ISA Bulletin 44 (PDF 93K) - HM Revenue & Customs

Savings Schemes Office
ISA Bulletin
Number 44 14 June 2012
The ISA Bulletin keeps ISA managers informed of any new
developments relating to the ISA scheme. Please ensure the
appropriate people in your organisation read it.
We suggest that you keep Bulletins at the front of your copy of the
Guidance Notes for ISA Managers.
This Bulletin contains articles on
� American Depositary Receipts
� Invalid application to open a Junior ISA
� ISA Regulations – reinstating ISA subscriptions
� ISA Regulations - connected account rules
� ISA regulations – Junior ISAs of looked-after children
Enquiries on this bulletin should be addressed to
David Taylor
HM Revenue & Customs
Specialist Personal Tax
Room 305
St John’s House
Merton Road, Liverpool L75 1BB
Telephone 0151 472 6140
e-mail: savings.audit@hmrc.gsi.gov.uk

American Depositary Receipts
A depositary interest (including a depositary receipt ‘DR’) can be a qualifying
investment for a stocks and shares ISA (regulation 7(2)(ha)) but regulation 4(6)(a)(i)
requires the ISA account investor to have beneficial ownership of the investment.
The commonest type we see are American Depositary Receipts (ADRs).
The recent decision of the First Tier Tribunal in the Stamp Duty Reserve Tax case of
HSBC Holdings and Bank of New York Mellon v Commissioners for HMRC, UKFTT
163 (TC) has shown that in some cases beneficial ownership may not rest with the
underlying investor.
Where a DR is issued in the UK the HMRC view is that the holder of a DR is the
beneficial owner of the underlying shares so the DR can be a qualifying investment.
Where a DR is issued outside the UK the question of whether the holder of the DR is
the beneficial owner of the underlying shares will be determined by reference to the
law of the territory in which the DR is issued. Information on beneficial ownership
may be provided to investors by the depository. Where the relevant law means that
the holder of a DR is not the beneficial owner of the underlying shares, the DR
cannot be a qualifying investment that can be held in a stocks and shares ISA.
Where beneficial ownership of the underlying shares cannot conclusively be
determined by reference to the law governing the arrangements relating to the issue
of the DRs, for tax purposes HMRC will continue to determine beneficial ownership
according to its understanding of the principles of UK law. This means that HMRC
will continue to apply its longstanding practice of regarding the holder of a DR as
holding the beneficial interest in the underlying shares.
Invalid application to open a JISA
We have been asked for further clarification about what providers should do when a
JISA registered contact tells them the child has a CTF or another JISA. We've been
asked about 3 specific scenarios.
1) A JISA is opened by a parent. The parent later informs the manager that
the child is eligible for a CTF.
This could mean that the child already has a CTF or has become entitled to one -
for example, where a Child Benefit appeal for a period before 4 January 2011 is
settled.
The manager needs to have this confirmed in writing for their records. They can
then remove the JISA wrapper from the account. If the parent does not provide
confirmation in writing the manager must flag the account so that no further
subscriptions are accepted and no new management instructs can be accepted.
2) A JISA is opened by a parent who later informs the manager that they or the
other parent have opened a JISA elsewhere.
If the other JISA that has been opened is of the other type, then no further action
needed. If the other JISA is of the same type, then one of them must cease to be

treated as a JISA. The first account opened is the valid JISA so the second must
be closed. The manager should obtain confirmation in writing that either:
(i) the JISA with them is the later account in which case the JISA wrapper can
be removed from the account
or
(ii) the JISA with them is the valid account and that the wrapper has been
removed from invalid account, or it has been closed. The manager can then
continue to accept subscriptions.
If neither confirmation is received the manager must flag the account so that no
further subscriptions can be accepted and no new instructions can be accepted.
3) A JISA is opened and the manager is later informed that the registered
contact does not have parental responsibility for the child.
In the first instance, the manager should seek confirmation from the existing
registered contact that the account opening declaration was invalid.
If confirmation is received, or the existing registered contact fails to respond, the
account can continue if someone with parental responsibility steps forward and
completes an application to be registered contact. The manager does not need
the agreement of the existing registered contact and the application should be
treated as if the existing registered contact cannot be contacted (see paragraph
21.6.2 of the ISA Guidance Notes).
If confirmation that the declaration is invalid is received, but no one with parental
responsibility steps forward, the JISA wrapper should be removed from the
account.
If the existing registered contact fails to respond, but no one with parental
responsibility steps forward, the account must be flagged so that no further
subscriptions or management instructions can be accepted.
ISA regulations
Attached to the bulletin are 3 working drafts of ISA amendment regulations (along
with one draft of CTF amendment regulations) that we hope to lay before Summer
recess. They are still undergoing final checks.
We would be very grateful for any comments on these drafts by close 27 June and
we apologise for this very tight timetable.
The drafts cover
� ISA reinstatement
� Amending the connected account rules (for both ISA and CTF)
� Allowing The Share Foundation to open and take on the registered contact role
for Junior ISAs of looked-after children.
REINSTATING ISA SUBSCRIPTIONS

