Individual Savings Accounts (ISAs) for managers: opening an ISA
Checks ISA managers must make before an account can be opened.
Opening an ISA
An investor must fully complete an application and agree to the ISA manager’s terms and conditions before the ISA can be opened. The ISA manager can open an ISA, provided they hold a valid application.
An ISA begins from the later of the date the:
- ISA manager accepts the application form
- subscription is made
This means you may accept an application before a subscription is made, but if you do the ISA does not begin until a subscription is made. You should record the date you’ve accepted the application which may not be before the date of application.
Where an ISA application is received near the end of the tax year, the ISA will be regarded as opened in that tax year if:
- you have accepted the application before the end of the tax year
- the subscription is made before the end of the tax year
If the account isn’t physically set up until after the end of the tax year the ISA should be shown as opened on 5 April. It is recommended that you examine all applications received to ensure that they are complete, and that a valid subscription has been made before the end of the tax year.
You may open the ISA on a provisional basis before all the personal information is received. The ISA will be valid from the date it was opened provided you obtain the missing personal information within 30 calendar days.
The missing information can be provided either by the investor, by the investor’s agent, or from your own records, and should be added to or retained with the application form. If the application form is amended the person making the entry should initial the amendment. The ISA will be cancelled and all tax exemptions lost where the missing personal information is not received within 30 calendar days.
Cancelling a subscription
You may allow investors the right to cancel their cash subscription to an ISA, or packaged product within an ISA. This is within a set period after they receive notice of the right to cancel. If this period - the cancellation period - does not exceed 30 days, investors who cancel their subscription are exempt from UK income and Capital Gains Tax on any income or gains arising from the subscription in the period.
Where the subscription is cancelled within the set period, investors will be treated as though they have not subscribed to an ISA.
If a subscription is cancelled within the set period, you should:
- notify the investor that the cancelled subscription does not count as a subscription to an ISA
- exclude the cancelled subscription from your annual return of information
If a subscription is cancelled after the set period, you should:
- notify the investor that the cancelled subscription counts as a subscription to an ISA, therefore they cannot subscribe to another ISA of the same type in the same tax year
- include the cancelled subscription on your annual return of information
Where a purchase of a packaged product in an existing ISA is cancelled, the ISA remains valid and the subscription may then be used to purchase other qualifying investment(s).
Withdrawing a subscription
Rather than providing cancellation rights, you may allow investors the right not to proceed with the ISA contract (a ‘pre-contractual right to withdraw’). The withdrawal period is 7 calendar days from the receipt by the ISA manager of the application to open an ISA.
Where withdrawal rights are offered:
- the ISA can only begin when the withdrawal period ends, so you must receive the application by 29 March of the tax year for which it is made
- during the withdrawal period the client money rules of the ISA manager’s regulatory body will apply to the cash subscription
- any interest which is paid at the end of the withdrawal period will not be exempt from tax and will count towards the subscription limit if it is paid into the ISA
Investors who exercise their right to withdraw from the ISA contract are free to subscribe to another ISA of the same type in the same tax year.
Completion of applications
You should check and accept that applications are fully completed provided you have no reason to believe that the investor:
- isn’t, or might not be, entitled to subscribe to an ISA
- has given false information in the application
The completed application must include:
- full name - this must include the investor’s first name and surname
- investor’s permanent residential address including postcode
- PO Boxes except for British Forces Post Office are not acceptable
- a care of address isn’t acceptable, unless it is a retirement home, nursing home, hospice or hospital
- where the investor lives on a new estate and a postcode has not been allocated, the application can be accepted - the postcode must be obtained as soon as it is allocated
- date of birth, or year if not known
- National Insurance number
- signature, this can be:
- power of attorney where the investor is physically incapable of signing the return
- registered lasting power of attorney
A photocopy or fax of a signature is not acceptable and a name that is printed is not an acceptable signature.
Applying for an ISA on behalf of someone else
Under normal circumstances ISA applications must be made by the investor.
You may accept an application from someone holding a Lasting Power of Attorney (LPA) if it:
- has been registered with the Office of the Public Guardian
- gives the attorney the power to make the decision to open an ISA
You must have sight of the LPA (or a certified copy of it) to check if there any restrictions and keep a copy in case the account is queried by HMRC.
If you have any queries about the registration of the LPA or the scope of it, these must be referred to the Court of Protection.
You can also accept the following as an alternative to the LPA:
- in England and Wales - an Enduring Power of Attorney made and signed before October 2007, registered with the Office of the Public Guardian
- in Scotland - an equivalent registered authority, for example an Intervention Order or a Guardianship Order
- in Northern Ireland - an Enduring Power of Attorney registered with the High Court (Office of Care and Protection)
You may accept applications signed under a General Power of Attorney where the investor is unable to sign the application because they are in the armed forces on active service in a war zone (for example, Afghanistan).
An application may also be made by the parent, guardian, spouse, civil partner, son or daughter of an individual who lacks mental capacity. You should:
- ask the person making the application to confirm that the investor lacks mental capacity, and what their relationship with the investor is
- ask to see documentation to show that the investor lacks mental capacity - for example letters or payment books that show the applicant is entitled to disability living allowance, severe disablement allowance or incapacity benefit
- make a (brief) note with the application of the documentation seen, and retain the written statement with the application
If the investor is physically incapable of signing the application, the signatory must be an attorney acting under a general or enduring power. Whether or not a person acting in a capacity has the authority to sign should be established before the application is accepted. These are the only circumstances in which a manager may accept an application from someone other than the investor.
You must not accept an application where the investor is capable of completing the application form, but is merely too busy, or is on holiday abroad (unless that person has given a LPA which has been registered).
In all cases you must report the full name, permanent residential address (including postcode), date of birth and National Insurance number of the incapacitated person on returns of information.
Subscriptions to an ISA
The subscription limit is £15,240 in each tax year which can be spilt across any type of ISA.
The frequency, amount, and method of payment are matters for the ISA manager and the investor. Applications are valid for subscriptions made in:
- the year of application
- each successive year following the year of application, in which the applicant subscribes to the ISA
This allows, for example, a continuous subscription by direct debit or standing order, provided at least one payment is made in each tax year, unless the application is valid for one year only. Where a single year application form is used for a fixed term ISA, the investor will need to complete a fresh application form if they wish to subscribe in the year of maturity or after.
If an investor fails to make a subscription by the end of a tax year, the application will cease to be valid. A new application must be made before subscriptions can start again. This rule applies even if investors make:
- additional permitted subscriptions for surviving spouses or civil partners
- flexible ISA replacement subscriptions
- defaulted subscriptions
- Help to Buy ISA reinstatement subscriptions