Can anyone cite this flexible ISA rule?

chrood

On this page (https://www.moneysavingexpert.com/savings/flexible-isas/) it says "Remember, flexibility works on three types of ISAs: cash ISAs, innovative finance ISAs and cash held in a stocks and shares ISA. If you withdraw current year's cash from one type, you are allowed to replace it in another type, eg, withdraw from a cash ISA, replace in an innovative finance ISA". Can anyone provide a link to a government page to back this up as evidence just in case I have any problems?

Long story short, I had £20,000 in a flexible stocks and shares ISA with bank A and tried to transfer it to bank B. Bank A initially refused the transfer as they thought I had oversubscribed but this was incorrect as they hadn't realised that I was within the rules due to it being a flexible ISA. As they were being so slow I decided to just cancel the transfer through bank B and withdraw the money, then more recently I deposited £10,000 back and intended to deposit the other £10,000 before the end of the tax year. But it turns out bank B messed up and didn't cancel the transfer so now it has gone through with £10,000. Bank A has closed the ISA. I am desparate to use my full ISA allowance so as the tax year is about to end, I think the best thing will be to put £10,000 into a cash ISA now and transfer it later, I just want evidence of the above quote being true. And then I'm thinking of escalating complaints with both banks to the Ombudsman as they have both messed up. Bank B has now returned the funds to bank A and it's not clear whether or not they will accept them back but I presume either way they will end up in one ISA under my allowance in the end.

Could someone also clarify if it is fine to do this as it was a partial withdrawal? I.e. I added £20,000 to the stocks and shares ISA and withdrew £10,000 in the same tax year, not the full amount.

eskbanker

chrood said:

On this page (https://www.moneysavingexpert.com/savings/flexible-isas/) it says "Remember, flexibility works on three types of ISAs: cash ISAs, innovative finance ISAs and cash held in a stocks and shares ISA. If you withdraw current year's cash from one type, you are allowed to replace it in another type, eg, withdraw from a cash ISA, replace in an innovative finance ISA". Can anyone provide a link to a government page to back this up as evidence just in case I have any problems?

https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#f-isa

Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule.

colsten

Sounds you are in a right old mess.

I have never heard of an ISA provider refusing a transfer out on the grounds of oversubscription. ISA flexibility does not come into is, as this concerns the same ISA only. 

You don't say when you deposited the £20k into the bank A ISA, but assuming you did it in the same tax year, you had then used up your subscription allowance for that year already, and depositing any further money in the same tax year into an ISA at bank B is breaching ISA rules. Depositing another £10K into the ISA at bank B, or another ISA, in the same tax year would then make the breach even worse.

If, on the other hand, your £20K was deposited in one or more previous tax years, your subscription allowance for the current tax year would have been the full £20K, and it sounds you might have used £10K of the current year's allowance.

It would help if you could post just the date(s) and amounts you deposited into which ISA. Could you also confirm or otherwise that both ISAs are cash ISAs.

chrood

eskbanker said:

chrood said:

On this page (https://www.moneysavingexpert.com/savings/flexible-isas/) it says "Remember, flexibility works on three types of ISAs: cash ISAs, innovative finance ISAs and cash held in a stocks and shares ISA. If you withdraw current year's cash from one type, you are allowed to replace it in another type, eg, withdraw from a cash ISA, replace in an innovative finance ISA". Can anyone provide a link to a government page to back this up as evidence just in case I have any problems?

https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors#f-isa

Withdrawals of current year subscriptions, can effectively be replaced in any current year ISA, but cannot breach the ‘one ISA of each type per tax year’ rule.

Thanks, that is helpful

colsten said:

Sounds you are in a right old mess.

I have never heard of an ISA provider refusing a transfer out on the grounds of oversubscription. ISA flexibility does not come into is, as this concerns the same ISA only. 

You don't say when you deposited the £20k into the bank A ISA, but assuming you did it in the same tax year, you had then used up your subscription allowance for that year already, and depositing any further money in the same tax year into an ISA at bank B is breaching ISA rules. Depositing another £10K into the ISA at bank B, or another ISA of the same type, in the same tax year would then make the breach even worse.

If, on the other hand, your £20K was deposited in one or more previous tax years, your subscription allowance for the current tax year would have been the full £20K.