As announced in ISA Bulletin 28, the ISA regulations are being amended to allow for
the reinstatement of ISAs where either a cash manager is declared in default, or
where compensation is received in respect of a stocks and shares ISA qualifying
investment.
The regulation provides different rules for:
� cash manager failures – a single subscription of up to the balance held in the
failed ISA at the time of default will be allowed into either a cash ISA or a stocks
and shares ISA
� compensation received in respect of stocks and shares qualifying investments – a
single subscription of up to the amount of compensation received can be
made to a stocks and shares ISA
� failures linked to the collapse of Lehman Brothers – a single subscription of up to
the value of the failed investment at the time of the Lehmans collapse can be
made to a stocks and shares ISA, and
� Keydata Investment Services – a single subscription can be made into a stocks
and shares ISA of up to the amount originally subscribed for the failed Keydata
investment
A draft regulation is attached to the bulletin and we would welcome any comments
by 27 June which will allow us to lay the regulation before Parliament rises for the
Summer recess.
Commentary
New reg 5D Subscriptions made in accordance with this regulation will not count
towards the annual subscription limits.
New reg 5DA ‘Defaulted cash account subscription’. Where a cash ISA manager is
declared in default, the investor can make a subscription up to the
balance held in the cash ISA at the time of the default into either a
cash ISA or stocks and shares ISA, without it counting towards the
annual subscription limits. The subscription must be made within 180
days of the default.
New reg 5DB ‘Defaulted investment subscription’. This allows a ‘defaulted
investment payment’ to be subscribed to a stocks and shares account
within 180 days of the investor receiving the payment. The maximum
amount of the payment is
� For Lehman accounts – see new reg 5DL
� For Keydata accounts – see new reg 5DM
� For other stocks and shares failures – the amount of the
compensation received.
New reg 5DC The rules for a cash ISA reinvestment are triggered when the FSA or
FSCS determine that there has been a default.
New reg 5DD This describes the type of payments that a stocks and shares ISA
investor could receive which can be reinvested into a S&S ISA without
counting as a fresh ISA subscription. Broadly, these are
compensation payments that would be subject to CGT if they were
paid in respect of an investment that was not held in an ISA.

New reg 5DE As investments held in a Junior ISA can be freely transferred between
cash and stocks and shares (and vice versa) this reg allows a
compensation payment made in respect of a S&S Junior ISA to be
paid into a cash Junior ISA.
New reg 5DF The draft regulations do not require the investor to be given a
‘reinvestment certificate’ (as has been the been the case for Northern
Rock, Keydata etc). Instead, the investor wishing to make the
reinvestment will have to provide information to the ISA manager.
� For reinvestment following a cash manager default, the information
must show the amount held in the account at the time of default
and also details of any current year subscriptions made in the year
of default.
� For stocks and shares investment failures
� Evidence of the amount of the compensation payment and the
date it was paid
� Details of the failed investment in respect of which the payment
was made
� Details of the ISA manager who held the investment when it
failed, and
� Details of the person making the compensation payment
New reg 5DG This allows the investor to make only a single reinvestment (unless a
later payment of compensation is received).
New reg 5DH / DI
Payments received before the regulations come into force will be
treated as having been received on the date the regs take effect. This
will allow reinvestment within 180 days of this date.
For cash manager failures and for compensation received in respect
of stocks and shares investments, any payments received after 6 April
2011 can be reinvested.
The special rules for Lehman cases apply to any payments made after
the collapse in 2008 and for Keydata to any payments made after the
administration in 2009.
The relevant definitions cover:
� Keydata investments, whether held by Keydata as ISA manager or
by any other manager
� Lehman Brothers Investments, which were investments for which
Lehman Brothers acted as the sole counterparty
New reg 5DJ For Lehman cases, the information required is as in reg 5DF above,
and in addition
� The value of the investment on the date Leman Bros collapsed
� Details of any subscriptions already made in respect of this
particular investment, along with details of the ISA managers to
whom the subscriptions were made.

