Bed and ISA limitations

aroominyork

I just spoke with Interactive Investor who confirmed that moving a fund from a Trading to ISA account under Bed and ISA prevents you being out of the market. However, you can only sell/buy the same fund class. Since my Trading fund is Inc. and my ISA would be Acc., that's not much use. Is there a technical reason for this limitation?

Edit: Is it becasue they do not buy and sell, but simply relabel? The ii guy on the phone said the proceeds would buy as many shares as the proceeds allowed, which suggested two transations rather than a relabelling.

masonic

The ISA rules require that the investment being moved into the ISA is sold and the proceeds moved in as cash. The limitation around not being able to choose a different financial instrument is more around the provider limiting the scope of this benefit rather than anything technical. They would rather you paid the additional trading fees if you are switching investments.

I cannot see how you would not be out of the market, and the later statement about buying as many shares as the proceeds allowed would contradict this. You must be out of the market if the number of shares bought can differ from the number sold (unlike for example a prefunded transaction where there is cash already available to place the buy order at exactly the same time). I don't think they'd be able to prefund a bed & ISA, because there is another rule about ISA subscriptions having to be made from the investor's own money, but you could preload the ISA with cash.