Fixed Rate ISA moving abroad

BadToro

I am British and was resident in the UK at the time of opening a Fixed Rate ISA with a well known and established financial institution. 

I made two distinct transactions, the first one the second week in April 2023 (transfer from another ISA provider) and the second one the first week in May 2023. 

In June 2023 I left the UK and become a non resident for tax purposes. 

A year later, April 2024, my Fixed Rate ISA provider informed me that 'HMRC rules require us to remove any subscriptions that have been made since the start of the tax year in which you became non-resident', and unbeknown to me they issued a cheque for what they believe to be the invalid subscription and relevant paid interest; the cheque corresponded to a third of the amount in the account which is odd, I reckon possibly linked to the second transaction I made in May 2023. 

My understanding is that if I open an ISA in the UK and then move abroad, I cannot put money into it AFTER the tax year that I move, and that I can keep my ISA open and still get UK tax relief on money held in it. If I understand correctly then, for the tax year 2023/2024 the money is a valid ISA subscription, however I cannot put any money into it for the tax year 2024/2025. 

If this is the case I believe my ISA provider is incorrect.

I made contact with my ISA provider and they are apparently still investigation the matter.

To date I have not received the cheque yet and no formal letter in regards to the above.

I only found out and got in touch with them when I saw the transaction of the cheque in question in my statement. 

Thank you for any suggestion/guidance.

xylophone

 Refer your provider to

 https://www.gov.uk/individual-savings-accounts/if-you-move-abroad

If you open an Individual Savings Account (ISA) in the UK then move abroad, you cannot put money into it after the tax year that you move (unless you’re a Crown employee working overseas or their spouse or civil partner).

You must tell your ISA provider as soon as you stop being a UK resident.

However, you can keep your ISA open and you’ll still get UK tax relief on money and investments held in it.

You can transfer an ISA to another provider even if you are not resident in the UK.

You can pay into your ISA again if you return and become a UK resident (subject to the annual ISA allowance).

xylophone

One other thought, presumably as tax resident in another country, presumably you must still report your interest in accordance with that country's fiscal rules?

BadToro

Thanks @xylophone I did when I made the complaint, it's mind blowing how the could have got this wrong though. And how long will they take to confirm their error, who knows! In the meantime, the cheque is somewhere in the post but certainly not in my hands.

BadToro

xylophone said:

One other thought, presumably as tax resident in another country, presumably you must still report your interest in accordance with that country's fiscal rules?

Yes of course 

eskbanker

BadToro said:

I am British and was resident in the UK at the time of opening a Fixed Rate ISA with a well known and established financial institution. 

No need to be coy, name and shame!

BadToro

eskbanker said:

BadToro said:

I am British and was resident in the UK at the time of opening a Fixed Rate ISA with a well known and established financial institution. 

No need to be coy, name and shame!

I can now since i just got off the phone with the "specialist complaints team" and was informed that their back office do not make errors, my complaint was rejected and am now waiting for their official letter where there will be instructions on how to complain to the ombudsman. And the cheque?! they are not worried about it since it takes 7+ days to reach...so it is now in transit across the world.

Thank you Santander.

xylophone

was informed that their back office do not make errors,

Delusions of infallibility?

A year later, April 2024, my Fixed Rate ISA provider informed me that 'HMRC rules require us to remove any subscriptions that have been made since the start of the tax year in which you became non-resident', and unbeknown to me they issued a cheque for what they believe to be the invalid subscription and relevant paid interest; the cheque corresponded to a third of the amount in the account which is odd, I reckon possibly linked to the second transaction I made in May 2023. 

Which rules? Chapter and verse?

https://www.gov.uk/guidance/who-can-invest-in-an-isa-if-youre-an-isa-manager

Investors must notify you if they no longer meet the residence qualification because they:

• have become non-resident

• no longer work as a Crown employee serving overseas

• are no longer married to, or in a civil partnership with, an eligible person

If this happens, an existing ISA does not need to be closed, but no further subscriptions to the ISA can be made apart from the exceptions to the rule, unless the investor meets the residence qualification again.

You were a UK resident for part of the tax year 23/24.

During the time that you were resident, you subscribed to an ISA for 23/24.

You made no further subscription after the date when you became non resident.

BadToro

xylophone said:

was informed that their back office do not make errors,

Delusions of infallibility?

A year later, April 2024, my Fixed Rate ISA provider informed me that 'HMRC rules require us to remove any subscriptions that have been made since the start of the tax year in which you became non-resident', and unbeknown to me they issued a cheque for what they believe to be the invalid subscription and relevant paid interest; the cheque corresponded to a third of the amount in the account which is odd, I reckon possibly linked to the second transaction I made in May 2023. 

Which rules? Chapter and verse?

https://www.gov.uk/guidance/who-can-invest-in-an-isa-if-youre-an-isa-manager

Investors must notify you if they no longer meet the residence qualification because they:

• have become non-resident

• no longer work as a Crown employee serving overseas

• are no longer married to, or in a civil partnership with, an eligible person

If this happens, an existing ISA does not need to be closed, but no further subscriptions to the ISA can be made apart from the exceptions to the rule, unless the investor meets the residence qualification again.

You were a UK resident for part of the tax year 23/24.

During the time that you were resident, you subscribed to an ISA for 23/24.

You made no further subscription after the date when you became non resident.

It's getting better, I just got a secure message that the specialist is double checking now with another team 'for her peace of mind' before sending out the final response. Oh dear oh dear.

BadToro

xylophone said:

Which rules? Chapter and verse?

https://www.gov.uk/guidance/who-can-invest-in-an-isa-if-youre-an-isa-manager

I'm now just wondering whether they refer to the following in regards to the link you posted:

Non-UK residence confirmed

Some circumstances result in all subscriptions to an ISA made in that year, including any income or growth relating to those subscriptions, (other than the exceptions) needing to be removed and any Lifetime ISA bonus received for that year returned to HMRC. 

This can happen if the investor:

• declares in-year that they are non-resident — the subscriptions cannot be reinstated after the year end even if the investor later establishes, they were resident"

p00hsticks

BadToro said:

xylophone said:

Which rules? Chapter and verse?

https://www.gov.uk/guidance/who-can-invest-in-an-isa-if-youre-an-isa-manager

I'm now just wondering whether they refer to the following in regards to the link you posted:

Non-UK residence confirmed

Some circumstances result in all subscriptions to an ISA made in that year, including any income or growth relating to those subscriptions, (other than the exceptions) needing to be removed and any Lifetime ISA bonus received for that year returned to HMRC. 

This can happen if the investor:

• declares in-year that they are non-resident — the subscriptions cannot be reinstated after the year end even if the investor later establishes, they were resident"

Yes, it reads to me that the problem is not that you left the UK but that you became non-resident in the same year.