Clarification of rules for opening ISAs

[PMTI]

Cash ISAs: As I understand it, you can only subscribe to one per tax year, but could in theory open as may as you want. OK. Is it the same for S&S ISAs?
I can't see why it wouldn't be, but have a nagging feeling there was a subtle difference in rules between cash and S&S ISAs. Perhaps this is no longer the case. My paranoia is further fuelled by what I hope is sloppy use of language on several websites, for example, Barclays, who state:

Can I open more than one Investment ISA in the same tax year?
No. You can open only one Investment ISA in a tax year. But you can split your allowance between Investment ISA, cash ISA and Innovative Finance ISA. They don’t have to be held with the same provider.

By which I hope they mean, you can only subscribe to one Investment ISA. I assume they make the reasonable assumption that if you open an ISA, you would normally be paying into it.

The purpose of the question is due to having an APS allowance which has been associated with a newly opened S&S ISA in the inheriting spouse's name. And now inheriting spouse wishes to move the contents of the ISA to another broker this tax year (so 2 S&S ISAs will have been opened, but none will have been subscribed to yet).

Can anyone please confirm this is OK?

Thanks

PMTI

[Urbandreamer]

The purpose of the question is due to having an APS allowance which has been associated with a newly opened S&S ISA in the inheriting spouse's name. And now inheriting spouse wishes to move the contents of the ISA to another broker this tax year (so 2 S&S ISAs will have been opened, but none will have been subscribed to yet).

You can MOVE an ISA, which is not the same as subscribing to more than one per year.
You can HAVE more than one ISA, as long as you only subscribe (fund) one per year.

The ISA inheritence is a special case that I know little about. What I understand is that it is an allowance that exists seperate from the funds. That is to say that if you inherit an ISA allowance you could deposit your own funds to the same value meanwhile the existing inherited "ISA" would cease to be tax exempt. I can't confirm, but suspect, that it doesn't have to be placed with the provider that you are funding in a given year. You will need to confirm that though.

Personally I have 3 S&S ISA providers. I buy and sell shares in all three but only fund one.

[PMTI]

Thanks Urbandreamer

To clarify I am asking if one can open 2 S&S ISAs in the same tax year? None will be subscribed to.

It's the wording from Barclays which says you may not open two ISAs in the same tax year which is causing the inheriting spouse some confusion. I just want to clarify my interpretation that their wording is misleading and it would be more technically accurate if they said you cannot subscribe to two ISAs in the same tax year.

Thanks

PMTI

[genou]

Thanks Urbandreamer

To clarify I am asking if one can open 2 S&S ISAs in the same tax year? None will be subscribed to.

It's the wording from Barclays which says you may not open two ISAs in the same tax year which is causing the inheriting spouse some confusion. I just want to clarify my interpretation that their wording is misleading and it would be more technically accurate if they said you cannot subscribe to two ISAs in the same tax year.

Thanks

PMTI

My bold.


http://www.tisa.uk.com/regulations/77_ISARegs_2016B.pdf

I do not claim to have read and absorbed all of this, but I'd suggest -

See reg 12(3)(d) (i)
in the case of a stocks and shares account, the applicant, except for a subscription made in accordance with regulation 5D(2)(a)(iia) or (iv), —
(i) has not subscribed, and will not subscribe, to any other stocks and shares account, in the year to which paragraph (2) refers, and

It seems you are free to open as many as you wish, until you subscribe to one, at which point you may not open another. You might want to look at 5DDA in relation to APS, but not immediately in point if you are not subscribing this FY

[Lootman]

It seems you are free to open as many as you wish, until you subscribe to one, at which point you may not open another.

That doesn't seem quite right to me. I don't think you can open an ISA somewhere without funding it at all. It's not like a bank account that can have a zero balance. And why would you open more than one if you don't intend to fund them, even if you could?

Also, you can open two ISAs in the same tax year. One might be for this year's subscription and the other might be a transfer from another ISA provider. However. I imagine if you went to Barclays and asked to open two accounts for that reason, they'd just open one account for you, which will accept both the cash subscription and the transfer.

[genou]

It seems you are free to open as many as you wish, until you subscribe to one, at which point you may not open another.

