The general terms and conditions ISA managers must provide when managing, transferring and withdrawing JISAs.
The general rules for managing ISAs also applies to the management of JISAs with a few exceptions as detailed in this guide.
A JISA may be found to be invalid. For example, it may be invalid because the investments held in the JISA are non-qualifying, or the registered contact does not have parental responsibility. Invalid JISAs can, in most circumstances, continue as JISAs after they have been corrected or repaired.
An invalid JISA must be repaired in all circumstances except where the child:
- is not eligible for a JISA
- already has another valid JISA of the same type
In these limited circumstances, no repair is possible, and the account can’t be a JISA so must be voided. Other than these cases where the child is not eligible for a JISA, you should never void a JISA except where you’re instructed to do so by HM Revenue and Customs (HMRC).
It isn’t necessary for you to obtain approval from HMRC before carrying out any routine ‘repair’ or corrective action on an account. You should keep a detailed record of all JISAs repaired and have them available at the next HMRC inspection. Repaired JISAs will be treated for all purposes as if they remain valid at all times, except for determining whether a penalty is chargeable.
If you find that a JISA is invalid you should immediately take steps to repair the JISA. The examples below cover most of the errors that could give rise to an invalid JISA, but it isn’t an exhaustive list. If you find other situations where you’re unclear as to how to repair the JISA, you should contact HMRC.
Repairs - removal of excess subscriptions
Excess subscriptions, investments purchased with those subscriptions and any income arising on those subscriptions or investments must be removed from the JISA. Any tax claimed from HMRC on income arising on the excess subscriptions, must be recovered by you, normally by deduction from the next claim under the heading ‘Adjustments to previous claims’.
Income arising on the excess subscriptions or investments purchased with the excess subscriptions is also subject to tax, you should inform the registered contact, and where appropriate the child.
In many cases identification of the investments acquired with excess subscriptions will be simple - there will have been one subscription to the JISA and purchase of one type of investment.
In some cases identification of the investments acquired with excess subscriptions will be more difficult. You can select the investments that represent the excess subscriptions, either by:
- taking a fraction of the investments held in the JISA at the date of repair which represents the excess subscriptions
- following the subscriptions through the JISA and identifying the relevant investments
If a JISA includes a life insurance policy and excess subscriptions have been applied as premium to the policy, the JISA may be repaired by making a part surrender of the policy of an amount equal to the over-subscription and withdrawing that amount from the JISA. No tax will be charged on any chargeable event gain arising from the part surrender and there’s no requirement to terminate the policy.
Repairs - incomplete or incorrect application form
In general, the registered contact should be asked to complete the form, or complete a new form with a reference to the original form, the JISA is treated as repaired and no further action necessary. However, the account won’t be treated as a JISA and can’t benefit from the relevant tax advantages if the registered contact:
- refuses to do so
- isn’t eligible to make an application
JISA opened by a parent who later informs the manager that the child is eligible for a CTF
This could mean that the child already has a Child Trust Fund (CTF) or has become entitled to one - for example, where a Child Benefit appeal for a period before 4 January 2011 is settled.
You will need to have this confirmed in writing for your records, you can then remove the JISA wrapper from the account. If the parent doesn’t provide confirmation in writing, you must flag the account so that no further subscriptions are accepted and no new management instructions can be accepted.
JISA opened by a parent who later informs you that they or the other parent has opened a JISA elsewhere
If a second JISA that has been opened is of the other type, then no further action needed. If the other JISA is of the same type, then one of them must cease to be treated as a JISA. The first account opened is the valid JISA so the second must be closed. You should obtain confirmation in writing that either the JISA held with you is the:
- later account in which case the JISA wrapper can be removed from the account
- valid account and that the wrapper has been removed from the invalid account, or has been closed
If you don’t receive confirmation, you should note the account that no further subscriptions or new instructions can be accepted.
JISA is opened and you’re informed that the registered contact doesn’t have parental responsibility for the child
You should seek confirmation from the existing registered contact that the account opening declaration was invalid.
If you receive confirmation, or the existing registered contact fails to respond, the account can continue if someone with parental responsibility steps forward and completes an application to be registered contact. You don’t need the agreement of the existing registered contact and the application should be treated as if the existing registered contact can’t be contacted.