New reg 5DL Lehman cases. Investors can reinvest the greater of the value of the
investment when Lehman Bros collapsed, or the total of the
compensation payments received. If a payments are received after
the regulations come into force these will each have their own 180 day
reinvestment period and any amounts already reinvested must be
taken into account when determining how much of the latest payment
can be reinvested.
New reg 5DM Keydata cases - this mirrors the approach in reg 5DL above.
The information required by reg 5DJ must include details of the
amount of the subscription used to acquire the Keydata investment.
New reg 6 This amends existing reg 31 which covers amounts that must be
included on the annual return. Where there is a cash manager default
and current year subscriptions were made to the failed manager,
these subscriptions must be included in the return made by the
manager accepting the reinvestment subscription.
CONNECTED ACCOUNT REGULATIONS
As announced in ISA Bulletin 42, the draft regulations attached qualify the connected
accounts rule so that from 1 November 2011, the date that the Junior ISA was
launched, an ISA or Junior ISA that is connected to another tax exempt account will
not breach the rule. For the purpose of the regulations, a tax exempt account is an
ISA, Junior ISA or CTF account.
A similar amendment will be made to the CTF connected accounts rule. For CTF
purposes, a deposit account or share account must not be connected to any other
investment (as opposed to the ISA rule which is limited to the account being
connected to another deposit or share account). So this amendment will allow a CTF
to be connected to a tax exempt investment which means an investment held in an
ISA, Junior ISA or CTF account.
JUNIOR ISAS FOR LOOKED AFTER CHILDREN
As announced in a Dept. for Education Press Notice of 1 November 2011, the Junior
ISA scheme is to be extended to allow accounts to be opened for children who have
been in care for a continuous period of at least 12 months starting after 2 January
2011 (the final date for CTF eligibility).
The attached draft regulation will amend the ISA regulations to allow the Share
Foundation to open a Junior ISA for looked after children and/or to take on the
Registered Contact role. The version attached is ‘work in progress’ and needs to be
updated to include the statutory cross references defining the appropriate looked
after children in Scotland.

STATUTORY INSTRUMENTS
2012 No. XXXX
INCOME TAX
CAPITAL GAINS TAX
The Individual Savings Account (Amendment No XX)
Regulations 2012
Made - - - - ***
Laid before the House of Commons ***
Coming into force - - ***
The Treasury make the following Regulations in exercise of the powers conferred by section 694
to 696, 699 and 701 of the Income Tax (Trading and Other Income) Act 2005(a) and section 151
of the Taxation of Chargeable Gains Act 1992(b).
Citation and commencement
1. These Regulations may be cited as the Individual Savings Account (Amendment No. XX)
Regulations 2012 and come into force on *** 2012.
Amendment to the Individual Savings Account Regulations 1998
2. The Individual Savings Account Regulations 1998(c) are amended as follows.
3. In regulation 2A(4) (meaning of account investor), after “regulations 5C,” insert “5D to 5DD,
5DF,”.
4. After regulation 5C (treatment of certain sums held in dormant accounts) insert—
“Subscriptions disregarded for the purposes of the subscription limits in regulations
4ZA and 4ZB
5D.—(1) A subscription to an account made in accordance with this regulation shall be
disregarded for the purposes of the subscription limits in regulations 4ZA and 4ZB.
(2) A subscription to an account held by an account investor is made in accordance with
this regulation if—
(a) 2005 c. 5; sections 694(1A), 695A, 699(9) and 701(6) were inserted by section 40 of the Finance Act 2011 (c. 11); section
701(4) and (5) were inserted by section 40 of the Finance Act 2008 (c. 9) and sections 695(3) and (4), 696(3) and 699(1)
and (2) were amended by paragraphs 131 and 132 of Schedule 4 to the Commissioners for Revenue and Customs Act 2005
(c. 11).
(b) 1992 c. 12; section 151(2) was substituted by section 64(2) of the Finance Act 1995 (c. 4), paragraph 436 of Schedule 1 to
the Income Tax (Trading and Other Income) Act 2005 (c. 5) and amended by section 40 of the Finance Act 2011 (c. 11);
section 151(4) was inserted by section 85 of the Finance Act 1993 (c. 34).
(c) S.I. 1998/1870; relevantly amended by […] and S.I. 2011/1780.

