Invested into 2 S&S ISAs - Same Tax Year - What Happens? 24 November 2020 at 6:57PM edited 24 November 2020 at 7:01PM in ISAs & Tax-free Savings 4 replies 122 views

Dragonfly1

So I knew about the £20,000 ISA limit - and the fact you can only create one S&S ISA per year. I didn't know about any other rule and I don't know how this affects me now.
I invested £7,000 into a Fidelity S&S ISA several months ago [it was already open from a previous tax year] along with a LISA from H&L (£4,000 - which was also already open from a previous tax year).

I then wanted to invest the rest of my yearly allowance into some US Companies - which Fidelity S&S cannot do; and from which I have already maxed out my HL LISA. Therefore I have recently (this week) opened a Stocks and Shares ISA with H&L and deposited the remainder of my ISA limit i.e. £9,000 into it and immediately bought shares.

The penny has just dropped 24 hours later that the rules appear to be that you can only invest in one S&S ISA per tax year despite me not exceeding the annual allowance. 

Does anyone know what HMRC usually do in this situation? Eeeek.

If it makes any difference, I do not usually have any Capital Gains Tax to be paid and I am a basic-rate taxpayer.

Dragonfly1

If I call HL and get the new S&S ISA investment moved to a regular Dealing Account, will that be the best course of action - assuming my £9,000 investment isn't worth over £21,000 (>£12,000 for CGT) tax by April !
I cannot simply move it across to the Fidelity ISA as they do not offer the equivalent shares.

masonic

It might be worth checking if there is a cooling off period for the HL S&S ISA. SImply selling and moving the proceeds outside the ISA won't undo the ISA subscription, but cooling off cancellation will.

HMRC may or may not take action, but the worst case scenario is they declare the HL S&S ISA invalid, you'll be treated as having bought them outside the ISA, and may need to sell and repurchase them in a general investment account. They won't know anything about it until well into next year when ISA managers complete their annual returns.

Edit: "A38 – cancellation Please note this section A38 does not apply to the SIPP. You have the right to cancel your HL ISA and Fund and Share Account by writing to HLAM by post or by secure message using the Online Service within 14 days of the date the Account was opened."

Dragonfly1

masonic said:

It might be worth checking if there is a cooling off period for the HL S&S ISA. SImply selling and moving the proceeds outside the ISA won't undo the ISA subscription, but cooling off cancellation will.

HMRC may or may not take action, but the worst case scenario is they declare the HL S&S ISA invalid, you'll be treated as having bought them outside the ISA, and may need to sell and repurchase them in a general investment account. They won't know anything about it until well into next year when ISA managers complete their annual returns.

Edit: "A38 – cancellation Please note this section A38 does not apply to the SIPP. You have the right to cancel your HL ISA and Fund and Share Account by writing to HLAM by post or by secure message using the Online Service within 14 days of the date the Account was opened."

Hmmmm.

If I were to close the ISA, I would have to sell the shares (bringing my commission fees to approx £200), followed by buying them in a general account for another £100. So it's at least an additional £200 in fees if I sell and rebuy.

I appreciate it's my error but it's a lot of money to throw away when I already own the shares.

Would they ever transfer the already owned shares to a general investing account outside of the ISA without the whole selling/buying again?

I'd be tempted to sit tight and wait to be contacted in the future? I've not broken any rules in the past. I feel like this is a stupid rule considering I haven't actually exceeded any allowances!

masonic

Dragonfly1 said:

masonic said:

It might be worth checking if there is a cooling off period for the HL S&S ISA. SImply selling and moving the proceeds outside the ISA won't undo the ISA subscription, but cooling off cancellation will.

HMRC may or may not take action, but the worst case scenario is they declare the HL S&S ISA invalid, you'll be treated as having bought them outside the ISA, and may need to sell and repurchase them in a general investment account. They won't know anything about it until well into next year when ISA managers complete their annual returns.

Edit: "A38 – cancellation Please note this section A38 does not apply to the SIPP. You have the right to cancel your HL ISA and Fund and Share Account by writing to HLAM by post or by secure message using the Online Service within 14 days of the date the Account was opened."

Hmmmm.

If I were to close the ISA, I would have to sell the shares (bringing my commission fees to approx £200), followed by buying them in a general account for another £100. So it's at least an additional £200 in fees if I sell and rebuy.

I appreciate it's my error but it's a lot of money to throw away when I already own the shares.

Would they ever transfer the already owned shares to a general investing account outside of the ISA without the whole selling/buying again?

If you read condition A38 in your T&Cs, you'll see what options you have for transferring the investments. It may well be the case that they can be placed into a Fund and Share Account as well as the other options described, you'll need to ask about this.

You can conventiently find a copy of the agreements you have entered into with HL when opening your ISA just above the "Open your ISA now" button on the ISA application webpage: https://www.hl.co.uk/investment-services/isa/apply-now

Dragonfly1 said:

I'd be tempted to sit tight and wait to be contacted in the future? I've not broken any rules in the past. I feel like this is a stupid rule considering I haven't actually exceeded any allowances!

I appreciate you may consider it to be a "stupid rule", but it is a rule you explicitly agreed to follow and then didn't. HL's ISA Declaration starts: "For your own benefit and protection you should read our Terms & Conditions carefully before committing to an investment. If you do not understand any point please ask us for further information." and includes "I have not subscribed, and will not subscribe, to another Stocks & Shares ISA in the same tax year that I subscribe to this Stocks & Shares ISA."

All of that is in the first few paragraphs of the agreement. The ISA declaration with the statement about not subscribing to another ISA (of the same type) is something every ISA provider will require you to agree to, and they ask you to agree to it again every tax year you pay new money into your ISA, so you will have been presented with it both by Fidelity and HL within the last few months.

Given that you didn't go back and check the T&Cs even after I pointed you to the specific term to check around cancellation (which outlines options for what could be done with the shares after the ISA is cancelled), I'd respectfully suggest this is something you need to work on for the future.

Whatever you do, it would be sensible to keep a record of the acquisition price of these shares, along with a record of any capital gains and dividend income from them, under the assumption that they will be treated as not having been invested within an ISA.