Guidance

Close, void or repair an ISA if you're an ISA manager

Find out when an ISA can be closed, and how to void or repair an ISA if you're an ISA manager.

When an ISA can be closed

Investors have the right to close their ISAs whenever they want and this right must be included in your ISA terms and conditions. Requests do not need to be in writing. A request to close an ISA can be accepted from a third party, but you should make sure the request is valid.

You may close an ISA where terms and conditions allow. For example, you may state in your terms and conditions that an ISA will be closed where the balance falls below a particular level.

If an investor wishes to close an ISA, you may leave it open until the date the final claim to tax is paid by HMRC, or the final claim is made for a Lifetime ISA.

You may also leave it open beyond the 90 day period where the account was closed on the purchase of first time residential property to allow any returned funds due to a failed purchase.

You may supplement from your own resources income received during the closure period with an amount equivalent to the tax on that income, in advance of the tax being received from HMRC (see pre-funding UK Income Tax reclaimable from HMRC to an ISA). However, you cannot pre-fund the government bonus on a Lifetime ISA.

You may re-open an ISA where it was closed earlier in the same tax year and the investor wants to resume subscriptions, or make flexible ISA replacement subscriptions for previous year funds withdrawn in the current year. If you do, they must report all subscriptions made in the year on the annual return of Information, not just the subscriptions made after the ISA is re-opened.

Where a Lifetime ISA is closed after the 30 day closure period (see closure of a Lifetime ISA) the provision set out in this paragraph does not apply.

An ISA does not be have closed because the investor has ceased to satisfy the residence qualification. The ISA can remain open and it can be transferred to another ISA manager. However, the investor cannot subscribe to the ISA, (other than by way of additional permitted subscriptions, flexible ISA replacement subscriptions, defaulted cash account subscriptions and defaulted investment subscriptions, and Help to Buy ISA reinstatement subscriptions until the residence condition is satisfied again.

For a Lifetime ISA, an existing account does not need to be closed but no further payments can be made – other than a defaulted Lifetime ISA subscription and a returned Lifetime ISA withdrawal after the failure of a first time residential purchase.

Bankruptcy of an investor

Under the Insolvency Act, a bankrupt’s estate vests in a trustee immediately on his appointment taking effect (or, in the case of the Official Receiver, on his becoming trustee).

If you’re notified of the bankruptcy of an investor must close the ISA with effect from the date on which the trustee’s appointment takes effect (or, in the case of the Official Receiver, the date on which they become trustee).

Where the account is a Lifetime ISA, you must deduct the 25% withdrawal charge and pay it to HMRC when the account is closed (other than where the investor is aged 60 or over, or you’ve received the appropriate terminal illness evidence in relation to the investor).

Dormant accounts

Since 1 February 2011, a Cash ISA that has had no transactions carried out by or on the instructions from the account holder for 15 years or more, may be a relevant dormant account. You can close the account and transfer the balance of a dormant Cash ISA to Reclaim Fund Limited.

Junior ISAs cannot be relevant dormant accounts and cannot be closed by ISA managers.

Account holders or personal representatives of a deceased account holder who contact you about their closed ISA have a right to repayment of the balance from Reclaim Fund Ltd.

The repayment of the balance from Reclaim Fund Ltd is not liable to tax. It will not form part of the investor’s annual ISA allowance if it’s paid back into the original Cash ISA or Cash ISA with the ISA manager.

If the repaid balance is invested in a Cash ISA with another ISA manager or a Stocks & Shares, Innovative or Lifetime ISA it does form part of an individual’s annual ISA allowance.

Death of an investor

When an investor died on or before 5 April 2018

Any ISAs held cease on the date of death. Any interest, dividends or gains for investments in their ISA that arise (which in general terms means ‘paid’) after the date of death to the date of closure are not exempt from tax (see death of an investor on or before 5 April 2018 regarding ISA policies of life insurance).

But there is no loss of exemption on interest, dividends or gains which arise before the date of death, including any gain treated as arising as a result of the death of the investor under the rules for investments in policies of life insurance and including any Lifetime ISA bonus due on qualifying additions made to the account on or before the date of death.