(a) the subscription is—
(i) a defaulted cash account subscription;
(ii) a defaulted investment subscription; or
(iii) permitted in accordance with regulation 5DE; and
(b) the account manager of the account to which the subscription is made is provided
with the information specified in regulation 5DF as relevant to the subscription.
Defaulted cash account subscription
5DA. A subscription is a defaulted cash account subscription if—
(a) it is made to an account (which may be a stocks and shares account or a cash
account) held by an account investor who held a cash account (“defaulted cash
account”) in respect of which a default event occurred no more than 180 days
before the subscription is made; and
(b) it does not exceed the amount held in the defaulted cash account immediately
before the default event occurred (including interest accrued but not paid at that
time).
Defaulted investment subscription
5DB. A subscription is a defaulted investment subscription if—
(a) it is made to a stocks and shares account held by an account investor to whom a
defaulted investment payment has been made no more than 180 days before the
subscription is made; and
(b) it does not exceed the amount of the defaulted investment payment.
Default event in respect of cash account
5DC. A default event in respect of a cash account held by an account investor occurs
where, on or after [date when regulations come into force], the account manager of that
account is determined to be in default under rule COMP 6.3.2R of the Financial Services
Authority Handbook by the Financial Services Authority or the Financial Services
Compensation Scheme.
Defaulted investment payment
5DD. A defaulted investment payment occurs where a payment is made on or after [date
when regulations come into force] to an account investor (otherwise than by accretion to a
stocks and shares account) by way of compensation in respect of the poor performance,
loss, depreciation or risk of depreciation of an investment described in regulation 7
(”defaulted investment”) held by the account investor in a stocks and shares account
(whether or not the defaulted investment continues to be held in the account at the time of
the payment).
Additional permitted subscription to a junior ISA account
5DE. A subscription is permitted by this regulation if it is made to a junior ISA account
that is a cash account but would have been a defaulted investment subscription if it had
been made to a stocks and shares account.
Information required by regulation 5D
5DF.—(1) The information specified by this regulation is—
(a) in relation to a defaulted cash account subscription—

(i) the amount held in that account immediately before the default event occurred
(including interest accrued but not paid at that time); and
(ii) the current year’s subscription made to the defaulted cash account;
(b) in relation to a defaulted investment subscription or a subscription permitted by
regulation 5DE—
(i) evidence of the amount of the defaulted investment payment and the date it
was paid;
(ii) details of the defaulted investment in respect of which the defaulted
investment payment was made;
(iii) the full name and address (including postcode) of the account manager of the
stocks and shares account in which the defaulted investment was held;
(iv) the full name and address (including postcode) of the maker of the defaulted
investment payment.
(2) In this regulation—
“current year’s subscription” in relation to a defaulted cash account means—
(a) subscriptions made to the account in the year in which the permitted cash account
subscription is made, but before the default event; and
(b) subscriptions made to any other account held by the account investor in the year in
which the permitted cash account subscription is made and transferred to the
account before the subscription is made.
Single regulation 5D subscription
5DG. Only one defaulted cash account subscription, defaulted investment subscription or
subscription permitted by regulation 5DE may be made in respect of a defaulted cash
account or a defaulted investment payment as the case may be notwithstanding that the
subscription made is an amount less than that which could have been made by way of such
subscription in accordance with regulation 5D.
Default event or default investment payment occurring in the period beginning on 6th
April 2011 and ending before [date when the regulations come into force]
5DH. Anything occurring in the period commencing on 6th April 2011 and ending before
[date when regulations come into force] that, if it had occurred after that period, would
have been—
(i) a default event in respect of a cash account within regulation 5DC, or
(ii) a defaulted investment payment within regulation 5DD,
shall be treated as occurring on [date when regulations come into force] for the purposes of
regulations 5D to 5DG.
Special provision in respect of Lehman Brothers investments and Keydata
investments
5DI.—(1) Regulations 5DJ to 5DM make special provision in respect of an investment
that is a Lehman Brothers investment or a Keydata investment.
(2) An investment is a Lehman Brothers investment if—
(a) the investment was a qualifying investment held by an account investor in a stocks
and shares account on 15th September 2008;
(b) Lehman Brothers Holdings Inc. acted as the sole counterparty underwriting the
investment on that day; and
(c) the investment was not sold or otherwise disposed of on that day so as to cause it
to cease to be a qualifying investment of the account on that day or any other day.

