Icesave ISA oddities.

Stormy

Hi,

I am just about to pay my first 2008/2009 cash into the Icesave ISA I set up a month or so ago and noticed this:

• The maximum you may subscribe to a Cash ISA in the 2008/2009 tax year is £3,600.
• If this is the first time you are making a subscription to your Easy Access ISA in the 2008/2009 tax year, under HMRC rules you are subscribing to a Cash ISA and you will not be able to open another Cash ISA in the 2008/2009 tax year.
• If you are paying money into your Easy Access ISA for the first time, your account open date, or subscription date, is the date we receive your money. It can take 4 business days for the money to reach your account. Please allow plenty of time when opening an ISA around tax year end.
• You must not subscribe more than £7,200 in total to ISAs in the 2008/2009 tax year.
• You will not be able to subscribe to another Cash ISA in the 2009/2010 tax year if you continue to subscribe to this Cash ISA in 2009/2010.

Point 1, yep happy with that.

Point 2, errr I am not happy with that HMRC rules say no such thing, HMRC rules say you can transfer an ISA to another provider whenever you like, and that the only rule is that if you have paid cash into that ISA this tax year, you must transfer it all of that years subscription. So while you cannot open and pay into two ISAs in the same year. The rules allow you to open one, and then open another if you transfer the entire current tax years subscription to the new one. The £3,600 rule applies.

Point 5, errr is this Icesave making the rules up as it goes along? There is no such tax rule, as long as I didnt pay a cash subscription to the Icesave ISA in the 2009/2010 tax year I am quite within my rights under HMRC ISA rules to open a new ISA with who I choose, or indeed as point 2, transfer when I like if I have subscribed to the Icesave ISA with a payment in 2009/2010.

Anyone got any comments?

Cheers,

Mike

Baldur

I transferred partial previous years' funds into their ISA in February - no problems in operating the product BUT I had to quote HMRC's Guidance Notes for ISA Managers in order to transfer in, as they were under the impression that they could only accept full ISA transfers, whether past years' or current year's funds.

As soon as I had quoted the relevant 'chapter & verse' they held their hands up & said "We were wrong".

I have since transferred the ISA to a fixed rate product with a different provider, again with no operational problems.

Stormy

Yeh, partial is ok on previous years as you say. Full is only applicable to the current tax year.

Icesave seem to just have made their own rules up. I will continue to operate mine as per HMRC rules and if a better deal comes up that allows transfers in (that I think is worthwhile for me as I know there are some higher rates out there atm) I will move it.

Baldur

As indicated in my post, I suspect that they:
1. Are, to some extent, learning as they go.
2. Are misinterpreting the HMRC Guidance Notes, which is easily rectified (hopefully) as I did above, by e-mailing them.

Their use of 'subscribe' in their 4th point is presumably intended to mean 'make a cash subscription', rather than just leaving the ISA open.

Lavendyr

Stormy wrote: »

Point 2, errr I am not happy with that HMRC rules say no such thing, HMRC rules say you can transfer an ISA to another provider whenever you like, and that the only rule is that if you have paid cash into that ISA this tax year, you must transfer it all of that years subscription. So while you cannot open and pay into two ISAs in the same year. The rules allow you to open one, and then open another if you transfer the entire current tax years subscription to the new one. The £3,600 rule applies.

All that Icesave is saying is that you cannot open and subscribe to another cash ISA - you can certainly transfer in/out. Transfers are different from 'opening' ISAs, I think it's just a semantics issue.

Stormy wrote: »

Point 4, errr is this Icesave making the rules up as it goes along? There is no such tax rule, as long as I didnt pay a cash subscription to the Icesave ISA in the 2009/2010 tax year I am quite within my rights under HMRC ISA rules to open a new ISA with who I choose, or indeed as point 2, transfer when I like if I have subscribed to the Icesave ISA with a payment in 2009/2010e

Following your post I guess you mean point 5 not 4, and yes, this is fine. All it means is that if you subscribe to (i.e. pay cash into) your Icesave ISA in 2009/2010, you cannot open and subscribe to another ISA - again I think you are misunderstanding Icesave's points here, though I agree they are not 100% clear. The word "subscribe" is commonly used by ISA providers, including NS&I, to mean "put money into", rather than "leave open".

