HELP needed... I subscribed to two Stocks and Shares ISA in the same year.

sandeepamar

Foolishly I have subscribed/paid in money and traded into two Stocks and Shares ISA in the same year but I have not exceeded the annual allowance per person per year.  I called HMRC and both brokers but neither can tell me what action will be taken, they said i need to wait till April and HMRC will contact me with the steps to take.  I have never done this before and I appreciate it is a mistake that can easily happen.   One of my ISA's is from years ago and the other I opened this year, logic tells me they will action something against the new/latest ISA but the question is what????  I hear and read different opinions, such as, first time mistake and they let it go, or worst case the account will be closed.  Has anyone actually experienced this situation and if so, please can you tell me how this was dealt with by HMRC and if they gave you any choices and was that in recent years?  

If HMRC will definitely close the new ISA account or treat it as a NON-ISA, this will really help me decide if i should just add more money to my old ISA right now to max the allowance for the year as that will be considered a legit ISA.  Right now I am under the £20k for the year over the two ISA's.  Hope someone out there can help, it's testing me......  Thank you for reading.

eskbanker

I wouldn't want to second guess what action they'll actually take and don't have first hand experience, but my understanding is that they'll generally view the one you first subscribed to this tax year as valid and the second as invalid, rather than considering the order in which they were opened.

masonic

In which tax year did you make the invalid subscriptions? I'm assuming the current tax year in the below...

There are a couple of options to avoid an issue being picked up. The simplest is to transfer the second S&S ISA you subscribed to in full to a different type of ISA (e.g. a cash ISA) before the end of the tax year. If you pick a flexible cash ISA you can flexibly withdraw the subscriptions and pay them into your valid S&S ISA. Whether this makes financial sense depends on what is in your second S&S ISA, and your future investing plans. If it is a small amount, and won't cost you to sell your investments, then it might be worthwhile. However, if you are going to pay lots of fees liquidating and moving it, HMRC's action (if they take any action) might be the lesser of two evils.

sandeepamar

$masonic  Just sent you a reply but not sure if it went through as i can't see it now, I haven't used this forum in years.  Hopefully you got it because it was quite detailed.  Cheers

sandeepamar

eskbanker said:

I wouldn't want to second guess what action they'll actually take and don't have first hand experience, but my understanding is that they'll generally view the one you first subscribed to this tax year as valid and the second as invalid, rather than considering the order in which they were opened.

Thanks for your point.

masonic

sandeepamar said:

$masonic  Just sent you a reply but not sure if it went through as i can't see it now, I haven't used this forum in years.  Hopefully you got it because it was quite detailed.  Cheers

I'm afraid not. All I can see is the response I've quoted above and the reply to eskbanker.

sandeepamar

masonic said:

sandeepamar said:

$masonic  Just sent you a reply but not sure if it went through as i can't see it now, I haven't used this forum in years.  Hopefully you got it because it was quite detailed.  Cheers

I'm afraid not. All I can see is the response I've quoted above and the reply to eskbanker.

Will try again, here goes:
Firstly, thanks for your suggestion.
-This tax year is the invalid subscription.  I was active in the old ISA this tax year before opening the second/new ISA, and subsequently have traded in both.
-Gains are currently below the taxable allowance per year.
-The second/new ISA has 16 foreign stocks that the original ISA couldn't offer, hence me opening the new ISA.  The cost to sell them will be approximately £250 and to buy them back another £250.  Going forward I am very keen to own these stocks.
-With the new ISA provider I have the option to transfer the ISA stocks to a trading account with the same broker thus leaving my ISA account empty, not sure if HMRC would like that.   If I did that, the broker mentioned a BED&ISA in the new tax year to transfer stocks back to ISA status and help mitigate some fees.  
-What I don't want to do is lose my allowance for this tax year.  

