Lifetime ISA help

garcey448 · 11 May 2018 at 2:33PM

Hi there,
I'm appealing for help because in the last tax year I opened two Lifetime ISA accounts, a Nutmeg stocks & shares Lisa and the Skipton Cash Lisa. Upon investigating why I had only received the government bonus on the S&S account I found out that it is only permitted to open one type of Lisa account in the same tax year (unlike the regular ISA rules). Since I have deposited money into both accounts I'm in a tricky situation. Answers I have received from the Lisa providers is to do an ISA transfer, great but I still end up potentially without a government bonus on money deposited into a Lisa account. I've being trying to get a definitive answer from Nutmeg, Skipton and HMRC on how to get the bonus on all money contributed as intended for this account, unfortunately because of how new the Lisa structure is, nobody knows if I will be able to claim the government bonus for all the money contributed from the last tax year.
My Question is if commit to an ISA transfer can the contributions be claimed for all the money?

Thank you in advance for any advice!
James

sully1311 · 11 May 2018 at 3:54PM

Pretty sure a Lifetime ISA is a Lifetime ISA: Both the Cash and S&S varieties come under one banner so you should have only opened one last tax year.

eskbanker · 11 May 2018 at 4:34PM

garcey448 wrote: »

I've being trying to get a definitive answer from Nutmeg, Skipton and HMRC on how to get the bonus on all money contributed as intended for this account, unfortunately because of how new the Lisa structure is, nobody knows if I will be able to claim the government bonus for all the money contributed from the last tax year.
My Question is if commit to an ISA transfer can the contributions be claimed for all the money?

https://www.gov.uk/guidance/lifetime-isas-for-isa-managers states that:

Where Lifetime ISA funds are transferred to another Lifetime ISA before any outstanding bonus has been claimed, it’s the receiving ISA manager’s responsibility to claim the bonus due on the transferred funds.

but it's not clear to me if that applies in the situation where an account has been opened in contravention of the rules (you'd have erroneously declared that you weren't paying into another LISA in the same year when opening your second).

You may find it more straightforward to simply close the Skipton account and pay in as new money to Nutmeg, although this would count against your 2018/19 LISA allowance - you obviously won't be eligible for bonus on more than £4K for 2017/18 anyway though (or 2018/19), but how much did you pay in to each last year and how much are you planing to contribute this year?

AirlieBird · 11 May 2018 at 5:26PM

Unfortunately, the LISA rules appear to be more strict than normal ISA rules. There is provision within normal ISA rules for an invalid combination of ISAs to be "repaired" as long as you were within the annual limits. This doesn't appear to be the case with Lifetime ISAs.

The Guidance notes for isa managers states

Where the investor subscribes to an invalid combination of Lifetime ISAs, subscribing to 2 Lifetime ISAs in the same tax year, the second Lifetime ISA is an invalid ISA. As the second Lifetime ISA is invalid it must be voided and the invalid payments to it (whether or not they have caused the Lifetime ISA payment limit to be exceeded) must be removed. In this instance, they may be removed without the application of a withdrawal charge and any government bonus that has been paid must be returned to!HMRC.

Edit: You will need to wait to see if HMRC issues a void Notice when they run their annual compliance programme towards the end of the year. Don't withdraw it yourself or you will incur a withdrawal penalty.

garcey448 · 11 May 2018 at 6:54PM

Thank you for the responses.
My intention is to move the money from the Nutmeg Lisa into the Skipton. contributions from the last tax year when the error occurred don't exceed the annual allowance. Unfortunately the Nutmeg Lisa had already claimed the bonus so the transfer advice doesn't apply to getting the bonus. I think I can fix the issue by telling the second Lisa which i subscribed to to withdraw the funds from that tax year without the charges as it states in the isa manager advice.

"As the second Lifetime ISA is invalid it must be voided and the invalid payments to it (whether or not they have caused the Lifetime ISA payment limit to be exceeded) must be removed. In this instance, they may be removed without the application of a withdrawal charge and any government bonus that has been paid must be returned to HMRC."

Thank you guys for the advice, this might be the answer which none of the organisations could give!

Lifetime ISA help

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