Transferring cash isa to stocks n shares

jamesd

colsten wrote: »

I still can't see how this would help the OP (who has put their full £15,240 into a cash ISA already and wants to know whether it is possible to transfer some of it to S&S).

The workarounds involve removing the whole current year subscription then redepositing to achieve the effect of a partial transfer.

colsten wrote: »

A self transfer is essentially a transfer of the entire deposit as you need to close your old ISA in the process of a self transfer. No partial transfer there. You cannot leave a bit behind.

See the quoted text of rule 12.33 that is explicit that it can remain open and can hold money from past years. Just not the current year.

For normal transfer 11.13 seems to envisage the account remaining open if desired, since it describes the current year's money and later rules explain how to tell the difference between past and current year money in the S&S context.

Yet my memory tells me that I also thought that there was a close account requirement, so I think that must have been based on older rules. Later, research reveals that in ISA Bulletin 45 from September 2012 there is this update to the rules:

"PARAGRAPHS 12.32–12.33 (SELF TRANSFERS)
The first cash ISA is regarded as closed where all of the current year subscriptions are withdrawn."

colsten wrote: »

The OP can, by all means, withdraw some of the money they deposited this year, but they cannot deposit it again into the same or any other ISA this year under the current rules (that both I and masonic have provided links to).

Yet I've provided references to the guidance notes and explicit quotes that even include an example from HMRC showing money being redeposited and saying it's OK.

colsten wrote: »

We agree on this one. Peace. :cool:

I don't like getting things wrong but when I do I appreciate well referenced corrections like those you two have provided. thanks to both of you!

jamesd

masonic wrote: »

1) I believe this will result in the subscription of more than the overall limit in total. Since £15,240 has been subscribed to a cash ISA in the 2015/16 tax year, the self transfer will not change that fact, even if only part of the money originally subscribed is replaced in the second cash ISA. Therefore, any subscriptions to the S&S ISA would be invalid, since the whole allowance has already been used for the cash component.

Part of rule 12.35 HMRC appears to explicitly contradict your view:

"When totalling subscriptions, subscriptions to an ISA that was validly self-transferred (paragraph 12.32) are ignored."

So the self-transfer approach described is fine, including the partial S&S and cash subscriptions that followed, because the subscription that was self-transferred is ignored in calculating the limit.

masonic wrote: »

2) We can only speculate, but I cannot see a scenario in which this could be allowed, since ISA managers are going to have to police these temporary removals to some extent and if multiple ISA managers are involved then they will be unable to do so and HMRC's SSO compliance unit is going to have a huge workload wading through annual returns and reconciling accounts as a result.

If say a million Pounds is withdrawn the original ISA manager will have all information required to know that the current available subscription limit for their customer is 1 million plus the annual allowance.

If multiple managers are involved I'm sure that HMRC computers are capable of reconciling reports. It's a pretty trivial job for a computer, provided the reports contain the relevant information, notably the amount withdrawn.

I assume that the SSO team will find themselves with some free time from not having to deal with self-transfers using the current rules.

masonic

jamesd wrote: »

Part of rule 12.35 HMRC appears to explicitly contradict your view:

"When totalling subscriptions, subscriptions to an ISA that was validly self-transferred (paragraph 12.32) are ignored."

So the self-transfer approach described is fine, including the partial S&S and cash subscriptions that followed, because the subscription that was self-transferred is ignored in calculating the limit.

I don't think it does contradict my view. What I am saying is...

£15,240 is paid into "cash ISA A". This is treated as a total of £15,240 subscriptions being made in the current tax year

Next, the £15,240 is removed and part of it is subsequently subscribed to "cash ISA B". Because of the text you have quoted above, subscriptions to an ISA that was validly self-transferred (in this case "cash ISA B") are ignored, so the total is still £15,240. This leaves no room for any further subscriptions to be made to "S&S ISA c" as the whole allowance has been used, and "S&S ISA c" could not be regarded as validly self-transferred, because only the first self-transferred ISA can be valid in any tax year (and self-transfer does not apply to S&S ISAs).

If say a million Pounds is withdrawn the original ISA manager will have all information required to know that the current available subscription limit for their customer is 1 million plus the annual allowance.

No problems up to here, except it was pointed out to me in another thread that the language of George Osbourne's statement was that only current year subscriptions would be included in the new freedoms (see: https://forums.moneysavingexpert.com/discussion/comment/68591564#Comment_68591564), so the jury is out on the available allowance ever rising above the normal annual limit (although I have my doubts it would be restricted to the current tax year only).

