Individual Savings Accounts (ISAs) for managers: Cash ISAs
Guidance about what types of Cash ISAs are qualifying investments, including connected accounts.
Qualifying investments for designated Cash ISA accounts are:
- cash deposited in a deposit account:
- share account with a building society
- with a registered credit union
- with a bank
- specified as a stakeholder product
- alternative financial arrangements - savings products providing similar types of return to a deposit savings account, such as Sharia accounts that don’t pay interest
- securities, but not national savings certificates, premium savings bonds, national savings stamps and national gift tokens, issued under the National Loans Act 1968 or the National Savings Bank Act 1971, on terms that provide for them to be held in the cash component of an ISA
- money market funds
- short-term money market funds
Investments acquired before 1 July 2014 that would otherwise have been eligible for the Stocks and Shares ISA but failed the 5% test that applied before that date include:
- units or shares in:
- a UK UCITS (Undertakings for Collective Investment in Transferable Securities) scheme
- a non-UCITS retail scheme
- a recognised UCITS
- units in a collective investment scheme specified as a stakeholder product
- shares in a company
- policies of life insurance made after 5 April 2004
In practice, you can operate a single account, which may also hold other savings products, such as Stocks and Shares ISA, feeder fund and current account balances, provided the:
- account is designated as an ISA account
- monies relating to each investor’s ISA are recorded and can be accounted for separately
A Cash ISA will cease to be a qualifying investment if it’s connected with another savings account that isn’t an ISA, Junior Individual Savings Account or Child Trust Fund.
A Cash ISA is connected with another account if either was opened with reference to the other, or with a view to:
- enabling the other to be opened on particular terms
- facilitating the opening of the other on particular terms
and the terms on which the Cash ISA was opened would have been significantly less favourable to the investor if the other had not been opened.
HM Revenue and Customs (HMRC) will accept that an account is not a connected account if it is a ‘feeder’ account opened to enable investors to fund future deposits into an ISA, provided that the interest on the feeder account is in line with the interest paid on your other savings accounts. These feeder accounts should not be included on your returns of information.
HMRC will not use the ‘connected accounts’ rule in cases where the terms of the connected accounts are the same.