While an ISA ceases on the death of the investor who died on or before 5 April 2018, the regulations are silent on what must happen to the account itself. You can remove the ISA wrapper and allow the account to continue, or the funds could be transferred to another account. The particular treatment will depend upon the terms and conditions for the account.

For the purposes of determining whether a claim can be made for income received under deduction of Income Tax, the important date is the payment date shown on the tax voucher. You can claim the tax deducted if the payment date is on or before the date of death.

If you have received payment from HMRC for a claim to tax on income that is no longer exempt from tax you must repay HMRC, normally by deducting the amount from the next claim under the heading ‘Adjustments to previous claims’.

When an investor dies on or after 6 April 2018

The savings of a deceased investor can continue to benefit from the tax advantages of an ISA during the administration period of the estate. Any interest, dividends or gains for investments in a continuing account of a deceased investor that arise (which in general terms means ‘paid’) after the date of death to the date of closure of the ISA are exempt from tax (see when an investor dies on or after 6 April 2018).

Find out how to manage additional permitted subscriptions into an ISA

Interest on cash on deposit for accounts where the account investor died on or before 5 April 2018

In strictness interest on cash on deposit (including un-invested cash in a stocks and shares ISA) paid or credited by you after the date of death is not exempt from Income Tax.

From 6 April 2016, there has been no need for banks, building societies and deposit-takers to deduct Income Tax from interest paid or credited on or after 6 April 2016.

But where notified of death after 5 April 2016, there is no need to revisit, and deduct tax from interest paid after the date of death and prior to 6 April 2016. You should, however, notify the personal representatives of any interest accrued and paid after death.

Any subscriptions paid into any ISA account after the date of death of an investor should be removed, along with any interest accrued on those subscriptions.

Remaining payers of yearly interest should continue to deduct Income Tax at the basic rate and account for the tax due by including it on their next CT61 return form, or deducting the tax from the next claim made. If returns or claims are not being made, a cheque should be sent to HMRC (see annual returns and claim).

In practice, however, you may apportion interest paid after the date of death into:

  • interest accrued up to and including the date of death, which can be treated as arising in the ISA (and therefore not liable to Income Tax)
  • interest accrued from the date of death, which is not exempt from Income Tax and where appropriate, for example if paid or credited before 6 April 2016 should be paid under deduction of tax at the basic rate

Until 1 July 2014, interest paid for un-invested cash in a stocks and shares ISA was subject to the 20% flat rate charge.

Interest on cash on deposit for accounts where the account investor dies on or after 6 April 2018

When an ISA investor dies on or after 6 April 2018, the ISA can continue to benefit from the ISA tax advantages during the administration period of the investor’s estate. The ISA is designated as a ‘continuing account of a deceased investor’ (see when an investor dies on or after 6 April 2018).

Any subscriptions paid into any ISA account after the date of death of an investor should be removed along with any interest accrued on these subscriptions.

See a worked example of interest on a cash deposit where an investor has died (PDF, 121KB, 1 page) .

Interest on ISA investments

When an ISA investor dies on or before 5 April 2018

Interest for ISA investments (for example, an interest distribution from an Authorised Investment Fund, or an interest payment from a corporate bond) paid or credited after the date of death is not exempt from Income Tax. The interest is not apportioned.

Where the payment is received under deduction of tax, you’ve claimed the tax and have received payment from HMRC you must repay the tax to HMRC (see death of an investor).

Where the payment is received gross, you only need to tell the personal representatives that they must account for any tax that may be due.

When an ISA investor dies on or after 6 April 2018

Interest for ISA investments (for example, an interest distribution from an Authorised Investment Fund, or an interest payment from a corporate bond) paid or credited after the date of death is within the ISA wrapper and is exempt from Income Tax.

If you receive any income that’s net of tax then you should claim repayment of any tax deducted in the usual way from HMRC. You and the personal representatives of the deceased investor’s estate don’t need to do take any further action.

