Accidentally withdrew money from cash ISA

tonyg_2

A friend - who isn't an ISA expert! - accidentally withdraw from his A&L cash ISA to his current account when trying to transfer (online) from one cash ISA to another.

He contacted A&L immediately expleining his mistake. A&L (unsuprisingly) is not being very helpful. Given that he contacted A&L straight away and this was a clear mistake is there anything he can do to maintain his tax-free wrapper on his existing money?

Aegis

Is it this year's cash ISA? If so, he may get away with it. Otherwise he's pretty much out of options

tonyg_2

Aegis wrote: »

Is it this year's cash ISA? If so, he may get away with it. Otherwise he's pretty much out of options

No, money was from a combination of 2 or 3 previous years cash ISA allowances.

A&L have said that they would need to explain to the Inland Revenue if they reversed this, but I guess my friend is thinking that (given it was a pure mistake and he contacted them immediately) why shouldn't A&L do this?

Aegis

tonyg wrote: »

No, money was from a combination of 2 or 3 previous years cash ISA allowances.

A&L have said that they would need to explain to the Inland Revenue if they reversed this, but I guess my friend is thinking that (given it was a pure mistake and he contacted them immediately) why shouldn't A&L do this?

In short, because it's not legal to do so. Withdrawing from the ISA is final, if it's done by the account holder. If A+L had withdrawn the money on his behalf after misinterpreting an instruction, they'd be able to reverse it, but if it was him carrying out the transaction, it's probably final.

tonyg_2

I thought this was probably so.

However my friend is claiming that when he opened his new A&L cash ISA it implied that an online transfer was possible, however the only option that appeared was via the linked current account from his old ISA.

He is also claiming that there was no warning about the loss of the tax wrapper when doing the transfer.

In honesty I don't think he has got much chance but I want to see what i can do for him!

Aegis

tonyg wrote: »

I thought this was probably so.

However my friend is claiming that when he opened his new A&L cash ISA it implied that an online transfer was possible, however the only option that appeared was via the linked current account from his old ISA.

He is also claiming that there was no warning about the loss of the tax wrapper when doing the transfer.

In honesty I don't think he has got much chance but I want to see what i can do for him!

Well, it certainly might be worth complaining to them. If nothing else they may offer some compensation as a goodwill gesture. I'm not sure he's going to be able to get his tax-free status back though, as the rules are quite clear on withdrawals...

MarkyMarkD

A&L haven't done anything wrong, so I can't see why you think they may offer some compensation.

You cannot do online transfers between A&L savings accounts in any circumstances. Transfers are always between the savings accounts and the linked current accounts, which means that you could never transfer money from one ISA account to another.

It says very clearly on A&L's website, about 2 clicks from the homepage:

How do I transfer my existing ISA funds to my Direct ISA?

If you have previous tax year subscriptions in another ISA, you can transfer them into your Direct ISA. This does not affect your £3,600 yearly subscription allowance. You must open a Direct ISA before transferring existing ISA funds.

To transfer existing ISA funds into Direct ISA either visit your local branch or print and complete the Application Transfer Form (pdf**) and return it to ISA Transfers, Savings Operations, B3G, Alliance & Leicester, Carlton Park, Narborough, Leicester, LE19 0AL.

Please note that the form must be fully completed in order for the transfer to take place. This form must be used for transfers from Alliance & Leicester ISAs or from an ISA held with another bank. A separate form must be used for each transfer requested.
DO NOT put your existing ISA funds into a non ISA account if you want to transfer them into your Direct ISA because they will lose their tax free status. You must use the ISA Application Transfer Form (pdf**).

It doesn't say you can transfer it yourself online. The emboldening is theirs, not mine.

Aegis

MarkyMarkD wrote: »

A&L haven't done anything wrong, so I can't see why you think they may offer some compensation.

You cannot do online transfers between A&L savings accounts in any circumstances. Transfers are always between the savings accounts and the linked current accounts, which means that you could never transfer money from one ISA account to another.

It says very clearly on A&L's website, about 2 clicks from the homepage: It doesn't say you can transfer it yourself online. The emboldening is theirs, not mine.

Sounds like they've covered themselves quite nicely against this sort of problem then.

tonyg_2

MarkyMarkD wrote: »

A&L haven't done anything wrong, so I can't see why you think they may offer some compensation.

You cannot do online transfers between A&L savings accounts in any circumstances. Transfers are always between the savings accounts and the linked current accounts, which means that you could never transfer money from one ISA account to another.

It says very clearly on A&L's website, about 2 clicks from the homepage: It doesn't say you can transfer it yourself online. The emboldening is theirs, not mine.

Yes you are right.

However my friend did say that he tried this route and A&L completely messed this up - though I'm not sure of the details. It was then that he received some advice on doing this online.

To be honest I realise now that I really need to find out further detailed information about what happenned!

MarkyMarkD

I can't honestly see that anyone would have "received some advice on doing this online" because there is no mechanism for transferring ISA funds yourself which would work and meet the HMRC requirements. Unless the funds were current year ISA funds in which case you are now able to DIY transfer.

Milarky

(If there was a run on, and people had queued around the block to 'accidentally' withdraw their ISAs then there is a precedent isn't there?)

To the OP: whatever A&L say (about loss of tax free status) is not the last word on this - you could ask the HMRC as they operate the rules. There may be a rule covering 'misadventure' (logically there ought to be) but I wouldn't rely on that being the case..