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  • FIRST POST
    • FatherAbraham
    • By FatherAbraham 16th Apr 18, 2:19 PM
    • 757Posts
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    FatherAbraham
    Can S&S ISAs really do 'in specie' transfers?
    • #1
    • 16th Apr 18, 2:19 PM
    Can S&S ISAs really do 'in specie' transfers? 16th Apr 18 at 2:19 PM
    Plenty of stocks-and-shares ISA providers appear to offer 'in-specie' transfers in, where securities already held in an ISA with another provider can be moved over, without the need to sell, transfer cash, and then rebuy.

    However, as far as I'm aware, ISA legislation makes a strong distinction between the current year's ISA contributions, and previous years. In particular, one may only contribute to a single stocks and shares ISA in a tax year, unless one does a transfer of the current year's contributions to another provider.

    When one makes a transfer of only the current year, presumably there are some irresolvable edge cases, if one uses 'in specie' transfers.

    For example, if an individual security is purchased using a mixture of money from a previous tax year and contribution from this tax year, is that security to be moved in a current-year-only, in-specie transfer or not?

    I presume that when we transfer cash between ISAs, as part of a current-year contribution transfer, what gets moved is purely the contribution -- any interest, growth or dividends earned on the contribution capital stay behind with the non-current-year assets. Otherwise, there would need to be a high level of tracking of returns, allocating them to specific contributions -- and any losses on invested contributions would have the effect of reducing the amount which could be transferred, while still using up current-year contribution limits.

    I can't make sense of the possibility of in-specie, contribution-limited, current-year transfers between ISAs -- how can they possibly be accounted for?

    What if I want to do an in-specie transfer for the current year of securities which were exclusively bought in a previous year? I presume this is possible, with only the contribution limits being respected -- there's no obvious allocation of assets to contribution years.

    Have I missed something? Are in-specie transfers only permitted for previous years? (Even then, we still have the problem of a large-denomination security which has been purchased using money from both this year's contribution and last year's contribution -- transferring that security as a previous-year in-specie move might breach the rules).

    The current-year/previous-years split makes some sense in the context of currency transfers (cash); the currency/in-specie split makes sense in the context of disregarding annual contribution limits.

    However, combining the two facilities seems to lead to irreconcilable problems with rule-compliance.

    What am I not understanding?
Page 1
    • grey gym sock
    • By grey gym sock 16th Apr 18, 4:01 PM
    • 4,274 Posts
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    grey gym sock
    • #2
    • 16th Apr 18, 4:01 PM
    • #2
    • 16th Apr 18, 4:01 PM
    see https://www.gov.uk/guidance/transfer-an-isa-if-youre-an-isa-manager#what-amounts-can-be-transferred

    the ISA manager appears to have a choice of either doing some high-level tracking of returns, or a simpler calculation giving lower and upper limits for the value of the current-year ISA.

    i think that implies that, if the manager can and does track the current-year investments, then a request to transfer the current-year ISA will transfer exactly those investments, not your choice of investments to the same value. but if the manager can't or won't do that, the transfer amount is just limited by total value; in which case, hopefully you do have a choice of which investments are transferred.

    it it does seem a bit unclear what the ISA manager will do, so i'd be inclined to avoid the issue, either by not using partial ISA transfers at all (which is what i've done to date), or by refraining from adding any current-year subscriptions to an ISA before making a partial transfer away from the account (so that there is no doubt that only the prior-year ISA is being split).
    • FatherAbraham
    • By FatherAbraham 16th Apr 18, 5:47 PM
    • 757 Posts
    • 580 Thanks
    FatherAbraham
    • #3
    • 16th Apr 18, 5:47 PM
    • #3
    • 16th Apr 18, 5:47 PM
    Thanks for that link.

    In the case of an innovative finance ISA this means that a transfer of the cash is not possible unless all the current year subscriptions are transferred i.e. by liquidating the peer-to-peer loans and crowdfunding debentures or transferring ‘in specie’.
    That's pretty bad. I hadn't even begun to consider IFISAs and transfers.

    Transferring out loans isn't really possible with a platform like Zopa, and even worse, it's not possible to sell loans which are in default or similar -- so one can be blocked from transferring the current year's subscription because of some immovable bad debt.
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