Information to be given to personal representatives

When an ISA investor dies on or before 5 April 2018, You should give personal representatives a statement showing:

  • the market value of the investments, other than insurance policies (see rights conferred by insurance policies), held in the ISA at the date of death, or in the case of a cash ISA, the value of the ISA at the date of death and the gross interest payable in the year of death up to date of death
  • the original cost price and date of acquisition of any investments bought after the date of death
  • details of any income received with a payment date after the date of death
  • the date of disposal and the amount of the net sale proceeds received for each disposal made after the date of death
  • where appropriate, a tax certificate (R185) or Section 975 ITA 2007 certificate showing interest received and tax deducted

A generic voucher template is available. If you cannot use the voucher template you may use your own design subsidiary tax certificates. However, before doing so you should submit drafts of the proposed certificates for approval to the Collective Investment Schemes Centre.

Rights conferred by insurance policies

Rights conferred by an insurance policy held in an ISA vest in the personal representatives on the death of the investor. The ISA policy must pay out on the death of the investor and personal representatives must not delay in claiming.

Where a delay in payment of a claim under a life insurance policy results in interest being paid to the personal representatives, the insurer should, where appropriate, deduct tax at the basic rate from the interest paid if the investor died on or before 5 April 2018 and notify the personal representatives of the amount of interest and any tax deducted.

When an ISA investor dies on or after 6 April 2018 and interest on a delayed payment of a claim under a life insurance policy is paid into a ‘continuing account of a deceased investor’, the insurer should not deduct tax from the interest paid. If the death proceeds are held by the insurer outside of the deceased’s ISA pending settlement of the claim then any interest paid by the insurer should have tax deducted at the basic rate of 20%.

How to repair or void an ISA

You may find an ISA is invalid. Examples of invalid ISAs are the:

  • investments held in the account are non-qualifying
  • investor is not a qualifying individual
  • subscription to the account is invalid

Invalid accounts can, in certain circumstances, continue as ISAs after being corrected, this is known as a ‘repair’.

Invalid accounts that cannot be repaired must be voided.

Where cash ISA subscriptions are repaired or voided, there is no requirement for banks, building societies and deposit-takers to deduct Income Tax from interest paid or credited on or after 6 April 2016 (following the ending of the Tax Deduction Scheme for Interest (TDSI)). Other payers of yearly interest should continue to deduct Income Tax at the basic rate.

For interest paid or credited before 6 April 2016 you should deduct Income Tax at the basic rate under TDSI, or from yearly interest as appropriate, and account for the tax due on their next CT61 return form. If returns are not being made, a cheque should be sent to HMRC (see annual returns and tax claims).

Where tax has been deducted and reclaimed from HMRC on interest payments for a stocks and shares ISA, you must repay the tax to HMRC (see death of an investor).

In all cases investors must be made aware that there may be more tax to pay and that income removed from the ISA for periods after 6 April 2016 will count towards the investor’s personal savings allowance.

Two types of invalid account can be repaired:

  • where the ISA is invalid because of an inadvertent failure in the checks that should be carried out by you (manager error), you can sometimes repair the account
  • where an ISA is invalid because the investor (investor error) has:
    • subscribed to a disallowed combination of ISAs (2 or more ISAs of the same type)
    • exceeded the overall subscription limit

The invalid subscriptions to the ISA can sometimes be repaired in full or in part.

A valid ISA can also be repaired if the investor exceeds the overall subscription.

An invalid ISA that cannot be repaired must be voided - the account should be closed with the loss of all tax exemptions.

‘Investor error’ ISA repair

In most cases investors who have subscribed to a disallowed combination of ISAs or have exceeded the overall subscription limit are not aware that they have made an error until it’s found during the HMRC compliance programme, which examines the annual returns submitted by ISA managers. You and the investor in this case will be informed of the error by HMRC compliance officers.

When you find out (usually from the investor) that the investor has subscribed to a disallowed combination of ISAs, or has exceeded the overall ISA subscription limit, you should advise the investor that HMRC will contact them in due course. Do give any advice to customers, as you may not have all of the relevant facts or be certain of the action that HMRC will take.