That doesn't seem quite right to me.

It would help if you quoted which para in the regulations supports you here......

[swill453]

That doesn't seem quite right to me. I don't think you can open an ISA somewhere without funding it at all. It's not like a bank account that can have a zero balance. And why would you open more than one if you don't intend to fund them, even if you could?

Yes, it is like a bank account that can have a zero balance.

And you might want to open more than one, so you can transfer one or more older ISAs into the new one(s).

As the OP rightly states, you can only subscribe new money into one ISA of each type per year.

ISA guidance notes are here https://www.gov.uk/government/uploads/s ... nagers.pdf - the chapter on opening ISAs does not mention any restrictions on numbers. The chapter on subscribing is now massively more complex than it used to be, talking about lifetime ISAs and all the other new stuff, but it should contain the answers required.

Scott.

[Lootman]

It seems you are free to open as many as you wish, until you subscribe to one, at which point you may not open another.

That doesn't seem quite right to me.

It would help if you quoted which para in the regulations supports you here......

I wasn't referring to the regulations at all, but rather to the inference that you made from them, starting with "It seems . . ".

I have never seen an ISA application form that didn't require you to fund (or transfer) at the same time. So in practice I don't believe you can just open an account and maintain it with a zero balance. Nor can I think of a reason why anybody would want to.

The important point about the rules is about subscriptions. Rather than allowing you to subscribe to multiple ISAs up to an annual limit, the rules limit you to only subscribing to one each year.

In that context, how many ISA accounts you open or have open is moot. You can have dozens of ISA accounts open at the same time. You can only subscribe to one of them each year. You might be able to get around that by subscribing and then transferring in part but, again, I don't know why anyone would.

[Lootman]

Yes, it is like a bank account that can have a zero balance. And you might want to open more than one, so you can transfer one or more older ISAs into the new one(s).

It may be possible to open an ISA account and leave it completely empty, but that is surely a very rare desire. In fact a provider might close a long-term ISA with a permanent zero balance. When you open an ISA, either you fund it with cash or you transfer in from somewhere else.

The important thing here surely is the limit of only being able to subscribe cash to one ISA account each tax year. These other theoretical cases just don't seem important at all and are muddying the waters.

But yes, you might open two accounts in the same tax year, one for cash and one for a transfer. I doubt that they would be with the same provider, however, as they would surely just open one account for both purposes.

[mc2fool]

To clarify I am asking if one can open 2 S&S ISAs in the same tax year? None will be subscribed to.

Then why? What's the point? To go back to your OP...

The purpose of the question is due to having an APS allowance which has been associated with a newly opened S&S ISA in the inheriting spouse's name. And now inheriting spouse wishes to move the contents of the ISA to another broker this tax year (so 2 S&S ISAs will have been opened, but none will have been subscribed to yet).

So you have a newly opened S&S ISA, which has not been subscribed to and so has nothing in it -- i.e. is empty -- and you want to move the "contents" of that empty ISA -- i.e. nothing -- to another broker, yes?

Well, technically you have opened one ISA and are transferring that ISA to another provider. However, my bet is that one or the other -- or possibly both -- of the providers' systems will melt down at the idea of transferring an empty ISA....

[genou]

That doesn't seem quite right to me.

It would help if you quoted which para in the regulations supports you here......

I wasn't referring to the regulations at all, but rather to the inference that you made from them, starting with "It seems . . ".

I have never seen an ISA application form that didn't require you to fund (or transfer) at the same time. So in practice I don't believe you can just open an account and maintain it with a zero balance. Nor can I think of a reason why anybody would want to.

The important point about the rules is about subscriptions. Rather than allowing you to subscribe to multiple ISAs up to an annual limit, the rules limit you to only subscribing to one each year.

In that context, how many ISA accounts you open or have open is moot. You can have dozens of ISA accounts open at the same time. You can only subscribe to one of them each year. You might be able to get around that by subscribing and then transferring in part but, again, I don't know why anyone would.

My inference is correct. The difference between what ISA managers will allow you to do and the regulations allow seems to me to be the OP's point. I'm not sure what your point is.