(3) An investment is a Keydata investment if—
(a) the investment was a qualifying investment held by an account investor in a stocks
and shares account on 8th June 2009;
(b) Keydata Investment Services Limited (Keydata) on that day—
(i) was the account manager of the account, or
(ii) administered the account for another account manager; and
(c) the investment was not sold or otherwise disposed of on that day so as to cause it
to cease to be a qualifying investment of the account on that day or any other day.
Special application of regulations 5DB, 5DD, 5DF and 5DH in respect of a Lehman
Brothers investment
5DJ. In respect of a Lehman Brothers investment—
(a) regulation 5DB shall apply as if—
(i) sub-paragraph (b) provided that a defaulted investment subscription must not
exceed the amount of the defaulted investment payment determined in
accordance with regulation 5DL;
(ii) after sub-paragraph (b) there is inserted—
“(c) no defaulted investment subscription may be made in respect of a defaulted
investment payment made or treated as made on [date when regulations
come into force] other than a single defaulted investment payment treated as
made by virtue of regulation 5DL(2).”;
(b) regulation 5DD is subject to regulation 5DL(2);
(c) regulation 5DF(1)(b) shall apply as if the information specified by it is—
(i) the information specified in paragraphs (i)-(iv) of that regulation;
(ii) the value of the defaulted investment at the opening of trading on the London
Stock Exchange on 15th September 2008;
(iii) the date and amount of any earlier defaulted investment subscriptions in
respect of the Lehman Brothers investment in question made before the
making of the defaulted investment subscription;
(iv) the name and address (including postcode) of the account manager to whom
any subscription referred to in paragraph (iii) was made;
(d) regulation 5DH—
(i) shall apply as if the period mentioned in that regulation were the period
commencing on 16th September 2008 and ending on [date when regulations
come into force];
(ii) is subject to regulation 5DL(2).
Deemed defaulted investment payment in respect of a Lehman Brothers investment
5DK. A defaulted investment payment shall be treated as made on [date when regulations
come into force] in respect of a Lehman Brothers investment to the account investor who
held it.
Specified amount for the purposes of a defaulted investment subscription in respect of
a Lehman Brothers investment
5DL.—(1) This regulation determines the amount which a defaulted investment
subscription must not exceed for the purposes of regulation 5DB(b) in relation to a
defaulted investment payment made or treated as made in respect of a Lehman Brothers
investment.

(2) Where one or more defaulted investment payments in respect of a Lehman Brothers
investment are made on [the date the regulations come into force] or are treated as made on
that day by virtue of regulations 5DH or 5DK , they shall be treated as if they comprised a
single defaulted investment payment made on that day of an amount which is the greater
of—
(a) the value of the investment at the opening of trading on the London Stock
Exchange on 15th September 2008; or
(b) the total of the payments made or treated as made by virtue of regulation 5DH on
[date when the regulations come into force].
(3) Where a defaulted investment payment in respect of a Lehman Brothers investment is
made after [the date when the regulations come into force], its amount for the purposes of
regulation 5DB(b) is the greater of—
(a) the amount determined by the formula A � B where—
(i) “A” is the total of the single defaulted investment payment treated as made on
[the date when the regulations come into force] in respect of the investment
by virtue of paragraph (2) and all defaulted investment payments made in
respect of it in the period commencing after that day and ending immediately
after the defaulted investment payment in question;
(ii) “B” is the total of all defaulted investment subscriptions made in respect of
the Lehman Brothers investment before the subscription in question; or
(b) the amount determined by the formula C � D where—
(i) “C” is the value of the investment at the opening of trading on the London
Stock Exchange on 15th September 2008;
(ii) “D” is the total of all defaulted investment subscriptions made in respect of
the Lehman Brothers investment before the subscription in question.
Special application of regulations 5DJ to 5DL in respect of a Keydata investment
5DM. In respect of a Keydata investment—
(a) regulations 5DJ to 5DL shall apply as if-
(i) a reference to a Lehman Brothers investment were a reference to a Keydata
investment;
(ii) a reference to 16th September 2008 were a reference to 8th June 2009;
(b) (i) the information described in regulation 5DJ(c)(ii) is not required to be
provided to the account manager of the account to which the subscription in
question is made;
(ii) details of the amount of the subscriptions used to acquire the Keydata
investment in question are required to be so provided;
(c) regulation 5DL(2)(a) shall apply as if it referred to the amount of subscriptions
made to the account (or any other account or personal equity plan) and other
proceeds (including income) representing those subscriptions used to purchase the
investment;
(d) regulation 5DL(3)(a)(i) shall apply as if element “A” is the amount described in
regulation5DL(2)(a) as construed in accordance with sub-paragraph (c) of this
regulation;
(e) regulation 5DL(3)(b)(i) shall apply as if element “C” is the total of the single
defaulted investment payment treated as made on [the date when the regulations
come into force] in respect of the investment by virtue of regulation 5DL(2) and all
defaulted investment payments made in respect of it in the period commencing
after that day and ending immediately after the defaulted investment payment in
question.