If the investor wishes to contact HMRC to discuss the error, they can phone the ISA Helpline.

An ISA is eligible for repair if it’s either:

  • invalid because the investor has subscribed to a disallowed combination of ISAs
  • it has exceeded the overall ISA subscription limit

An ISA is not eligible for repair if it’s invalid because:

  • the investor did not satisfy the residence qualification at the time the subscriptions were made
  • the investor was under age at the time the subscriptions were made (see investors under 18)

If you find out that the investor has subscribed to an ISA while not satisfying the residence condition, or when under age, you must void the invalid subscriptions.

‘Investor error’ ISA self transfer

ISA investors must transfer their ISAs through the you. Investors cannot transfer an ISA by closing it and opening a new ISA with the new ISA manager (commonly known as ‘self-transfer’), even if the investor is moving from one ISA product to another with the same manager.

Self-transfer is not available for Lifetime ISAs.

However, where:

  • the investor subscribes to 2 cash ISAs, in the same tax year
  • subscriptions to the first ISA subscribed to were valid
  • all of the current year subscriptions to the first ISA subscribed to were withdrawn (whether or not that ISA was closed) before subscriptions to the second ISA were made

The subscriptions to the second ISA may be valid, subject to the guidance below.

The first cash ISA to be self-transferred in a tax year is valid, and does not need to be repaired.

The second (and any subsequent) self-transferred cash ISA is not valid and is not eligible for repair.

The first cash ISA may be closed and all the funds held in the ISA withdrawn (including any subscriptions for earlier years) or the first cash ISA may remain open and after the self-transfer will hold only subscriptions which were made in previous years. If the ISA remains open, no further subscriptions can be made to it in the tax year of the self-transfer.

See worked examples of repairs and voiding.

ISA repair – disallowed combination of ISAs or overall subscription limit exceeded

In each tax year an investor may subscribe to one cash ISA and one stocks and shares ISA (see – the ‘one-type-of-ISA-a-tax-year’ rule). From 6 April 2016 investors have also been able subscribe to an innovative finance ISA.

From 6 April 2017 investors have also been able to subscribe to one Lifetime ISA if they subscribe to a:

  • disallowed combination of ISAs (2 – or more - ISAs of the same type) in the same tax year, the subscriptions to the second (and subsequent) ISA are invalid
  • single cash ISA, a single stocks and shares ISA, and a single innovative finance ISA, but exceeds the overall subscription limit, the subscriptions which cause the limit to be breached lead to that ISA being invalid
  • a single cash ISA, a single stocks and shares ISA, a single innovative finance ISA, and a single Lifetime ISA but exceeds the overall subscription limit, the subscriptions which cause the limit to be exceeded lead to that ISA being invalid - with the proviso that, where they have not also exceeded the Lifetime ISA payment limit, the excess must be removed from the accounts which are not Lifetime ISAs – even where the Lifetime ISA was first subscribed to later in that tax year than any of the other ISAs

In general, the invalid subscriptions can be repairedas long as the total subscriptions in the tax year do not exceed the overall subscription limit, or for Lifetime ISAs they do not exceed the Lifetime ISA payment limit.

When totalling subscriptions, subscriptions to an ISA that was validly self-transferred (repairs – self transfer) are ignored unless the invalid subscriptions were used to buy an insurance product (see part repair), when they cannot be repaired.

See worked examples of repairs and voiding.

ISA repair – valid combination of ISAs but overall subscription limit exceeded

An investor can subscribe to one cash ISA, one stocks and shares ISA, and one innovative finance ISA (a valid combination) but exceed the overall subscription limit. An otherwise valid ISA will then become invalid during the tax year by reason of oversubscription.

In Mr James’s case (see worked examples of repairs and voiding (PDF, 209KB, 8 pages) ), the investor has a Cash ISA with Candobank and a Stocks and Shares ISA with Megafund. That is not a disallowed combination of ISAs. His infringement is to exceed the overall subscription limit. The ISA with Megafund is that one that received the subscription that caused the overall limit to be breached so is the invalid account but it can be repaired.

