Cautionary tale about Trading 212 ISA

lohr500

Last week my wife fell foul of the Trading 212 T&Cs and as a result they advised her that they were terminating her account with immediate effect.

The reason was because both she and I had opened T212 accounts using my mobile phone. Different email and logon credentials, different proofs of ID, etc.
However T212 sent her this message when she attempted to withdraw some money from the flexible ISA : 

We observed documents uploaded to your account by a third party. Thus, we're unable to confirm ownership of the Trading 212 account. Trading 212 offers accounts for personal use only. Sharing an account with a relative or another third party is against the terms of service.
 
We are not able to process a transfer request as your account will be closed.

Not sure what went wrong, perhaps something to do with the 2 factor authorisation code generated on my phone. On contacting T212 they were adamant that the account would be closed. 

The problem now is that she had transferred £8k of a 23/24 ISA allowance into the T212 Cash ISA as well as placing the full £20k allowance for 24/25.

T212 refused to reverse the transfer and insisted the full £28k must be returned to the linked bank account from where the £20k 24/25 allowance was funded.

So she has lost the tax free benefit of the 23/24 ISA.

She has opened a new Cash ISA with another institution to deposit the £20k for this year. I'm not 100% sure if this breaks the new rules on having multiple ISA's but as T212 closed the account, presumably HMRC will be OK with this.

The real issue and the warning to others though is that she has lost the tax free status on the 23/34 allowance.

In our case, this isn't important as we need some free cash to cover a number of expenses.
But if she had transferred many previous years ISA allowances, the loss of the tax free status would have been damaging.

I did wonder about raising the issue with the Financial Ombudsman, but as it doesn't impact us, it would be a waste of time.

I recognise that using the same mobile device to open both a/c was not the smartest thing to do and lesson learned.

But I just wanted to flag the risk of doing so to others as I wouldn't want anyone to lose their historic ISA tax benefits, or have to get into a battle with T212 over the way funds are reversed when an a/c is terminated.

masonic

This seems a very odd stance to take. Generally providers who require a unique mobile phone number to operate an account would not accept a number that had been previously registered. It would be reasonable of them to flag this when they discovered it, but very draconian to insist the account must be closed regardless of any explanation or evidence that the account is indeed being used by a single individual. Presumably in all cases the money going into the ISA has come from accounts held by the individual named on the ISA account.

lohr500 said:

The problem now is that she had transferred £8k of a 23/24 ISA allowance into the T212 Cash ISA as well as placing the full £20k allowance for 24/25.

T212 refused to reverse the transfer and insisted the full £28k must be returned to the linked bank account from where the £20k 24/25 allowance was funded.

So she has lost the tax free benefit of the 23/24 ISA.

She has opened a new Cash ISA with another institution to deposit the £20k for this year. I'm not 100% sure if this breaks the new rules on having multiple ISA's but as T212 closed the account, presumably HMRC will be OK with this.

Up until the start of this tax year, it would have been ok to 'self-transfer' a cash ISA to another provider, as there was an explicit rule about this in the ISA manager guidance. The new rules have taken a more restrictive stance on this and adding £20k to a new ISA will result in HMRC seeing £40k subscribed in this tax year with no self-transfer loophole available. So they may not be ok with it, but generally take no action for a first breach of the rules. I think it is still worth going down the formal complaint route and on to the Financial Ombudsman Service if necessary as, strictly, your wife has lost out on the opportunity to earn tax free interest on a £28k balance for the rest of her life. Having an upheld complaint may help if and when HMRC get in touch (which may not be for years).

Also, if you go down the complaints route, and can get a final decision before the end of this tax year, the ISA could be reinstated and the £28k returned as replacement subscriptions, avoiding any breach of the ISA rules.

lohr500 said:

I recognise that using the same mobile device to open both a/c was not the smartest thing to do and lesson learned.

Opening two accounts via a website on a shared family device is commonplace and I doubt that would be an issue in the slightest. Logging in to two different accounts on a single mobile app would be unwise (at least without clearing data first), as would using the same mobile phone number for 2FA. But mobile phone numbers don't always belong to the same individual for life. Some get changed and then reissued to a new customer. What do T212 do if someone by chance gets issued a mobile number that was once upon a time used by different customer? Or is it concurrent use of a single mobile number that is the problem?

lohr500

Thanks for the reply @masonic

Yes, all money going into the accounts came directly from the individuals named on the ISA a/c. Although as we have a joint current a/c with Santander, the 24/25 funding for both our ISAs came from the same joint a/c. I would have thought this was a fairly common event as well.

Having played ping pong with the Motor Ombudsman for months over a vehicle warranty issue last year, only to resolve the matter myself direct with Vauxhall. I'm not sure I can be bothered engaging with the Financial Ombudsman. But thanks for explaining the rule change on 'self-transfers'. I think we will let the matter rest unless HMRC finally catch up with it. 

If the timing had been different and my wife had transferred a much larger fixed ISA value that is due to mature in early August, then I would have been more inclined to engage with the Financial Ombudsman.