If multiple managers are involved I'm sure that HMRC computers are capable of reconciling reports. It's a pretty trivial job for a computer, provided the reports contain the relevant information, notably the amount withdrawn.

I assume that the SSO team will find themselves with some free time from not having to deal with self-transfers using the current rules.

Of course you could be right, but I see it as far more likely that ISA managers will essentially be expected to complete the same annual returns in respect of the state of the account at the end of the tax year - details of withdrawals and money paid back in will just be left to the ISA manager to keep track of. My view is that what you suggest above would require a significant overhaul of the systems currently in place and that it would be hopelessly infeasible to achieve this within the stated timeframe of the plans.

jamesd

masonic wrote: »

I don't think it does contradict my view. What I am saying is...

£15,240 is paid into "cash ISA A". This is treated as a total of £15,240 subscriptions being made in the current tax year

Next, the £15,240 is removed and part of it is subsequently subscribed to "cash ISA B". Because of the text you have quoted above, subscriptions to an ISA that was validly self-transferred (in this case "cash ISA B") are ignored, so the total is still £15,240.

It's cash ISA A that is validly self-transferred, not cash ISA B. Worth reading the HMRC text and examples again, since it does seem to make this clear.

masonic wrote: »

This leaves no room for any further subscriptions to be made to "S&S ISA c" as the whole allowance has been used, and "S&S ISA c" could not be regarded as validly self-transferred, because only the first self-transferred ISA can be valid in any tax year (and self-transfer does not apply to S&S ISAs).

After re-reading the HMRC text I don't agree with that exact reasoning - it's the first ISA being self-transferred - but do think that the HMRC text envisions only one destination account that is a cash ISA. So I've struck out the self-transfer option in my earlier post.

masonic wrote: »

No problems up to here, except it was pointed out to me in another thread that the language of George Osbourne's statement was that only current year subscriptions would be included in the new freedoms (see: https://forums.moneysavingexpert.com/discussion/comment/68591564#Comment_68591564), so the jury is out on the available allowance ever rising above the normal annual limit (although I have my doubts it would be restricted to the current tax year only).

Thanks, that's interesting.

masonic wrote: »

Of course you could be right, but I see it as far more likely that ISA managers will essentially be expected to complete the same annual returns in respect of the state of the account at the end of the tax year - details of withdrawals and money paid back in will just be left to the ISA manager to keep track of. My view is that what you suggest above would require a significant overhaul of the systems currently in place and that it would be hopelessly infeasible to achieve this within the stated timeframe of the plans.

Could be. I'm sure that HMRC will want ISA managers to do all checks that they can do on their own. I suppose nothing prevents it from being done in two steps if that seems like the practical way to get it done, assuming that there is the desire to do so on the part of government.

On this I think we're both in agreement that we're pretty much left wondering and waiting to see what emerges.

masonic

jamesd wrote: »

It's cash ISA A that is validly self-transferred, not cash ISA B. Worth reading the HMRC text and examples again, since it does seem to make this clear.

Yes, I do now see from the Examples that the intended meaning is as you say. However, on re-reading the HMRC text I am no longer convinced the statement about totalling subscriptions in 12.35 is intended to apply to the "Investor error - Self transfer" as it is in a separate part of the document headed "Repairs – disallowed combination of ISAs or overall subscription limit exceeded".

12.32a starts "The first cash ISA to be self-transferred in a tax year is valid, and need not be repaired", so anything written under repairs would not necessarily apply.

Edit: or perhaps your point is that if splitting the proceeds between cash and S&S is treated as an oversubscription, 12.35 suggests when you go down that path the totalling suggests it isn't, in which case you could be right.

This would leave us with the situation in which:
- Withdrawing £15,240 from the original cash ISA and paying that £15,240 into a S&S ISA is not allowed.
- Withdrawing £15,240 from the original cash ISA and paying that £15,239 into a S&S ISA is allowed if and only if £1 is first subscribed to a new cash ISA.
- Withdrawing £30,480 (including previous years subscriptions) from the original cash ISA and paying £15,240 into a cash ISA and £15,240 into a S&S ISA is allowed.

Something still doesn't sit quite right with me about those later hypotheticals...

After re-reading the HMRC text I don't agree with that exact reasoning - it's the first ISA being self-transferred - but do think that the HMRC text envisions only one destination account that is a cash ISA. So I've struck out the self-transfer option in my earlier post.

I agree the problem is that the text as written was not designed to address this scenario. I think we have both made some minor misinterpretations that have led us to take opposing views, but there is an underlying lack of clarity and it is impossible to say with any degree of confidence what would happen in practice in the situation we were originally discussing.