All tax relief (Income Tax and Capital Gains Tax) on the subscription of £15,200 made to this account will be lost up to the date of the HMRC ‘repair’ letter, but following repair, when the excess subscription of £3,400 is removed from the ISA, the balance of the subscription (£11,800) is exempt from tax. All income earned on the subscription of £15,200 before the date of the notice of repair is subject to tax but only the income on the excess subscription has to be removed from the ISA.

However, where Mr James has also subscribed to a Lifetime ISA the excess must be removed from the accounts which are not Lifetime ISAs in date order – even where the Lifetime ISA was first subscribed to later in that year than any of the other ISAs.

ISA repair – removal of excess subscriptions

There are 3 situations in which excess subscriptions must be removed from an ISA.

The first is where the investor subscribes to a valid combination of ISAs, but subscribes more than the overall subscription limit in total.

See repair – identification of investments where the subscriptions were used to buy insurance.

The second is where the investor subscribes to an invalid combination of ISAs (more than one ISA of the same type) and subscribes more than the overall subscription limit in total.

See repair – identification of investments where the subscriptions were used to buy insurance.

The third is where the investor subscribes to a valid combination of ISAs, does not exceed the overall subscription limit but exceeds the Lifetime ISA payment limit. In this instance the Lifetime ISA must be repaired and excess subscriptions must be removed. In this instance the excess subscriptions were not valid subscriptions and may therefore be removed without the application of a withdrawal charge. Any government bonus that has been paid must be returned to HMRC.

See worked examples of repairs and voiding.

ISA repair – action by the manager

The HMRC compliance unit will write to the investor before instructing you of the action to be taken. The investor will have been given the opportunity to query the information provided to HMRC before HMRC write to you. In all cases the HMRC compliance unit will issue a notice of discovery to you saying which ISAs can be repaired, and to what extent. They will also inform the investor of the action to be taken by you.

You should not repair an investor error without a notice of discovery. The date of the notice is the date of repair of the invalid ISA.

All investments in a repairable ISA lose their tax exemption from the date of the first invalid subscription up to the date of repair. Up to this date the repairable ISA is effectively treated in the same way as a void ISA.

Subscriptions to a repaired ISA for years other than that covered by the notice of discovery are not affected by that notice.

The following paragraphs provide more details, but in summary, where an ISA is repaired or voided, you should proceed as follows:

  • interest earned on cash should be taxed in accordance with repair and voiding

  • where you have received net income and has claimed tax back from HMRC (see for example REIT payments in Property income distributions), you must repay the tax to HMRC and pay income net to the investor

  • where you received gross income, you should pay the income out gross to the investor

  • the government bonus must, in the first instance, be deducted for Lifetime ISAs from the balance in the account - where the balance is insufficient to recover the government bonus any outstanding part thereof may be recovered by HMRC by way of an assessment against the investor

In all cases investors must be made aware that there may be more tax to pay and that income removed from the ISA for periods after 6 April 2016 will count towards the investor’s personal savings allowance.

ISA part repair

This is where income (arising prior to date of repair) is to be taxed and some of the invalid subscription and the associated (taxed) income has to be removed from the ISA.

First:

Second, remove from the ISA that element of the invalid subscription that the partial repair notice says must be removed.

Third, remove from the ISA that portion of the income that relates to element of the invalid subscription that must be removed.

From the date of repair the excess subscriptions are not held in an ISA. The balance after removal of the excess is treated as having been held in the ISA from the date of repair.

Within 30 days of the date of the notice you should identify the investments bought with the excess subscriptions and remove them from the ISA, together with any income arising on those investments. If the investments include insurance, the investor should decide which investments should be removed - see voiding.