[Lootman]

My inference is correct. The difference between what ISA managers will allow you to do and the regulations allow seems to me to be the OP's point. I'm not sure what your point is.

As mc2fool has also just pointed out, there is no point in opening multiple ISA accounts and then doing nothing with them. So whether the rules allow that or whether providers allow that doesn't seem like a useful thing to make inferences about, whether correct or wrong.

And there is another reason not to do it, apart from the fact that it is pointless. And that is that there is a good chance that ISA providers notify HMRC when ISA accounts are opened, as part of HMRC wanting to ensure people don't abuse the rules. If you open a dozen ISA accounts this March (for whatever bizarre reason you have) then HMRC will likely receive a blizzard of notifications about it, and decide they want to take a good luck at you.

The only reason to open an ISA account other than to fund it with cash (once a year) is with the intention of doing a transfer from another ISA. But the subscription limit doesn't apply in that case anyway.

[PMTI]

Thanks all for the discussion this has generated.

To make our intentions more plain let me elaborate;

Spouse has inherited shares which were held in an ISA - the valuation of which forms the APS
Spouse wishes to keep the portfolio of shares as they are but obviously they must somehow be transferred to the spouses name.
Brokers are unable to transfer an APS to another broker 'in specie' and instead all shares would have to be sold triggering fees for rebuying with new broker when trying to replicate portfolio. The APS amount would then be associated with the new account.
Alternatively, the spouse can open an ISA with the original broker and all shares stay as shares and are transferred to spouse's name.
A straight transfer 'in specie' can then be made from the original broker to the new broker.
Since I am assuming transferring the shares from deceased's name to spouse's name with the original broker is not considered subscribing, this is how/why we desire to open 2 ISAs but won't subscribe (new money) to either.

Hope that makes it a bit clearer?

Thanks

PMTI

[stevensfo]

I don't think you can open an ISA somewhere without funding it at all. It's not like a bank account that can have a zero balance. And why would you open more than one if you don't intend to fund them, even if you could?

I did this a few years ago when I was in a hurry to open a second ssISA. For some reason I sent off the forms to Equiniti (correct name?) but almost immediately started to read poor reviews about them. I think I also kept confusing them with the Illuminati.

Immediately opened an account with AJBell and never read my post from Equiniti assuming that in any case, my account wouldn't be open till I'd sent more supporting docs. A year later I discovered that in fact, it had been opened and I was receiving nice statements showing ZERO. Not sure which company this code stands for. Zimbabwe something?

Steve

[Lootman]

Spouse has inherited shares which were held in an ISA - the valuation of which forms the APS. Spouse wishes to keep the portfolio of shares as they are but obviously they must somehow be transferred to the spouses name. Brokers are unable to transfer an APS to another broker 'in specie' and instead all shares would have to be sold triggering fees for rebuying with new broker when trying to replicate portfolio. The APS amount would then be associated with the new account.

Alternatively, the spouse can open an ISA with the original broker and all shares stay as shares and are transferred to spouse's name.A straight transfer 'in specie' can then be made from the original broker to the new broker.

Since I am assuming transferring the shares from deceased's name to spouse's name with the original broker is not considered subscribing, this is how/why we desire to open 2 ISAs but won't subscribe (new money) to either.

Yes, that makes a lot more sense than some of the speculative ideas about opening multiple ISA accounts with no money, transfer or reason!

To avoid the potential for finger-pointing as well as the issues you cited, I'd be tempted to open the new ISA with the same provider as the existing ISA. That should make the in specie transfer trivially easy with less risk of miscommunications between brokers.

And this would not count as "subscribing", which is only for new cash.

At some later point, and only if you wish to, the ISA could then be transferred to another broker in the usual way. Typically the inbound provider may reimburse you for any costs incurred, or at least they did in my case a couple of times.

[mc2fool]

Since I am assuming transferring the shares from deceased's name to spouse's name with the original broker is not considered subscribing, this is how/why we desire to open 2 ISAs but won't subscribe (new money) to either.

Ok! Not familiar with the ins and outs of APS, but https://www.gov.uk/government/publicati ... a-investor says (amongst many other things) that additional permitted subscriptions count as previous year subscriptions, and that an ISA opened solely to receive the additional permitted subscriptions will not cause the saver to breach the ‘one ISA of each type per tax year’ rule.