It would help if you could post just the date(s) and amounts you deposited into which ISA. Could you also confirm or otherwise that both ISAs are cash ISAs.

Thank you. I opened the ISA with bank A at the start of this tax year and deposited £20k. I then withdrew the funds in September, before depositing them again in January and opening the account with bank B and requesting the transfer (I didn't deposit any other money into bank B ). Bank A rejected it as they could see £40k of deposits this tax year and they hadn't realised that I had also withdrawn £20k so it was allowed due to it being a flexible ISA. Due to the delay I decided to withdraw the funds from bank A and cancel the transfer. I then deposited £10k with bank A again in February and planned to deposit the remaining £10k this tax year. I don't believe that I have broken any rules.

The problem is, bank B didn't actually cancel the transfer despite confirming that they had. So I ended up with £10k in bank B and I want to get the other £10k that I withdrew from bank A into the ISA wrapper again. So I am thinking at this stage in the tax year the best quick fix must be to put £10k into a cash ISA.

Also both ISAs are stocks and shares ISAs.

Also can anyone confirm whether or not a deposit made today into an ISA might be counted as a deposit next tax year? My bank will show the transfer as being made on Tuesday 6th April as that is the next working day, however that is the next tax year!

colsten

chrood said:
 I opened the ISA with bank A at the start of this tax year and deposited £20k. I then withdrew the funds in September, before depositing them again in January and opening the account with bank B and requesting the transfer (I didn't deposit any other money into bank B ). Bank A rejected it as they could see £40k of deposits this tax year and they hadn't realised that I had also withdrawn £20k so it was allowed due to it being a flexible ISA. Due to the delay I decided to withdraw the funds from bank A and cancel the transfer. I then deposited £10k with bank A again in February and planned to deposit the remaining £10k this tax year. I don't believe that I have broken any rules.

So far, no ISA rules broken, provided your ISA was indeed a flexible ISA.

chrood said:

The problem is, bank B didn't actually cancel the transfer despite confirming that they had. So I ended up with £10k in bank B and I want to get the other £10k that I withdrew from bank A into the ISA wrapper again. So I am thinking at this stage in the tax year the best quick fix must be to put £10k into a cash ISA.

Afraid, I don't think this would work, because you have already deposited your full £20K in the current tax year. Your annual allowance does not get reduced if you make use of the flex rule, and you can only redeposit into the same ISA you have made the withdrawal from. But not all is lost - you should be able to deposit the £10K with provider B, into the same ISA your other £10K has been transferred into, as this ISA has now your "same" ISA. To quote from the above gov document:



Whether provider B still accepts deposits for the current tax year - only they can answer this.

JohnRo

OP, why are you being cagey about the banks involved?

Just say who they are and folks can check what they offer. It looks fairly obvious that you've made assumptions about their ISA product that don't apply.

masonic

chrood said:

Thank you. I opened the ISA with bank A at the start of this tax year and deposited £20k. I then withdrew the funds in September, before depositing them again in January and opening the account with bank B and requesting the transfer (I didn't deposit any other money into bank B ). Bank A rejected it as they could see £40k of deposits this tax year and they hadn't realised that I had also withdrawn £20k so it was allowed due to it being a flexible ISA.

What evidence do you have that it is a flexible S&S ISA? Most S&S ISAs are not flexible. Alternatively, name Bank A and we can check.

chrood said:

Bank B has now returned the funds to bank A and it's not clear whether or not they will accept them back but I presume either way they will end up in one ISA under my allowance in the end.

If Bank B has rejected the transfer and returned funds back to Bank A, then it seems both banks agree that after paying in £20k, withdrawing £20k, paying in another £20k, then withdrawing £20k, then paying in a further £10k, the ISA is no longer valid (i.e. £50k subscribed overall), which would be consistent with the ISA not being flexible.

chrood

colsten said:

chrood said:
 I opened the ISA with bank A at the start of this tax year and deposited £20k. I then withdrew the funds in September, before depositing them again in January and opening the account with bank B and requesting the transfer (I didn't deposit any other money into bank B ). Bank A rejected it as they could see £40k of deposits this tax year and they hadn't realised that I had also withdrawn £20k so it was allowed due to it being a flexible ISA. Due to the delay I decided to withdraw the funds from bank A and cancel the transfer. I then deposited £10k with bank A again in February and planned to deposit the remaining £10k this tax year. I don't believe that I have broken any rules.

