Advice on ISA re-investment

Statler_2

I hope someone out there will be able to advise me. My ISA provider and HMRC have been unable to do so.

I have a Cash ISA maturing shortly and would like to re-invest the monies with the same provider. However, the paperwork provided includes the following sentence under "Declaration":

"I have not subscribed and will not subscribe to another cash ISA in the same year that I subscribe to this cash ISA."

I have not invested with this provider during the current tax year but did invest £5,760 with another provider (who was offering considerably better interest at the time) at the start of the tax year.

All the information that I have read in print or online appears to imply that I will have to transfer the maturity proceeds to another provider to protect the tax-free status.

Can anyone clarify what the position is, please?

It doesn't make any sense to me to have to transfer to another provider. The monies involved relate to tax years prior to 2013/14 and represent "old" money.

Any guidance will be much appreciated.

jimjames

You always have to transfer to a new provider. If you withdraw the money then it loses its tax free status and you will then need to use up allowance to put it back in an ISA.

If you haven't put any money into a cash ISA this year and don't intend doing so AND the money is less than the ISA limit then taking it as cash and redepositing is an option. You've said that you put money into a cash ISA THIS tax year so you cannot use this option if that is the case.

Statler_2

Thanks for your thoughts, jimjames.

What I still can't get my head round is why a re-investment with the same provider appears to have to be treated as a new investment. Surely the money is just being re-cycled: same amount in as out, same provider. Why can't it remain with the same provider?

To make matters worse, the ISA in which I invested at the start of the tax year matures in March, so I will have to go through this all over again in six weeks!

Archi_Bald

Statler wrote: »

"I have not subscribed and will not subscribe to another cash ISA in the same year that I subscribe to this cash ISA."

Transfers do not count as subscriptions. Therefore you can open an ISA with the same or another provider simply for the purposes of transferring an old ISA.

Mikeyorks

Statler wrote: »

All the information that I have read in print or online appears to imply that I will have to transfer the maturity proceeds to another provider to protect the tax-free status.

Can anyone clarify what the position is, please?

Yes - that's totally wrong. As you suggest you can simply re-cycle the matured funds within the existing provider - provided they have an offer you find acceptable.

In such circumstances I've never had to complete a fresh ISA application - it just gets rolled forward to whichever fixed or variable product I choose. I've been doing that for 10 years with some of my cash ISAs - admittedly they started out as 5 year fixes initially.

I can't understand why you're being asked to 're-apply' where there is no new money involved as that's not appropriate. But it's easier to go with the flow than to argue sometimes - so just sign it? That on the basis you are 'transferring' internally - you are not 'subscribing'.

If you've spoken to the HMRC ISA 'experts' - unfortunately the ISA line was helpful some years ago but now has the same reduced technical calibre as most customer facing call centres. In short they're now pretty useless.

Statler_2

Thanks, Archi Bald

What's in a word, eh?!

I never thought that the word "subscribed" could assume such importance. If it is so clear-cut, I am a little surprised that this explanation could not be provided by my current provider - it must be in their interests, after all, to retain the investment built up over a few years.

Statler_2

Thanks, Mikeyorks

We appear to have a consensus that I can simply re-invest with a clear conscience.

This is what happens when people read the small print they are asked to sign, isn't it?

badger09

jimjames wrote: »

You always have to transfer to a new provider.

Sorry jimjames, but this is simply incorrect .

You don't always have to transfer to a new provider - if your current provider has a suitable ISA which accepts transfers, you can obviously ask them to carry out the transfer into that.

jimjames wrote: »

If you withdraw the money then it loses its tax free status and you will then need to use up allowance to put it back in an ISA.

Correct

jimjames wrote: »

If you haven't put any money into a cash ISA this year and don't intend doing so AND the money is less than the ISA limit then taking it as cash and redepositing is an option. You've said that you put money into a cash ISA THIS tax year so you cannot use this option if that is the case.

Correct again.

OP - does the provider you're referring to actually have a suitable ISA which accepts transfers? If so, go ahead and sign the transfer form