So, sounds good for what you want to do. It also, on a very quick skim through, confirms your understanding that in specie APS transfers can only happen within the same ISA manager or nominee.

A few things: first to check that the ISA manager accepts APS, as it seems they don't have to (I'll bet you've already done that ). Secondly to check on transfer-out fees (and possible transfer-in sweeteners) and do the costs arithmetic. And lastly, not to underestimate the amount of time both transfers (APS->spouse and old->new broker) may take, esp. considering we're coming up to the end of the tax year.

[Urbandreamer]

Alternatively, the spouse can open an ISA with the original broker and all shares stay as shares and are transferred to spouse's name.
A straight transfer 'in specie' can then be made from the original broker to the new broker.
Since I am assuming transferring the shares from deceased's name to spouse's name with the original broker is not considered subscribing, this is how/why we desire to open 2 ISAs but won't subscribe (new money) to either.

Hope that makes it a bit clearer?

Thanks

PMTI

[Urbandreamer]

Ooops, sorry for the previous post

Alternatively, the spouse can open an ISA with the original broker and all shares stay as shares and are transferred to spouse's name.
A straight transfer 'in specie' can then be made from the original broker to the new broker.
Since I am assuming transferring the shares from deceased's name to spouse's name with the original broker is not considered subscribing, this is how/why we desire to open 2 ISAs but won't subscribe (new money) to either.

Hope that makes it a bit clearer?

Thanks

PMTI

So, if I have understood you right. Spouse has an empty ISA that has not been subscribed to where they wish to hold the inherited shares.
The original broker can not transfer the shares in specie as they are not in spouses name. The only way to transfer them in specie is to use the APS allowence with the existing broker and then transfer them.

As mc2fool says, given the date it may be as well to wait until March to effect the transfer, though legaly there is no reason to do so. Technically the empty "ISA" does not exist until it has recieved funds. It's an account that is intended for use as an ISA but is not until that point.

Reading stuff on the web spouse could have a ISA acount that they are funding, inherit the APS and use it to create a second account (in this case with the original provider). That ISA, with its specie could then be transfered to another (possibly even a 3'ed) provider. The only confusion in this case is that the provider chosen has opened an "ISA" account in advance. Explain the situation to them (the provider to recieve the transfer) and they will rectify the paperwork.

[mike]

Lootman wrote

That doesn't seem quite right to me. I don't think you can open an ISA somewhere without funding it at all. [....] And why would you open more than one if you don't intend to fund them, even if you could?

I want to open a new ISA in March but not fund it until 6 April. This will be to buy shares that I will be selling on 5 April to bed-and-ISA, so do not want a delay while opening. My two current ISAs are quite large now and I want a 3rd one for new subscriptions while the other 2 have income re-invested.

This seems quite a reasonable request and reason - are we sure this cannot be done ?

Mike

[Lootman]

Lootman wrote

That doesn't seem quite right to me. I don't think you can open an ISA somewhere without funding it at all. [....] And why would you open more than one if you don't intend to fund them, even if you could?

I want to open a new ISA in March but not fund it until 6 April. This will be to buy shares that I will be selling on 5 April to bed-and-ISA, so do not want a delay while opening. My two current ISAs are quite large now and I want a 3rd one for new subscriptions while the other 2 have income re-invested.

This seems quite a reasonable request and reason - are we sure this cannot be done ?

Yes, I feel certain that will be fine as you are opening an ISA with the explicit intention of quickly funding it. Nor can I imagine the fact that the period crosses the end of a tax year will matter. You should explicitly inform them that you are opening a 2017-2018 ISA, just in case they document it as being for the wrong year. They would then presumably put it into some kind of pending status until April 6th.

Where I was expressing doubt was with the idea that genou expressed here:

"It seems you are free to open as many as you wish".

I suspect that doing that will either lead to them being flagged as opening multiple ISAs in the same year, or that the provider will close them if they are not funded within a reasonable time, or both. It's also pointless.

Opening one without immediately funding it, in good faith, should cause no problems.