Where interest is credited to a stocks and shares ISA, you should follow the guidance on Interest on ISA Investments and proceed as follows:

  • where the payment was received under deduction of tax, you have claimed the tax, and have received payment from HMRC, you must repay the tax to HMRC

  • where the payment is received gross, you only need to tell the investor that they must account for any tax that may be due

Where an interest distribution or property income distribution is credited to a stocks and shares ISA, you should follow the advice on interest on ISA investments and proceed as follows:

  • where the payment was received under deduction of tax, you have claimed the tax, and have received payment from HMRC, you must repay the tax to HMRC

  • where the payment is received gross, you only need to tell the investor that they must account for any tax that may be due

ISA repair – identification of investments

In many cases identification of the investments acquired with invalid subscriptions will be simple – the investor will have made one subscription to the account and bought one type of investment.

In some cases identification of the investments acquired with invalid subscriptions will be more difficult. You and/or the investor can select the investments that represent the invalid subscriptions, using one of the following methods.

The simplest method of identifying the investments is to take a fraction of the investments held in the ISA at the date of repair representing the invalid subscriptions.

Another method is to follow the subscriptions through the account and identify the relevant investments.

Identification of investments removed from a repaired ISA applies only for ISA purposes. The investor must apply normal Capital Gains identification rules to disposals of investments prior to repair, and to disposals of investments to effect the repair.

If the ISA contains an insurance product, and any of the excess subscription to be removed to the ISA is assigned to that insurance product, it must be removed in full. An insurance policy cannot be repaired: it must either all stay in the ISA or all be removed. See policies of life insurance.

See worked examples of repairs and voiding.

Voiding an ISA

Where an ISA cannot be repaired it must be voided. This is where all income for the invalid subscription and the invalid subscription has to be removed from the ISA. Valid subscriptions from previous (and possibly later) years are unaffected.

First, any interest earned by the invalid subscription, is taxed as appropriate (for a cash ISA), or dealt with in accordance with interest on ISA investments if the ISA is a stocks and shares ISA. This is not limited to interest paid on or before the date on which the ISA Void Notice (no repair) - letter ISA41 - was issued.

Second, the whole of the invalid subscription is removed from the ISA. However, for a Lifetime ISA the rule is that any excess must first be removed from the accounts which are not Lifetime ISAs in date order – even where the Lifetime ISA was first subscribed to later in that year than any of the other ISAs.

Third, the whole of the income earned by the invalid subscription is removed from the ISA (but see below if the ISA is a multi-year ISA).

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.

If the ISA is a ‘single year ISA, any ‘closing’ interest - interest earned by the invalid subscription for the period from 1 February 2017 to the date on which the ISA is closed - is removed from the ISA.

If the ISA is a multi-year ISA, any interest earned by the invalid subscription for the period from 1 February 2017 to the date on which the Void Notice (no repair) was actioned should be removed from the ISA.

However, when auditors check whether managers have actioned repair or void notices correctly they will look to see that the invalid subscription and income received up to and including the date of the Void Notice (no repair) has been removed from the ISA. They will not be concerned about income received after that date.

Where, before 1 July 2014, the interest has arisen on a stocks and shares ISA and has been subject to the 20% flat rate charge there is no need for you to deduct basic rate tax from the interest payment as the flat rate charge will be deemed to be the basic rate tax due.

When providing the investor’ with a section 975 ITA 2007 certificate for interest, You should treat the flat rate charge as tax, and complete the certificate accordingly. The investor needs to be made aware that the interest needs to be reported to HMRC and that higher or additional rate tax might be due (or a repayment of tax if the investor is not liable).

After 1 July 2014, the flat rate charge will not apply so you should deduct tax at basic rate from any interest paid and to pay the tax to HMRC.

No deduction of basic rate Income Tax is required from interest paid or credited on or after 6 April 2016.

Where an ISA is made void it does not mean that the investments must be sold. Where the investor wishes, and the scheme terms and conditions allow, you may transfer the investments to the investor (but a void ISA policy of life insurance must terminate and cannot be transferred to the investor).

An ISA opened with a continuous application (see applications in writing) is strictly invalid for the year in which the terms of the application are breached, and for all succeeding years.