5. In regulation 31 (returns of information by account manager)—
(a) in paragraph (3)(c)(ii), after “paragraph (3A)” insert “and (3AB)”; and
(b) after paragraph (3A) insert—
“(3AB) Where a defaulted cash account subscription in accordance with regulation 5D
(subscriptions disregarded for the purposes of the subscription limits in regulations 4ZA
and 4ZB) is made to an account in the year or part of the year for which a return required by
this regulation is made, the amount of subscriptions reported to an account manager in
accordance with regulation 5DF(1)(a)(ii) (current year’s subscriptions made to the defaulted
cash account) must be included as part of the total amount of cash subscribed to the account
required by paragraph (3)(c)(ii).”.
Name
Name
Date Two of the Lords Commissioners of Her Majesty’s Treasury

EXPLANATORY NOTE
(This note is not part of the Order)
These Regulations, which come into force on *** 2012, amend the Individual Savings Account
Regulations 1998 (S.I. 1998/1870) (“the ISA Regulations”) to allow certain subscriptions to
accounts to be disregarded for the purposes of the subscription limits, in cases where there has
been a default by the cash account manager or where a compensation payment has been made to
the investor in relation to the failure of a stocks and shares account.
Regulation 1 and 2 provide for the citation and commencement of these Regulations and generally
for the amendment of the ISA Regulations.
Regulation 3 amends the definition in regulation 2A(4) of the ISA Regulations, clarifying the term
“account investor” for the purposes of new regulations 5D to 5DD and 5DF in relation to junior
ISAs.
Regulation 4 inserts the new regulations 5D to 5DM into the ISA Regulations. Regulation 5D
provides for the general rule that defaulted cash account subscriptions, defaulted investment
subscriptions and subscriptions permitted by regulation 5DE are to be disregarded for the purposes
of the ISA subscription limits, so long as the information specified in inserted regulation 5DF is
provided to the account manager. The new regulations 5D to 5DM provide as follows.
Regulation 5DA provides that a defaulted cash account subscription is one made (to a cash or
stocks and shares account) within 180 days of a default event, not exceeding the amount invested
in the defaulted account immediately before the default event occurred. Regulation 5DB provides
that a defaulted investment subscription is one made to a stocks and shares account within 180
days of a defaulted investment payment being made to an account investor, not exceeding the
amount of the defaulted investment payment. Where a subscription is made to a cash junior ISA
account, but would have been a defaulted investment subscription if made to a stocks and shares
account, it is permitted by regulation 5DE.
Regulations 5DC and 5DD describe what is meant by a default event and defaulted investment
payment. A default event occurs when the cash account manager is determined to be in default in
accordance with rules contained in the Financial Services Handbook (made by the Financial
Services Authority under the powers in the Financial Services and Markets Act 2000 (c. XX)). A
defaulted investment payment is made where the account investor receives compensation for poor
performance, loss or depreciation of an investment in a stocks and shares account.
Regulation 5DF describes the information which must be provided to the account manager when a
subscription under regulation 5D is made. Regulation 5DG provides for the general rule that only
one subscription under regulation 5D or 5DE may be made notwithstanding that the amount
subscribed is less than the maximum that could have been subscribed under that regulation.
Where an event occurs after 6th April 2011 and before *** 2012 that would have been a default
event for a cash account or a defaulted investment payment within regulations 5DC and 5DD if it
had occurred after *** 2012, regulation 5DH provides that it shall be treated as occurring on ***
2012 for the purposes of regulations 5D to 5DG.
Regulation 5DI defines Lehman Brothers investment and Keydata investment, for the purposes of
the special application to those investments of the general rules in regulations 5DB, 5DD, 5DF and
5DH. In relation to a Lehman Brothers investment, regulation 5DJ applies regulation 5DB subject
to the maximum amount of the single defaulted investment payment provided under regulation
5DL(2). Broadly, in respect of defaulted investment payments made or treated (under regulation
5DH) as made on *** 2012, the maximum amount is the greater of the value of the investment on
15th September 2008 and the total payments made (or treated as made under regulation 5DH). In
respect of subsequent subscriptions, regulation 5DL(3) provides the maximum amount is the
greater of ……..

Regulation 5 of these Regulations makes consequential amendments to the requirements for
returns to account managers in regulation 31 in relation to defaulted cash account subscriptions.
A Tax Information and Impact Note covering this instrument [has been published on the HMRC
website at …].

