Guidance for ISA managers about how to operate the Junior ISAs scheme rules.
The Junior Individual Savings Account (JISA) became available on 1 November 2011 and is a type of Individual Savings Account (ISA) available to eligible children. Most of the ‘adult’ ISA rules apply specifically to JISAs.
A JISA is an investment account of an eligible child managed in accordance with the ISA regulations under terms agreed between the ISA provider and the registered contact. The JISA must be held in the name of the child.
Only parents or a guardian with parental responsibility can open a JISA for under 16s, but anyone can pay into a child’s JISA.
You shouldn’t refuse to accept JISA applications because the child is within the Child Trust Fund (CTF) eligibility age range - born after 31 August 2002 and before 3 January 2011 as there may be a number of reasons why a child in the CTF age range isn’t eligible for a CTF.
A child can’t hold an Innovative Finance ISA.
Income arising from parental subscriptions to a JISA doesn’t count towards the parent’s income under the settlements legislation (section 629 ITTOIA 2005).
Gifts made by a parent to a JISA are treated in the same way as any other gifts they make for Inheritance Tax purposes.
The detailed rules for JISAs are contained within the Individual Savings Account Regulations 1998 No 1870.
Who provides JISAs
Any person approved to provide ISAs will automatically be able to offer a JISA. All of the ISA approval rules apply, with the additional requirements that an ISA provider offering JISA accounts must:
- publicise details of the minimum amounts they will accept as JISA subscriptions and the methods of payment they accept
- inform anyone proposing to subscribe to a JISA that the subscription is a gift
The conditions and processes are the same for ISAs and JISAs regarding:
- HM Revenue and Customs (HMRC) approval of managers
- requirements in relation to non-UK account managers, providers ceasing to offer accounts
- HMRC withdrawal of approval to offer accounts
Cash and stocks and shares accounts
A JISA, like an ISA, can be offered as either a:
- cash account
- stocks and shares account
which is subject to the subscription limit for both accounts, there should be separate statements for each account.
A ‘shell’ account holding less than one penny, for example, where all investments previously held have been transferred to another JISA is disregarded when considering the ‘one account of each type’ rule.
HMRC understands that Stocks and Shares JISAs may, depending on the investments held, be subject to the Markets in Financial Instruments Directive (MiFID) and therefore MiFID reporting requirements.
Further advice should be sought from the Financial Conduct Authority (FCA) if required.
Qualifying investments for a JISA
The investments you may purchase, make or hold in a JISA are the same as the investments that can be held in Cash and Stocks and Shares ISAs. There is one exception, shares acquired under a Save as You Earn (SAYE) option scheme, profit sharing scheme or Share Incentive Plan (SIP) can’t be transferred into a Stocks and Shares JISA.
The current rules for ‘adult’ ISAs that include an insurance policy, and the additional requirements on ‘insurer-managers’ who are also account providers also apply for JISAs that include an insurance policy. This includes the rules concerning:
- eligible policies
- vesting of title to policies
- termination of policies in certain circumstances
- the restriction of transfers, assignment or assignation of policies
But in relation to JISA:
- the life assured must be that of the child holding the account
- where the insurer issuing a policy is also an account manager for the JISA account, title to the policy must be held in the name of the registered contact
- the policy must not be transferred or assigned, including to the child holding the account or the registered contact, except where:
- amounts may be withdrawn from a JISA
- an account is transferred to another provider
- there is a change to the registered contact for the account
- the account holder turns 18, and the account therefore ceases to be a JISA
- the normal circumstances where an ISA policy must automatically terminate due to the relevant conditions not being met don’t apply to a JISA that can be repaired or corrected within a reasonable time
There are no restrictions or requirements on payment methods for JISA accounts, anyone can subscribe cash payments to a JISA. The person subscribing doesn’t need to be:
- resident in the UK
- related to the child
You don’t need to obtain the consent of the registered contact or account holder before accepting subscriptions from anyone. However, you may operate your own rules concerning the acceptance or refusal of any particular subscription, subject to your normal regulatory requirements.
Subscriptions to the JISA can be made even if the child isn’t present in the UK.
You must make it clear to the person subscribing that the amount subscribed is a gift to the child, and it can’t be repaid to them if they change their mind at a later date.
All subscriptions must be made in cash, which may include:
- payment by cheque
- direct debit
- charge card
- credit card
- direct credit
- standing order
When subscriptions to a JISA can be accepted
A JISA is opened on the date when a valid application and opening subscription are made.
The maximum amount that can be subscribed to a JISA each year is £4,080. Any part of the limit that isn’t used is lost and can’t be carried forward or back to other years. You must ensure that subscriptions in any tax year don’t exceed the limits. Interest, dividends or other income arising from the investments held in the JISA don’t count toward the annual subscription limit.
If you do identify that a subscription is likely to exceed the limit, you should refuse it, for example, two or more parties wish to subscribe to the JISA, and together the subscriptions are greater than the amount of unused subscription limit. But if the excess has already entered the JISA, and either you or HMRC have identified it, HMRC will provide you with instructions on any action you should take.
