Individual Savings Accounts (ISAs) for managers: setting up an ISA
Notes for ISA managers, providing guidance and rules on how to operate the ISA scheme from 6 April 2016.
An Individual Savings Account (ISA) is an investment scheme managed in accordance with the ISA regulations under terms agreed between the ISA manager and the investor.
In each tax year, investors can subscribe to one Cash ISA, one Stocks and Shares ISA and one Innovative Finance ISA.
Prior to 6 April 2016, investors could only subscribe in each tax year to one Cash ISA and one Stocks and Shares ISA.
The administration process
HM Revenue and Customs (HMRC) administers the ISA scheme, only people, including companies that have been approved by HMRC can manage ISAs.
To obtain approval to manage an ISA a person must:
- be eligible to manage an ISA
- make an application to HMRC
Eligibility to manage an ISA
The following are eligible to manage any type of ISA:
- an authorised person who has permission under the Financial Services and Markets Act 2000 to carry on one or more of the activities
- a European institution that carries on one or more of those activities
- a credit union that is authorised person who has permission under the Financial Services and Markets Act 2000 to carry on one or more of the activities
- the Director of Savings
- a building society
- a bank
- an insurance company
- an incorporated friendly society
- a registered friendly society
- an assurance company that isn’t an insurance company, incorporated friendly society, or a registered friendly society
Read further information about authorised persons on the legislation website.
As an ISA manager, you must not be prevented from acting as such by any:
- requirement imposed under section 43 of the Financial Services and Markets Act 2000
- prohibition imposed by, or under any rules made by the Financial Services Authority under that Act
Individuals cannot manage their own ISAs, even if they would otherwise be eligible as an ISA manager.
If you’re an ISA manager who doesn’t have a UK branch or business establishment, you must appoint a tax representative or contact HMRC to ensure that your duties as a manager are met.
A tax representative must be:
- an individual who is resident in the UK or a company that has a business establishment in the UK
- entitled to act on behalf of the manager in relation to the duties prescribed under the regulations
- responsible for ensuring that the manager meets the duties prescribed under the regulations
- personally liable where the manager fails to meet the prescribed duties, as if the duties imposed on the manager were jointly and severally imposed on him and the manager
HMRC can terminate the appointment of a tax representative where they have reason to believe that the tax representative:
- has failed to ensure that the manager met his prescribed duties
- does not have adequate resources to ensure that the duties are met
HMRC will notify the manager of the termination, specifying the date on which the termination is effective.
Applying for approval as an ISA manager
If you wish to be an ISA manager, you must complete the form application for approval as an ISA manager.
UK insurers will also need to send a copy of their notice of authorisation from the Treasury Insurance Directorate or the Friendly Societies Commission with their application.
Foreign insurers will need to send a copy of their authorisation under Article 6 of the First Long Term Insurance Directive.
HMRC will normally respond to any application for approval within 14 calendar days and will:
- notify successful applicants in writing
- allocate a reference number for use in all future communications
- include the new ISA manager in the next edition of the list of approved ISA managers, the list is updated quarterly
The terms of approval may include conditions designed to ensure that the provisions of the ISA regulations are satisfied. The approval is valid from the date of the notice issued by HMRC, if the decision is not to approve a person they will explain the reasons in writing.
Changes that need to be notified to HMRC
You should inform HMRC of any subsequent changes in writing as soon as possible. If you’re incorporated, and you change your name, you should send a copy of the certificate of incorporation on change of name to HMRC. A pdf copy can be emailed to email@example.com.
HMRC must also be informed of any change of liaison officer, either by the retiring liaison officer, or by an authorised signatory.
If you’ve been approved for one type of ISA you must notify HMRC in writing before you can manage another type of ISA. For example, ABC Ltd has applied for, and received approval, to manage the Cash ISA. If they decide to offer a Stocks and Shares ISA, or an Innovative Finance ISA, they must first notify HMRC.
Ceasing to be a manager
Withdrawal of approval by HMRC
HMRC may withdraw your approval as an ISA manager if they have reason to believe that you’re:
- failing, or have failed to manage the ISAs in accordance with the regulations
- not qualified to act as an ISA manager
HMRC will issue a notice of withdrawal of approval, which will specify the:
- type of ISA from which approval is withdrawn
- date from which the approval is withdrawn
- reason for the withdrawal
The notice will explain how to make an appeal against the withdrawal. You can appeal within 30 calendar days of the date the notice is issued.
If you intend to stop managing ISAs, you must give notice to HMRC and each investor within 30 calendar days before the intended date of cessation. The notice to investors must inform them of their right to transfer their ISAs to another manager.
You will cease to qualify as an ISA manager when you’re no longer eligible if:
- you’re subject of a bankruptcy restrictions order or an interim order
- in Scotland, your estate is sequestrated or you make an arrangement or composition with your creditors
A company will cease to qualify as an ISA manager when a resolution has been passed or a petition has been presented to wind it up.
A European institution, a relevant authorised person or an assurance undertaking will cease to qualify as an ISA manager when action corresponding to that in the paragraph has been taken by or in relation to the institution, person or undertaking under the law of a European Economic Area state.
A building society will cease to qualify as an ISA manager when:
- it ceases to be a building society
- its directors have made a proposal under Part 1 of the Insolvency Act 1986 for a composition in satisfaction of its debts or a scheme of arrangement of its affairs
- an Administration Order is made in relation to it
- a receiver or manager of its property has been appointed
A manager who has ceased to qualify must inform HMRC and each investor within 30 calendar days of the date he ceased to qualify. The notice to investors must inform them of their right to transfer their ISAs to another manager.
Returns required on cessation as a manager
If you no longer manage ISAs, you must submit:
- an annual return and claim form
- a return of information
- an annual return of market value statistical information
- an annual return of subscription statistical information
for the period from the previous reporting date to the date of cessation.
In the case of involuntary cessation or withdrawal of approval the person appointed to terminate the scheme should perform these duties.