STATUTORY INSTRUMENTS
2012 No. XXXX
INCOME TAX
CAPITAL GAINS TAX
The Individual Savings Account (Amendment No. [ ])
Regulations 2012
Made - - - - ***
Laid before the House of Commons ***
Coming into force - - ***
The Treasury make these Regulations in exercise of the powers conferred by sections 694 to 699
and 701 of the Income Tax (Trading and Other Income) Act 2005(a) and section 151 of the
Taxation of Chargeable Gains Act 1992(b):
Citation, commencement and effect
1.—(1) These Regulations may be cited as the Individual Savings Account (Amendment No. 3)
Regulations 2012 and comes into force on [ ] 2012.
(2) The amendments made by regulation 2 have effect from 1st November 2011.
Amendments to the Individual Savings Account Regulations 1998
2. The Individual Savings Account Regulations 1998(c) are amended as follows—
(a) in regulation 2(1)(a) (interpretation), after the definition of “child” insert—
““child trust fund” has the meaning given in section 1 of the Child Trust Funds Act
2004(d)”;
(b) in regulation 8 (qualifying investments for a cash component) for paragraph (3) insert—
“(3) A deposit account or share account which is a qualifying investment for a cash
component falling within paragraph (2)(a) or (b) respectively must not be connected with
any other account falling within the descriptions in those sub-paragraphs, held by the
account investor or any other person.
(4) For the purposes of paragraph (3), an account is connected with another if—
(a) 2005 c.5; sections 694(1A), 695A, 699(9) and 701(6) were inserted by section 40 of the Finance Act 2011 (c. 11), and
section 701(4) and (5) was inserted by section 40 of the Finance Act 2008 (c. 9); sections 695(3) and (4), 696(3), 698(2), (3)
and (4) and 699(1) and (2) were amended by paragraphs 131 and 132 of Schedule 4 to the Commissioners for Revenue and
Customs Act 2005 (c. 11).
(b) 1992 c. 12; section 151 was amended by section 40 of the Finance Act 2011 (c. 11).
(c) S.I. 1998/1870; relevant amending instruments are S.I. 1998/3174, S.I 2003/2747, S.I. 2005/2561, S.I. 2005/3350, S.I.
2008/704, S.I. 2008/1934, and S.I. 2011/1780.
(d) 2004 c. 6.

(a) either of the accounts was opened with reference to the other, or with a view to
enabling the other to be opened on particular terms, or with a view to facilitating
the opening of the other on particular terms,
(b) the terms on which the first mentioned account in this paragraph was opened
would have been significantly less favourable to the holder if the other had not
been opened, and
(c) either of the accounts is not a tax exempt account.
(5) The following are tax exempt accounts for the purposes of paragraph (4)—
(a) an account opened (or treated as opened) in accordance with regulation 12 or 12A;
(b) a child trust fund.”.
Name
Name
Date Two of the Lords Commissioners of Her Majesty’s Treasury
EXPLANATORY NOTE
(This note is not part of the Regulations)
These Regulations, which come in to force on [ ] 2012, amend the Individual Savings
Account Regulations 1998 (S.I. 1998/1870) (“the ISA Regulations”). In exercise of the power
in section 701(4) of the Income Tax (Trading and Other Income) Act 2005 (c. 5) to make
regulations having effect in relation to times before they are made, regulation 2 has effect
from 1 November 2011.
Regulation 2 of these regulations amends regulation 8 of the ISA Regulations (qualifying
investments for a cash component), so that an account will not be connected with another account
for the purposes of regulation 8(3) of the ISA Regulations where both are tax exempt accounts. A
tax exempt account is an ISA, a junior ISA or a child trust fund.
A Tax Information and Impact Note covering this instrument will be published on the HMRC
website at http://www.hmrc.gov.uk/thelibrary/tiins.htm.

STATUTORY INSTRUMENTS
2012 No. XXXX
CHILD TRUST FUNDS
The Child Trust Funds (Amendment) Regulations 2012
Made - - - - ***
Laid before Parliament ***
Coming into force - - ***
The Treasury make the following Regulations in exercise of the powers conferred by sections 3(2)
and 28(1) to (4) of the Child Trust Funds Act 2004(a):
Citation and commencement
1. These Regulations may be cited as the Child Trust Funds (Amendment) Regulations 2012 and
come into force on [ ] 2012.
Amendment of the Child Trust Funds Regulations 2004
2. For paragraph (8) of regulation 12 of the Child Trust Funds Regulations 2004(b), substitute—
“(8) A deposit account or share account which is a qualifying investment for an account
falling within paragraph (2)(k) or (l) must not be connected with any other investment, held
by the named child or any other person.
(8A) For the purposes of paragraph (8), a deposit account or share account described in
that paragraph, is connected with another investment if—
(a) either was opened or acquired with reference to the other, or with a view to
enabling the other to be opened or acquired on particular terms, or with a view to
facilitating the opening or acquisition of the other on particular terms,
(b) the terms on which the deposit account or share account was opened would have
been significantly less favourable to the holder if the other investment had not been
held, and
(c) the other investment is not a tax exempt investment.
(8B) The following are tax exempt investments for the purposes of paragraph (8A)—
(a) an account investment held under a child trust fund;
(b) an account investment within the meaning given in the Individual Savings Account
Regulations 1998(c) held under an account opened (or treated as opened) in
accordance with regulation 12 or 12A of those regulations.”.
(a) 2004 c. 6.
(b) S.I. 2004/1450; relevant amending instruments are S.I. 2005/909 and S.I. 2010/582.
(c) S.I. 1998/1870; amended by S.I. 2001/908, S.I. 2002/1974, S.I. 2002/3158, S.I. 2003/2155, S.I. 2005/3230, S.I. 2005/2078,
S.I. 2007/2119, S.I. 2008/704, S.I. 2009/1994 and S.I. 2011/1780.