The overall subscription limit for the tax year can be divided between subscriptions to a Cash JISA and a Stocks and Shares JISA as directed by the registered contact.
Once a subscription is made to a JISA, the cash, and any investments bought with the cash, are owned by the child. The subscriber can’t recover their subscription, which they have confirmed is a gift to the child, nor can they, unless they are the registered contact, give any instruction as to how the cash is to be managed or used in the JISA.
Subscriptions paid to wrong JISA
If you find that you’ve made a subscription into the wrong JISA in error, contrary to the donor’s instructions, you can take the subscription out of the JISA and place it in the correct JISA.
Investments held by a person outside a JISA can be sold, and the proceeds subscribed to the JISA. The Capital Gains Tax rules will apply to any disposal.
The subscription year is based on tax years and runs from 6 April to the following 5 April. For the year in which a JISA opens the subscription year starts on the date of opening and ends on the next 5 April.
Amounts in excess of the annual subscription limit can’t go into the JISA until the start of the next tax year. You may, if you wish, set up feeder accounts for excess subscriptions. The feeder account is not a JISA, and for tax purposes will be treated in the same way as any other children’s savings account.
Subscriptions between ages 16 and 18
When a child reaches age 16 they can apply for an ‘adult’ Cash ISA which they can subscribe to in addition to any subscriptions made to their JISAs. Holding both a Cash JISA and an ‘adult’ Cash ISA doesn’t breach the JISA rule that the child can only have one JISA account of each type, and the subscription limits for all ‘adult’ ISA products apply independently of whether or not a child holds, or has held, a JISA in the relevant year.
This means that, in the tax year when the child turns 16 they can subscribe up to the JISA limit, and from their 16th birthday they can also subscribe up to 50% of the overall ‘adult’ ISA limit to a Cash ISA.
Child turns 17
In the tax year when the child turns 17 they can subscribe up to the JISA limit, and subscribe up to the overall ISA limit to a Cash ISA.
Child turns 18
From the start of the tax year the child turns 18, they can:
- use their whole JISA subscription limit, even though the JISA will be held for a part-year only
- subscribe the overall ‘adult’ ISA limit to a Cash ISA
- from their 18th birthday, invest in a Stocks and Shares ISA, or an Innovative Finance ISA, subject to the normal ‘adult’ subscription limits
Direct Debit Indemnity Scheme
Under this scheme, where money is taken out of an account by direct debit by mistake, the account holder can claim the return of the money. The account holder’s bank repays the money to the account holder, and claims back that amount from the recipient bank, in effect the transaction is reversed. Subscribers to a JISA might make a claim under the Direct Debt Indemnity Scheme.
Where the subscriptions made to a JISA are relaxed under the Direct Debit Indemnity Scheme, the subscription will be treated as not being made and no gift will have been made to the child. Any amount is disregarded for the purposes of the JISA subscription limit. If tax relief on interest has been claimed from HMRC, it must be repaid to HMRC, and any interest arising may be subject to deduction of tax.
Building society bonus payment
Building societies can pay bonuses to their members in respect of products they hold and this can include children who hold a JISA. Bonuses paid in respect of JISAs are exempt from tax and don’t count towards the annual JISA subscription limit provided they’re paid directly into the JISA account.
A building society bonus for JISA purposes doesn’t include the demutualisation, merger or sale of a building society subsidiary.
There’s no requirement to accept any minimum one-off or regular payment subscription, but you can design your products to include minimum subscription limits which will be included in the terms and conditions of the account.
You can make charges for management and other expenses as you see fit, subject to other regulatory requirements and agreement with the registered contact.
Applications can be made in writing, over the internet, by fax or by telephone. The investor will need to provide the same information, make the same declaration and provide the same authority and other information as for a written application. The investor’s signature isn’t required. A JISA application can only be made by:
- the child, if aged 16 or over
- a person with parental responsibility, including children who are over 16
- ‘The Share Foundation’ for a child who has been looked after by a Local Authority for a continuous period of at least 12 months for JISA purposes, The Share Foundation is treated as having parental responsibility for the child
You should accept that an applicant has parental responsibility, but if you suspect that this isn’t the case, you should ask for proof which can be:
- the name of the applicant on the child’s birth certificate
- a court order awarding parental responsibility
- a marriage certificate of the person married to the child’s mother at the date of birth of the child also has parental responsibility
You don’t need proof if the application is made by The Share Foundation.
The completed application must include:
- full name - this must include the applicants first name and surname
- The Share Foundation for looked after children, this is the address of their registered office
- the child’s title (if any), and full name
- the child’s permanent residential address, including postcode
- the child’s date of birth
- the child’s National Insurance number if they’re aged over 16
Conditions for opening a JISA
All of the following conditions must be satisfied before the JISA can be opened:
- the applicant enters into an agreement with you for the management of the JISA which includes the application and declaration
- where there is a pre-contractual right to withdraw - not cancellation rights, the period for withdrawal has expired
- where the application isn’t in writing, the applicant has agreed, or is treated as having agreed, a copy of the declaration
Applications made through third parties
An application can be made by the registered contact through a third party such as an Independent Financial Adviser (IFA).