If you receive confirmation that the declaration is invalid, but no one with parental responsibility steps forward, the JISA wrapper should be removed from the account.
If the existing registered contact fails to respond, but no one with parental responsibility steps forward, the account must be flagged so that no further subscriptions or management instructions can be accepted.
Repair - non-qualifying investments
If you find that non-qualifying investments are held in a JISA, it must be repaired by selling the non-qualifying investment, except if it is a life insurance policy, which must be surrendered. Insurers should not provide the wrong sort of policy as a JISA investment. The proceeds of the sale or surrender of the investments must remain within the JISA and used to buy qualifying investments, which need not be of the same type as the investments sold or surrendered. Any income, capital gains or chargeable event gains arising on these non-qualifying investments is taxable in the same way as if the JISA was made void, but the proceeds won’t be returned to the child.
Using a JISA as security for a loan
A JISA can’t be used as security for a loan.
ISA rollover at age 18
When the account holder turns 18, the rules specific to JISA will cease. You should contact the account holder before their 18th birthday to discuss future saving options. However, the investments must remain in a tax-free wrapper. Where the investments are applied to an ‘adult’ Cash or Stocks and Shares ISA, you can continue to use the same account number or allocate a new one depending on your systems and processes.
On their 18th birthday the child can access the savings in their JISA and can make withdrawals. There are no specific ISA rules about identification checks that need to be made. You should proceed as with any other type of account and conduct identification and Anti Money Laundering (AML) checks.
Once the former JISA account holder turns 18, any savings in the account that are not immediately withdrawn will stay within the ISA wrapper and the same tax advantages will apply.
If the investor wishes to make subscriptions after their 18th birthday they’ll need to provide their National Insurance number and confirm their residence status, as well as the standard ISA declaration and authority.
Transferring a JISA
Subject to the JISA terms and conditions, a JISA may be transferred:
- by transferring investments
- in cash
- in a combination of investments and cash
Transfers may be made between account providers, or investments in a JISA may be transferred, in whole or in part, from one type of JISA - cash or stocks and shares to another.
An account may be transferred even if, at the time that the transfer is made, the child would not be eligible for a new JISA, for example, because they are no longer:
- resident in the UK
- a crown servant
- the spouse or dependant of a crown servant
The transfer should be carried out as soon as requested by the registered contact, subject to:
- the Cash JISA to Cash JISA transfer rules
- for other transfers, the reasonable business period required to carry out the transfer, but not exceeding 30 days
- expiry of any withdrawal period offered by the new manager
Previous years’ JISA subscriptions can be transferred in whole or in part (depending on the terms and conditions offered by the 2 providers involved, and subject to the child not having 2 accounts of the same type at the end of the transfer process).
Current years’ JISA subscriptions must be transferred in full. This means that part transfers of JISA investments can only be made to a JISA of a different type (cash or stocks and shares). A transfer from a Cash JISA to another Cash JISA or a Stocks and Shares JISA to another Stocks and Shares JISA must involve the transfer of the entire contents of the ‘old’ JISA. In such cases, the provider may close the ‘old’ nil value account.
A registered contact can transfer a JISA internally by changing the type of JISA, from cash to stocks and shares, or vice versa. These internal transfers can only take place where you offer both types of JISA.
To carry out an internal transfer the registered contact must contact you with the appropriate transfer you require.
You’re not required to:
- accept the transfer of accounts from another provider
- allow partial transfers in or out
A child can’t have more than one JISA of each type at any time. If a Cash JISA is transferred to a Cash JISA with another provider, or a Stocks and Shares JISA is transferred to Stocks and Shares JISA with another provider, the whole account must be transferred.
But, a Cash JISA can be transferred either in full or in part to a new or existing Stocks and Shares JISA or vice versa, provided that at the end of the transfer process the child doesn’t have more than one JISA of each type.
If the whole balance of a JISA is transferred, you may close the old JISA. Another JISA of the same type could be opened at a later date for the child without breaching the ‘one account of each type per lifetime’ rule. However, following the transfer, the old manager keeps the empty shell account open with a nil balance, this will not prevent the child having another JISA of the same type with another manager.