Name
Name
Date Two of the Lords Commissioners of Her Majesty’s Treasury
EXPLANATORY NOTE
(This note is not part of the Regulations)
These Regulations amend regulation 12 of the Child Trust Funds Regulations (S.I.
2004/1450) (“the CTF Regulations”). They come into force on [ ] 2012.
Regulation 2 of these regulations amends regulation 12 of the CTF Regulations (qualifying
investments for an account), so that a deposit account or share account which is a qualifying
investment will not be connected with another investment for the purposes of regulation 12(8) of
the CTF Regulations where both are held in an ISA account, junior ISA account or a child trust
fund.
A Tax Information and Impact Note covering this instrument will be published on the HMRC
website at http://www.hmrc.gov.uk/thelibrary/tiins.htm.

STATUTORY INSTRUMENTS
2012 No. x
INCOME TAX
CAPITAL GAINS TAX
The Individual Savings Account (Amendment No. X)
Regulations 2012
Made - - - - ***
Laid before the House of Commons ***
Coming into force - - ***
The Treasury, in exercise of the powers conferred by sections 694, 695A and 701 of the Income
Tax (Trading and Other Income) Act 2005(a) and section 151 of the Taxation of Chargeable
Gains Act 1992(b) make the following Regulations:
Citation and commencement
1.These Regulations may be cited as the Individual Savings Account (Amendment No. X)
Regulations 2012 and shall come into force on x.
Amendments to the Individual Savings Account Regulations 1998
2. The Individual Savings Account Regulations 1998(c) are amended as follows.
3. In regulation 2(1)(a) (interpretation), after the definition of “xxx” insert—
“ “Looked After Child” has the meaning given in regulation 2F (special provision in
respect of Looked After Children)”.
4. After regulation 2E, insert—
(a) x
(b) x
(c) x
(d) x
“Special provision in respect of Looked After Children”
(2F) A child is a Looked After Child where he or she, for a continuous period of at least
12 months occurring after 2 January 2011—
(a) is looked after by a local authority for the purposes of section 22(1) of the Children
Act 1989 (general duty of local authority in relation to children looked after by
them)(d); or
(b) is in the care of the local authority by virtue of an order made under section
31(1)(a) of the Children Act 1989 (care and supervision orders)(a); or

(c) is provided with accommodation by an authority by virtue of article 21 of the
Children (Northern Ireland) Order 1995 (provision of accommodation for children:
general)(b); or
(d) is in the care of an authority or authorised person by virtue of an order made under
article 50(1)(a) of the Children (Northern Ireland) Order 1995 (care orders and
supervision orders)(c); or
(e) is [x]; or
(f) is [x](d); or
(g) is [x] (e); or
(h) is [x](f).
(4) In relation to a Looked After Child, regulations 2C(4)(b) and 12A(4)(b)(i) may apply
as if the Share Foundation has parental responsibility in respect of that child.
(5) In relation to an application to assume responsibility for the management of a junior
ISA account by the Share Foundation, regulation 2C(7)(c) must be construed as requiring a
declaration that—
(i) the applicant is the Share Foundation;
(ii) the application is in relation to a Looked After Child; and
(iii) the Share Foundation is to be the registered contact for the account.
(6) Where an application to assume responsibility for the management of a junior ISA
account is made in relation to which the registered contact is the Share Foundation,
regulation 2C(9)(a) must be construed as referring only to sub-paragraphs (e) and (g) of
paragraph (10).
(7) Where the registered contact in relation to a junior ISA account is the Share
Foundation, any reference in these Regulations to the residence of the registered contact
must be construed as meaning a reference to the registered offices of the Share Foundation.
(8) In this regulation “the Share Foundation” refers to the organisation registered with the
Charity Commission of England and Wales as number 1108068 and as a company limited
by guarantee number 4500923. ”
EXPLANATORY NOTE
(This note is not part of the Regulations)
(a) 1989 c. 41. Amendments have been made to section 31 but none are relevant.
(b) 1995 no. 755 (NI.2)
(c) 1995 no. 755 (NI.2)
(d) 1995 c. 36 [amendments?]
(e) 1995 c. 36. [amendments?]
(f) [x]