This means that an investor who opens an invalid ISA in a tax year with an invalid continuous application, and who continues to subscribe to that ISA in the next tax year, should have 2 year’s ISA subscriptions voided.

In practice, an ISA opened with a continuous application can be treated as if the application had been completed anew on the date that the first subscription is made to the ISA in each tax year.

See worked examples of repairs and voiding.

ISA repair and voiding – transfers and withdrawals

Where an account is voided or repaired you need to recover any Income Tax claimed on investments bought with the invalid subscriptions.

If, after using any cash balance and the sales proceeds from investments, there is insufficient in the account (because, for example, the investor has withdrawn funds, or the account has been closed, or transferred to another manager), you must write to HMRC, providing details of the amount of tax credit or tax on interest that has not been recovered.

Withdrawals from an ISA prior to the date of the notice of discovery can be counted towards the amount of invalid subscriptions that must be withdrawn to repair the ISA provided that the withdrawal does not pre-date the date of the invalid subscription.

However, in the case of flexible ISAs, any replacement subscriptions must also be taken into account. Other than this, the investor or manager can select the investments that are to be withdrawn.

See worked examples of repairs and voiding.

ISA repair and voiding – accounting for tax

Any tax claimed from HMRC Repayments on income arising on the invalid subscriptions, must be repaid by the provider, normally by deduction from the next claim under the heading ‘Adjustments to previous claims’ .

If the ISA is a cash ISA and the manager is a building society or deposit-taker any tax charged on interest paid or credited before 6 April 2016 on the invalid subscriptions (see full repair, part repair and voiding) must be accounted for on their next CT61 return form. If returns are not being made, a cheque should be sent to HMRC (see basis of annual returns and tax claims).

In all cases investors must be made aware that there may be more tax to pay and that income removed from the ISA for periods after 6 April 2016 will count towards the investor’s personal savings allowance.

ISA repair and voiding - information to be provided to investor

You should inform investors of:

  • the date and amount of each income payment received for the investments bought with the invalid subscription or of investments transferred to the ISA, and the amount of tax deducted from those income payments - and, if the investments have since been sold, the date and amount of each income payment received for the replacement investments and the amount of tax deducted from those income payments
  • the date and amount of any interest paid or credited on cash deposits for the invalid subscription, the amount of any tax deducted from that interest, and that interest paid after 6 April 2016 will count towards their personal savings allowance
  • the original cost price, any incidental costs of acquisition and date of acquisition of investments bought with invalid subscriptions or transferred to the ISA and, if they have since been sold, the original cost price, any incidental costs of acquisition and date of acquisition of the replacement investments
  • the date of disposal, the amount of the sale proceeds and any incidental costs of disposal of investments bought with invalid subscriptions or transferred to the ISA and, if they have since been sold, the date of disposal, amount of the sale proceeds and any incidental costs of disposal of the replacement investments

If the ISA contains an insurance product, you will need to ascertain the amounts of any gains treated as arising in order to calculate how much tax to deduct, and must inform the investor of the:

  • amount of premiums paid and the date on which they were paid
  • amount of part withdrawals and the date on which each was made and also, for each part withdrawal, the date of the last day of the ‘year’ as defined in section 546(4) ICTA 1988 in which the part withdrawal was made
  • amount of tax deducted for each part withdrawal
  • benefits payable on death, maturity or surrender and the date of the event
  • amount of tax deducted for the benefits payable on death, maturity or surrender
  • amount of benefits actually paid to the investor, after all deductions of tax

You should advise the investor to report details to their tax office of the interest, dividends, chargeable gains and allowable losses and corresponding deficiencies (see chargeable events) arising for the void subscriptions for the tax year in which they arose.

You should supply tax certificates R189K and/or Section 975 certificates (or their own tax vouchers - information to be provided to personal representatives) on request to the investor showing, respectively, the dividends and tax credits and the gross interest credited and any tax deducted.

See worked examples of repairs and voiding (PDF, 209KB, 8 pages) for more information.

Published 5 April 2018
Last updated 5 September 2018 + show all updates
  1. New section added with information on dormant accounts.
  2. First published.