I have seen exactly the same stipulations on other ISAs so I really wouldn't worry, I hope that makes more sense now.

Lavendyr

Just for comparison, here are NS&I's statements which you must agree with in order to open their ISA. Slightly different wording but the meaning is the same. Again, the word "subscribe" is used in exactly the same way.

"I apply to subscribe for a cash ISA for the tax year of 2008/09 and each subsequent year until further notice. I declare that:
- All subscriptions made, and to be made, belong to me;
- I am 16 years of age or over;
- I have not subscribed and will not subscribe more than £7,200 in total to a cash ISA and a stocks and shares ISA in the same tax year;
- I have not subscribed and will not subscribe more than £3,600 of the overall £7,200 total to a cash ISA; and
- I have not subscribed and will not subscribe to another cash ISA in the same year that I subscribe to this cash ISA.
I am resident and ordinarily resident in the United Kingdom for tax purposes, or, if not so resident, either perform duties which, by virtue of Section 28 of Income Tax (Earnings & Pensions) Act 2003 (Crown employees serving overseas), are treated as being performed in the United Kingdom or I am married to, or in a civil partnership with, a person who performs such duties. I will inform NS&I if I cease to be so resident and ordinarily resident or to perform such duties or be married to, or in a civil partnership with, a person who performs such duties.
I authorise NS&I to hold my cash subscriptions and any interest earned on those subscriptions.
I declare that this application has been completed to the best of my knowledge and belief.
PLEASE KEEP FOR REFERENCE"

http://www.nsandi.com/products/disa/tandc.jsp

Baldur

It's fairly standard wording, shown in the HMRC's Guidance Notes for ISA Managers, Chapter 4.39 'Sample application form', there may be slight adaptations between ISA providers but the salient points are effectively prescribed by HMRC.

Stormy

Lavendyr wrote: »

All that Icesave is saying is that you cannot open and subscribe to another cash ISA - you can certainly transfer in/out. Transfers are different from 'opening' ISAs, I think it's just a semantics issue.

But to transfer to another ISA I need to open the new ISA with the new provider don't I, when I transfer in?

Icesave seem to imply I am not allowed to, when I most certainly am under current HMRC rules.

ps yep point 5, edited.

Thanks,

Mike

Lavendyr

Again, I think it's just semantics. Technically yes it is "opening" but when you transfer, it's not treated as though you are opening another ISA, rather you transfer your existing ISA to another ISA provider. That's the point I think they are trying to convey. Though as I said, I can see how it is misleading.

Paul_Herring

Stormy wrote: »

If this is the first time you are making a subscription to your Easy Access ISA in the 2008/2009 tax year, under HMRC rules you are subscribing to a Cash ISA and you will not be able to open another Cash ISA in the 2008/2009 tax year.

errr I am not happy with that HMRC rules say no such thing, HMRC rules say you can transfer an ISA to another provider whenever you like, and that the only rule is that if you have paid cash into that ISA this tax year, you must transfer it all of that years subscription. So while you cannot open and pay into two ISAs in the same year. The rules allow you to open one, and then open another if you transfer the entire current tax years subscription to the new one. The £3,600 rule applies.

Your interpretation of "open" is not the same as HMRCs. An ISA is open when it has funds from the current tax year in it. You can have only one "open" account per tax year.

You will not be able to subscribe to another Cash ISA in the 2009/2010 tax year if you continue to subscribe to this Cash ISA in 2009/2010.

errr is this Icesave making the rules up as it goes along? There is no such tax rule, as long as I didnt pay a cash subscription to the Icesave ISA in the 2009/2010 tax year I am quite within my rights under HMRC ISA rules to open a new ISA with who I choose, or indeed as point 2, transfer when I like if I have subscribed to the Icesave ISA with a payment in 2009/2010.

Subscribing requires you to contribute money. If you don't contribute, you haven't subscribed. Your interpretation of the ISA rules do not contradict what IceSave have said.

Basically IceSave have not said anything incorrect, but it's not the clearest of pages.