So far, no ISA rules broken, provided your ISA was indeed a flexible ISA.

chrood said:

The problem is, bank B didn't actually cancel the transfer despite confirming that they had. So I ended up with £10k in bank B and I want to get the other £10k that I withdrew from bank A into the ISA wrapper again. So I am thinking at this stage in the tax year the best quick fix must be to put £10k into a cash ISA.

Afraid, I don't think this would work, because you have already deposited your full £20K in the current tax year. Your annual allowance does not get reduced if you make use of the flex rule, and you can only redeposit into the same ISA you have made the withdrawal from. But not all is lost - you should be able to deposit the £10K with provider B, into the same ISA your other £10K has been transferred into, as this ISA has now your "same" ISA. To quote from the above gov document:



Whether provider B still accepts deposits for the current tax year - only they can answer this.

Thanks for this. The trouble is, bank B has returned the funds to bank A as I complained to them about it and they didn't admit to making the mistake themselves at first. But bank A has said that it's not their fault so they won't reopen the ISA. So now I don't know what is going to happen to my money as bank A hasn't confirmed receipt yet, maybe they will end up sending it back to bank B. But it seems that this won't happen this tax year now so I presume I can't really take advantage of the above?

But as per my quote from this website in my first post which has been evidenced with a link by someone else, I understand that I can deposit the £10k into a cash ISA now?

JohnRo said:

OP, why are you being cagey about the banks involved?

Just say who they are and folks can check what they offer. It looks fairly obvious that you've made assumptions about their ISA product that don't apply.

Bank A is Barclays and bank B is AJ Bell. The fact that Barclays did make the transfer in the end is an admission that they were in the wrong before.

masonic said:

chrood said:

Thank you. I opened the ISA with bank A at the start of this tax year and deposited £20k. I then withdrew the funds in September, before depositing them again in January and opening the account with bank B and requesting the transfer (I didn't deposit any other money into bank B ). Bank A rejected it as they could see £40k of deposits this tax year and they hadn't realised that I had also withdrawn £20k so it was allowed due to it being a flexible ISA.

What evidence do you have that it is a flexible S&S ISA? Most S&S ISAs are not flexible. Alternatively, name Bank A and we can check.

chrood said:

Bank B has now returned the funds to bank A and it's not clear whether or not they will accept them back but I presume either way they will end up in one ISA under my allowance in the end.

If Bank B has rejected the transfer and returned funds back to Bank A, then it seems both banks agree that after paying in £20k, withdrawing £20k, paying in another £20k, then withdrawing £20k, then paying in a further £10k, the ISA is no longer valid (i.e. £50k subscribed overall), which would be consistent with the ISA not being flexible.

Bank A is Barclays and the ISA is definitely flexible.

chrood

Also even if it was a problem if I put the £10k into a different ISA, can HMRC step in and allow it if the only reason I did that was because the banks messed up my accounts?

masonic

chrood said:

Thanks for this. The trouble is, bank B has returned the funds to bank A as I complained to them about it and they didn't admit to making the mistake themselves at first. But bank A has said that it's not their fault so they won't reopen the ISA.

So what exactly did AJ Bell do wrong? Is it that they failed to cancel the transfer, or that they did cancel the transfer? I don't think it is reasonable to blame them for Barclays sending them the money while you were in the process of stopping the transfer.

Did AJ Bell return the money to Barclays because they could not accept the money, or because you complained? The one element of this situation that messed things up irrecoverably was the return of the money to Barclays, so whomever is responsible for causing that to happen has undoubtedly made things worse. If the money had been transferred to AJ Bell then all would be well and you could deposit the extra £10k.

Barclays should be willing to accept the cancellation of the transfer. Their unwillingness to do so leads me to wonder whether they are the reason the transfer couldn't be cancelled in the first place.

chrood said:

But as per my quote from this website in my first post which has been evidenced with a link by someone else, I understand that I can deposit the £10k into a cash ISA now?