To start a transfer the registered contact must complete a transfer application with the new provider.
The new provider must contact the old provider and request the transfer of the JISA after receiving the completed form and after any withdrawal period has expired. The new provider must give the name of the person who requested the transfer, the registered contact, as well as details of the account, to the old provider, otherwise the transfer can’t continue.
The old provider must transfer investments and/or cash direct to the new provider, and must keep a record of the transfer notice for 3 years after the date of transfer. The original application form shouldn’t be sent to the new provider, but must be kept by the old provider.
Where the JISA investment is transferred to another provider is an insurance policy, and the new provider is an insurer, title to the policy and any policy documents should be transferred to the registered contact as part of the transfer arrangements.
The transfer should be carried out by the old provider as soon as requested by the new provider, subject to the Cash JISA to Cash JISA transfer rules. For other transfers, the reasonable business period required to carry out the transfer shouldn’t exceed 30 calendar days. The transfer should not be delayed awaiting re-registration of investments, or receipt of dividends or other income from investments. Any subscriptions received after transfer should be forwarded to the new provider.
External transfer history forms
You should produce your own external transfer history forms and send them to the new provider within:
- 5 business days for Cash JISA to Cash JISA transfers
- 30 days of the date of the transfer for other transfers
The form must include the:
- child’s full name
- permanent address and postcode
- date of birth
- National insurance number - if they have one
- type of JISA - cash or stocks and shares
- date of transfer
- total subscriptions made in the tax year prior to the date of transfer
- date of the first subscription - if the account is transferred in the same year it is opened
- amount of any dividends payable on the investments
Cancellation of a transfer
Internal and external transfers can’t be carried out until after the withdrawal period offered by the new manager has expired.
Refusal to accept an external transfer
You’re not required to accept any application for external transfer of a JISA, or part transfer of JISA investments. In addition, credit unions can’t accept an external transfer to them of a JISA where the child does not fulfil the membership requirement.
Transferring a CTF to a JISA
A child can’t have a CTF and a JISA, so if a CTF is transferred the whole account must be transferred and the CTF provider must close the account. If the terms and conditions of the CTF and JISA allows, a CTF may be transferred to a JISA in one of the following ways:
- investments held by the CTF provider, or his nominee, may be transferred in its actual form
- in cash
- a combination of investments and cash
Transfers can be made between CTF providers and JISA managers even if there’s a nil balance. Investments in a CTF can be transferred from a CTF to a JISA, with the same institution.
A CTF may be transferred if, at the time that the transfer is made, the child wouldn’t be eligible for a JISA, this could be because they’re:
- no longer resident in the UK
- a dependant of a crown servant
The transfer should be carried out within 30 days of the request by the CTF registered contact and after any cancellation or withdrawal period has expired.
A CTF must be transferred in full, even where there’s a nil balance and the CTF account closed once the investments/cash have been passed to the JISA manager. Part transfers of CTF investments aren’t allowed.
The transfer of the CTF to an existing JISA can take place provided there’s no change to the registered contact, otherwise the JISA should be voided.
Internal CTF transfers
A CTF registered contact can request the transfer a CTF to a JISA.
To carry out an internal transfer the CTF registered contact must contact you with the appropriate transfer details you require.
External CTF transfers
You don’t have to accept the transfer in to a CTF account, but if you do, the CTF registered contact must complete a transfer authority request.
The JISA manager must contact the CTF provider and request the transfer of the CTF after receiving the completed form and after any withdrawal period has expired.
If you’ve opened a JISA account on a provisional basis pending the CTF transfer, you can allow a provisional account for 60 days to allow time for the registered contact to be changed and the transfer to go ahead, otherwise the provisional JISA must be closed and any subscriptions removed.
The CTF provider must transfer investments and/or cash direct to the JISA manager, and must keep a record of the transfer notice for 3 years after the date of transfer. The original CTF application form should not be sent to the new provider, but must be retained by the CTF provider.