Do you think that the 'first time offence, we will let is slide' outcome is unlikely?  Thanks for your time and any insight is welcome.

masonic

sandeepamar said:

Do you think that the 'first time offence, we will let is slide' outcome is unlikely?  Thanks for your time and any insight is welcome.

HMRC is more lenient in instances where the ISA allowance has not been breached, but tends to be stricter for non-cash ISAs. I don't know how high up their priority list this would be and whether or when they'd get around to chasing you about it. Another poster made small contributions to several IF ISAs in the same tax year and last I heard HMRC hadn't contacted him or taken any action a year later.

Incurring hundreds of pounds of costs is a non-starter, so any attempt to fix the error yourself can be forgotten.

The worst case scenario is HMRC instructs the provider to void the ISA, in which case it will be treated as a trading account. There is no benefit to moving the shares out of the ISA pro-actively through your broker, unless the ISA is a flexible ISA. Is it?

If you decide to take a 'wait and see' approach then you do risk losing some of this year's allowance - to top up your valid ISA and exceed the annual allowance would likely make matters worse.

sandeepamar

masonic said:

sandeepamar said:

Do you think that the 'first time offence, we will let is slide' outcome is unlikely?  Thanks for your time and any insight is welcome.

HMRC is more lenient in instances where the ISA allowance has not been breached, but tends to be stricter for non-cash ISAs. I don't know how high up their priority list this would be and whether or when they'd get around to chasing you about it. Another poster made small contributions to several IF ISAs in the same tax year and last I heard HMRC hadn't contacted him or taken any action a year later.

Incurring hundreds of pounds of costs is a non-starter, so any attempt to fix the error yourself can be forgotten.

The worst case scenario is HMRC instructs the provider to void the ISA, in which case it will be treated as a trading account. There is no benefit to moving the shares out of the ISA pro-actively through your broker, unless the ISA is a flexible ISA. Is it?

If you decide to take a 'wait and see' approach then you do risk losing some of this year's allowance - to top up your valid ISA and exceed the annual allowance would likely make matters worse.

masonic said:

sandeepamar said:

Do you think that the 'first time offence, we will let is slide' outcome is unlikely?  Thanks for your time and any insight is welcome.

HMRC is more lenient in instances where the ISA allowance has not been breached, but tends to be stricter for non-cash ISAs. I don't know how high up their priority list this would be and whether or when they'd get around to chasing you about it. Another poster made small contributions to several IF ISAs in the same tax year and last I heard HMRC hadn't contacted him or taken any action a year later.

Incurring hundreds of pounds of costs is a non-starter, so any attempt to fix the error yourself can be forgotten.

The worst case scenario is HMRC instructs the provider to void the ISA, in which case it will be treated as a trading account. There is no benefit to moving the shares out of the ISA pro-actively through your broker, unless the ISA is a flexible ISA. Is it?

If you decide to take a 'wait and see' approach then you do risk losing some of this year's allowance - to top up your valid ISA and exceed the annual allowance would likely make matters worse.

To make things that little bit worse my last action in the new ISA is that I added only £400 cash and realised it took me over the allowance for the year by only £150 or so.  I immediately transferred the cash out to the trading account.  Is that technically considered an allowance breach? 

In your opinion and as things stand if HMRC take action against an ISA of mine, is it likely to be the second/new ISA as it was opened after I was active in the old ISA?

Genuine, small fry mistakes but the waiting potentially means I miss out on this years remaining allowance.  May I ask your opinion on one scenario?  I leave both ISA's status as is but continue adding funds to the old ISA to reach the £20K allowance in that ISA alone.  This is now clearly a significant allowance breach as well as multiple S&S ISA's.  I presume they will take action but on what ISA do you think they will act?  Thanks!

masonic

sandeepamar said:

masonic said:

sandeepamar said:

Do you think that the 'first time offence, we will let is slide' outcome is unlikely?  Thanks for your time and any insight is welcome.