Yes you can open and fund a cash ISA with £10k if you can find one that will accept a deposit immediately and count it towards the current tax year allowance.

chrood said:

Bank A is Barclays and the ISA is definitely flexible.

The evidence you need is in the T&Cs, specifically 7.7. So Barclays are clearly in the wrong for informing you of the oversubscription and can be held responsible for the money not being in the ISA when it was transferred. The error was compounded by the transfer being returned, it seems that was on your instruction, but if AJ Bell cancelled the transfer without you asking them to do so then they may also have some responsibility for the situation.

Suggest you try to get AJ Bell to cancel the cancellation if the end result you want is the money at AJ Bell, especially given Barclays don't want to have it back. I still don't fully understand why the £10k didn't remain with AJ Bell.

chrood

masonic said:

chrood said:

Thanks for this. The trouble is, bank B has returned the funds to bank A as I complained to them about it and they didn't admit to making the mistake themselves at first. But bank A has said that it's not their fault so they won't reopen the ISA.

So what exactly did AJ Bell do wrong? Is it that they failed to cancel the transfer, or that they did cancel the transfer? I don't think it is reasonable to blame them for Barclays sending them the money while you were in the process of stopping the transfer.

Did AJ Bell return the money to Barclays because they could not accept the money, or because you complained? The one element of this situation that messed things up irrecoverably was the return of the money to Barclays, so whomever is responsible for causing that to happen has undoubtedly made things worse. If the money had been transferred to AJ Bell then all would be well and you could deposit the extra £10k.

Barclays should be willing to accept the cancellation of the transfer. Their unwillingness to do so leads me to wonder whether they are the reason the transfer couldn't be cancelled in the first place.

chrood said:

But as per my quote from this website in my first post which has been evidenced with a link by someone else, I understand that I can deposit the £10k into a cash ISA now?

Yes you can open and fund a cash ISA with £10k if you can find one that will accept a deposit immediately and count it towards the current tax year allowance.

chrood said:

Bank A is Barclays and the ISA is definitely flexible.

The evidence you need is in the T&Cs, specifically 7.7. So Barclays are clearly in the wrong for informing you of the oversubscription and can be held responsible for the money not being in the ISA when it was transferred. The error was compounded by the transfer being returned, it seems that was on your instruction, but if AJ Bell cancelled the transfer without you asking them to do so then they may also have some responsibility for the situation.

Suggest you try to get AJ Bell to cancel the cancellation if the end result you want is the money at AJ Bell, especially given Barclays don't want to have it back. I still don't fully understand why the £10k didn't remain with AJ Bell.

Thank you. I contacted AJ Bell about a month ago to cancel the transfer to Barclays and they confirmed that they had done so but the transfer recently went through. I contacted Barclays immediately when this happened and they said that if they had done anything wrong then not to worry, they will sort it. I also contacted AJ Bell who said that they did indeed cancel the transfer so they contacted Barclays for bank details and returned the funds. But then Barclays came back to me and said that AJ Bell had never cancelled the transfer and in fact AJ Bell had recently got in touch requesting the cash so they had not done anything wrong and would not re-open the account. I then relayed this back to AJ Bell who looked into it and said that actually due to a technical issue they hadn't cancelled the transfer and so they had sent an automatic request to Barclays for the money.

Anyway I have put the £10k into a cash ISA with Barclays now as they said that it would count as this tax year's subscription. Frustratingly the deposit is dated on the account as 6th April as they date everything for the next working day which not all banks do but I have been assured over the phone that it has counted against this year's limit.

It is clear to me that Barclays and AJ Bell have both messed up and won't take responsibility so I think maybe I should escalate both complaints to the Ombudsman. Do you know if they are happy to look at two complaints with different banks together in situations like this? I don't know what will happen to the money that was sent to Barclays but I presume that either Barclays will reopen my ISA after all and put it there or send it back to AJ Bell again, surely I can't be at risk of this money being taken out of the ISA wrapper.

The other thing I am wondering is whether or not Barclays was allowed to make this transfer. When I made the original request, I had £20k in my Barclays account in cash and I indicated this on the form. At the time that they made the transfer, I had £10k in the account and it was invested in a fund. Apart from the amounts not matching, was Barclays allowed to sell my fund when I hadn't authorised this on the transfer form?