The transfer should be carried out by the CTF provider as soon as requested by the JISA manager, subject to any reasonable business period but this shouldn’t exceed 30 calendar days. The transfer shouldn’t be delayed whilst awaiting re-registration of investments, or receipt of dividends or other income from investments. Any sums received after transfer should be forwarded to the JISA manager together with details of the CTF in respect of which the sums have been received.
External CTF transfer history forms
CTF providers should produce their own external transfer history forms. The form should be sent to the JISA manager within 30 days of the date of the transfer and include:
- full name of child
- date of birth
- Unique Reference Number of the child
- date of transfer
- follow on dividends
Cancellation of a CTF transfer
Internal and external transfers can’t be carried out until after the withdrawal period offered by the new manager has expired.
Subscriptions following a CTF to JISA transfer
The annual subscription limit for a CTF is based on the child’s birth year but JISA subscriptions are based on tax years. Where a CTF is transferred to a JISA, the CTF provider doesn’t need to pass any subscription details to the JISA manager. Once the transfer has been made, the child can access the full JISA subscription limit for the tax year of transfer regardless of any subscriptions made to the CTF in that year.
Withdrawals from a JISA
Investments, including cash and the income earned by JISA investments, can only be withdrawn in the following circumstances:
- where a terminal illness claim made on behalf of the child has been agreed
- on closure of the JISA
- to meet certain provider management charges and other specific expenses
If you receive a request to reverse a JISA subscription, you must contact HMRC by email: email@example.com, and provide full details of the circumstances surrounding the subscription.
Closure of the JISA
A JISA can only be closed when:
- the child dies
- the child reaches their 18th birthday
- direct instruction from HMRC that the JISA is void
- when a nil balance arises in the following circumstances:
- a JISA has been opened and a small initial investment has been made, but contributions then stop and agreed charges then bring the balance down to nil
- a terminal illness claim has been accepted under and the registered contact has withdrawn the funds held in the JISA
A JISA can’t be closed just because the child has become non-resident in the UK. Further subscriptions can be made to the JISA even when a child becomes non-resident in the UK. The JISA can also be transferred between providers, but a new JISA can’t be opened on behalf of the child.
Death of the child
You must obtain proof of the death of the child before the JISA can be closed. In most cases sight of the original death certificate or the Coroner’s report will be sufficient.
Any subscriptions made after the date of death are not valid subscriptions to the JISA.
When a child dies, the interest, dividends or gains in respect of investments in their JISA arising after the date of death to the date the account is closed won’t be exempt from tax. But there’s no loss of exemption on interest, dividends or gains which arise before the date of death.
Where the payment date is on or before the date of death any tax deducted can be reclaimed.
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 JISA - paid without deduction of tax
- interest accrued from the date of death, which isn’t exempt from Income Tax and where appropriate interest paid before 6 April 2016 should be paid under deduction of tax at the basic rate
If the JISA terms and conditions allow, you should advise the personal representatives that they have the choice of:
- having the JISA investments transferred to them or a beneficiary
- allowing you to sell the JISA investments and paying the proceeds to them or a beneficiary
You must pay any tax deducted to HMRC, normally by deduction from the next claim made.
Child’s 18th birthday
When the child reaches their 18th birthday the account will cease to be a JISA, but any investments held at that date remain in the tax-free ISA wrapper until the account is closed.
After age 18, the investments will become subject to the terms and conditions of the ‘adult’ ISA. You may decide to send the new or amended terms to the child before their birthday.
Voiding a JISA
Voiding the JISA doesn’t mean that the account must close, it means that the JISA wrapper around the investments must be removed. So if there have been other contributions to the account it will be for you to agree with the registered contact what is to happen to these. The terms and conditions of the account may require the account to close and the contributions to be sent to the child or they may allow the sums to be moved to a non-JISA account.
The parents of a child who is terminally ill may make a claim to HMRC to be allowed to access the funds in the child’s JISA. If the claim is agreed, HMRC will issue a letter to the registered contact letting them know that the funds in the JISA can be withdrawn. You should ask for sight of the letter as HMRC won’t send you a copy.
The only person who can withdraw money from the JISA on behalf of the child is the registered contact. In most cases the withdrawal will be in cash, but if you allow, the investments in the account can be transferred to the registered contact directly.
Published: 6 April 2016
From: HM Revenue & Customs