HMRC is more lenient in instances where the ISA allowance has not been breached, but tends to be stricter for non-cash ISAs. I don't know how high up their priority list this would be and whether or when they'd get around to chasing you about it. Another poster made small contributions to several IF ISAs in the same tax year and last I heard HMRC hadn't contacted him or taken any action a year later.

Incurring hundreds of pounds of costs is a non-starter, so any attempt to fix the error yourself can be forgotten.

The worst case scenario is HMRC instructs the provider to void the ISA, in which case it will be treated as a trading account. There is no benefit to moving the shares out of the ISA pro-actively through your broker, unless the ISA is a flexible ISA. Is it?

If you decide to take a 'wait and see' approach then you do risk losing some of this year's allowance - to top up your valid ISA and exceed the annual allowance would likely make matters worse.

To make things that little bit worse my last action in the new ISA is that I added only £400 cash and realised it took me over the allowance for the year by only £150 or so.  I immediately transferred the cash out to the trading account.  Is that technically considered an allowance breach? 

In your opinion and as things stand if HMRC take action against an ISA of mine, is it likely to be the second/new ISA as it was opened after I was active in the old ISA?

Genuine, small fry mistakes but the waiting potentially means I miss out on this years remaining allowance.  May I ask your opinion on one scenario?  I leave both ISA's status as is but continue adding funds to the old ISA to reach the £20K allowance in that ISA alone.  This is now clearly a significant allowance breach as well as multiple S&S ISA's.  I presume they will take action but on what ISA do you think they will act?  Thanks!

It would depend if your new ISA is a flexible ISA. Only flexible ISAs allow individuals to make withdrawals that are deducted from the current tax year annual allowance. Withdrawing money from a conventional ISA has no effect on the amount of allowance used. It might help to name the provider.

sandeepamar

masonic said:

sandeepamar said:

masonic said:

sandeepamar said:

Do you think that the 'first time offence, we will let is slide' outcome is unlikely?  Thanks for your time and any insight is welcome.

HMRC is more lenient in instances where the ISA allowance has not been breached, but tends to be stricter for non-cash ISAs. I don't know how high up their priority list this would be and whether or when they'd get around to chasing you about it. Another poster made small contributions to several IF ISAs in the same tax year and last I heard HMRC hadn't contacted him or taken any action a year later.

Incurring hundreds of pounds of costs is a non-starter, so any attempt to fix the error yourself can be forgotten.

The worst case scenario is HMRC instructs the provider to void the ISA, in which case it will be treated as a trading account. There is no benefit to moving the shares out of the ISA pro-actively through your broker, unless the ISA is a flexible ISA. Is it?

If you decide to take a 'wait and see' approach then you do risk losing some of this year's allowance - to top up your valid ISA and exceed the annual allowance would likely make matters worse.

To make things that little bit worse my last action in the new ISA is that I added only £400 cash and realised it took me over the allowance for the year by only £150 or so.  I immediately transferred the cash out to the trading account.  Is that technically considered an allowance breach? 

In your opinion and as things stand if HMRC take action against an ISA of mine, is it likely to be the second/new ISA as it was opened after I was active in the old ISA?

Genuine, small fry mistakes but the waiting potentially means I miss out on this years remaining allowance.  May I ask your opinion on one scenario?  I leave both ISA's status as is but continue adding funds to the old ISA to reach the £20K allowance in that ISA alone.  This is now clearly a significant allowance breach as well as multiple S&S ISA's.  I presume they will take action but on what ISA do you think they will act?  Thanks!

It would depend if your new ISA is a flexible ISA. Only flexible ISAs allow individuals to make withdrawals that are deducted from the current tax year annual allowance. Withdrawing money from a conventional ISA has no effect on the amount of allowance used. It might help to name the provider.

I don't think its a flexible ISA, I didn't know they existed till you mentioned it.  Yes, the provider names would help:
Old/first S&S ISA is Hargreaves and Lansdown
New/second S&S  ISA is Interactive Investor

Very much appreciate your time here