Applications made in writing must be signed by the applicant and passed on by a third party to you.
Where applications not made in writing are passed on to you by a third party, you must make a written declaration on behalf of the applicant. Notification can be:
- the declaration can be read back to the applicant (not the IFA) over the phone, or by face to face contact
- a copy of the declaration can be sent back via email, the internet, faxed or by post
The information, declaration and authorisation required for opening a JISA are only required during the account application. This doesn’t need to be reviewed annually. However, it is necessary to obtain new information, declaration and authorisation if subsequently as part of an application for a new registered contact for the account.
You may refuse an account application. You may accept any information or declaration offered by the account applicant at face value, but you shouldn’t open an account if you believe that any of the information given by the applicant is untrue.
A single declaration by The Share Foundation in respect of multiple account opening declarations may be accepted provided there is an audit trail from each account/application to the declaration.
Applications must include an authority for you to manage the account on behalf of the child. The following authority will satisfy the requirements of the regulations - I authorise (provider’s name) to hold the subscriptions, JISA investments, interest, dividends and any other rights or proceeds in respect of those investments and cash, and to make on the child’s behalf any claims to relief from tax in respect of JISA investments.
The authority continues until it is replaced by one of the following:
- a change in registered contact
- the account is transferred to another provider
All JISAs must be managed in accordance with the ISA/JISA rules, and under terms agreed between the registered contact, on behalf of the child where appropriate and you.
The management agreement must include instructions about how subscriptions are to be invested.
The registered contact
The registered contact is the only person who can give instructions to you regarding the management of the JISA investments. There can only be one registered contact at any time. The registered contact should also be issued with any statements or correspondence relating to the JISA. The correspondence should be addressed to the registered contact so that they are in a position to manage the JISA.
The registered contact must be a person aged 16 or over. This can be either the:
- person who has parental responsibility for the child holding the account where the child is under 16
- child holding the account if they’re between 16 and 18
In all circumstances, the person who applies for the JISA will be the first registered contact, and the required declaration and authorisation are to be contained in the application form.
If you become aware that the registered contact for an account no longer has parental responsibility for the child, you no longer take further instructions from them.
Who can be the registered contact
The role of registered contact can be passed to another person who has parental responsibility at any time during the lifetime of a JISA, but the status can only be passed with the consent of the existing registered contact.
If a child is between 16 and 18 years of age, they can become the registered contact for their account at any time, they won’t need consent of the existing registered contact. Once the child account holder has registered contact status, it can’t be passed to another person except where the child later lacks mental capacity or suffers from a mental disorder.
An application for registered contact status will take effect from the date it is accepted as complete and correct by the account manager, and where appropriate, once the consent of the existing registered contact is confirmed.
The application to the registered contact must contain the same information for opening a JISA account and include a declaration that the information given is correct. To satisfy the regulations, the declaration will be one of the following:
- I am 16 years of age or over
- I am the child
- I have parental responsibility for the child
- I will be the registered contact for the JISA
- I authorise the JISA provider to record the terms of this declaration in a written declaration made on my behalf (for applications not in writing)
Change of registered contact or existing registered contact
The registered contact can’t be changed until the existing registered contact gives consent to another person taking over the role, except where the following applies:
- the applicant for registered contact status is the account holder who is 16 years or older
- on the death or incapacity of the existing registered contact
- the existing registered contact lacks capacity
- the existing registered contact can’t be contacted - if there’s been no contact within 12 months or post has been returned unopened
- a court order brings to an end the existing registered contact being a person with parental responsibility for the child
- a court has appointed a guardian or a special guardian of the child who holds the JISA
- a court orders that the person who is the existing registered contact cease to be so
- the new registered contact has adopted the child under an adoption order
In the case of death, incapacity, or replacement by court order of the current registered contact, you should satisfy yourself that this is so, either by sight of suitable documentation, or from other evidence you may hold.
You should manage the process of obtaining the agreement of an existing registered contact to the transfer to another registered contact. If you’re contacted by someone wishing to become the registered contact for a JISA and they ask you for details of the existing registered contact, you’re strongly advised not to release this information.
If an adoptive parent tells you that they want to become the registered contact, you musn’t give any details about the existing registered contact or seek the agreement of the existing registered contact to the change.
When you’re satisfied that the applicant has adopted the child, you must update the details immediately to ensure that in these very sensitive cases any correspondence only goes to the correct contact.
The Share Foundation - change of registered contact
Where the existing registered contact is The Share Foundation, their consent to another person is needed except where:
- the applicant to be the registered contact is the account holder who is 16 years of age or older
- a court orders
Where The Share Foundation is the registered contact, you should advise the applicant to contact the Local Authority so that the correct procedure for transferring the registered contact role can be followed.