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

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.