to partially transfer an account which has both current and previous year contributions in it, there are no rules (AFAIK) which tell the provider whether to transfer the previous contributions first or the current year contributions first, which could create issues, but as long as you are transferring at least as much as your current year's contributions it shouldn't stop the transfer.

I have seen one or two providers stipulate that their ISA can only ever be transferred in full, never in part, but I don't know whether that applies here.

vacheron

Thanks to you both for the extra info.

Following this I've been digging a little deeper I found this on the HMRC website at
http://www.hmrc.gov.uk/isa/transfer-isa.htm

Transferring an ISA

Investors can transfer their ISAs from one manager to another whenever they want. They may transfer

• their current year ISA subscriptions (and any related income) and/or
• all or part of their previous years ISA subscriptions (and any related income).

If the ISA contains current year subscriptions only the entire account must be transferred.

So from this my thought is:

I can make multiple transfers in 1 tax year.
I can make partial transfers providing that the ISA I am transferring isn't composed of entirely new money.

So I still can't see where I am breaking any ISA rules?

If I had arranged a partial transfer of 35K from NatWest to my new Barclays account and then a full transfer of the rest of the NatWest ISA to my the old Barclays account (which both allow transfers in) then it looks like I would have achieved the same outcome but without these problems.

Amusingly however, I thought it would be easier to move the money all to one institution and then transfer it internally once it was there. :doh:

I'll see if I can talk to them again, but as suggested I may have to take a look to see if I can open a new ISA with Barclays or another institution with just transferred money in order to solve the problem.

vacheron

I've also read this on other reputable sites, but not being directly from HMRC I cannot guarantee that the interpretation is correct:

- On cash Isas taken out on or before April 5, 2012 (read 2013), you can transfer part or all to the new provider. You can transfer different amounts or parts to as many providers as you like, as many times as you like.

- You can even split the money between variable rate and fixed rate deals. However, not all providers accept 'partial' transfers.

westy22

This is where the added complexity comes in - providers interpreting HMRC rules in different ways. Just because HMRC say that something is legally possible doesn't necessarily mean that providers will make it practically possible.

It is more likely that Barclays don't want the hassle and so blame it on HMRC rules. Of course, most people accept these sort of statements at face value and don't question it.

I would ask to speak to a Barclays CS manager and see if you can get them to see sense.

vacheron

Will do that.. and will keep you posted on the outcome.

Thanks for all the help.