ISA Guidance Notes Crowd Funding Extract

ISAs
Guidance Notes
for ISA Managers
DRAFT
Crowdfunding
Chapters / paragraphs with no amendments have been omitted
04/2016
GUIDANCE NOTES FOR ISA MANAGERS
These notes provide general guidance for ISA managers on how to operate the ISA
schemes. They replace all previous HM Revenue & Customs guidance.
The notes are not binding and do not affect any persons right of appeal. Nor are they a
full statement of the law as it applies to ISA managers. ISA managers should refer to the
relevant legislation where appropriate.
04/2016
Updates
This version of the ISA Guidance Notes for Managers provides guidance on the rules to be applied
from 1 November 2016, and in particular incorporates guidance on debentures offered by
crowdfunding platforms to be eligible for inclusion within an ISA.
04/2016
Contents
1.
INTRODUCTION
What is an ISA?
What was a PEP?
Who are the Guidance Notes for?
HMRC contact addresses and phone numbers
How the ISA scheme works
The legislation
Investor enquiries
2.
THE ISA MANAGER
Who can manage ISAs?

Applications for approval as an ISA manager
Ceasing to be a manager
3.
5.1
5.5
5.7
5.8
5.24
ISA SUBSCRIPTIONS
Subscription limits
Cash subscription
Subscription by transfer of shares
Subscriptions that do not count towards the annual subscription limits
Flexible ISAs
Help to Buy ISA reinstatement
Additional permitted subscriptions following the death of account holder
04/2016
4.1
4.9
4.18
4.24
4.29
4.32
4.35
4.38
4.39
4.42
OPENING AN ISA
When can an ISA be opened?

Cancellation
Withdrawal
Completion of application forms
Applying for an ISA on behalf of someone else
6.
3.4
3.14
3.17
3.21
APPLICATIONS AND TERMS AND CONDITIONS
Applications to subscribe to an ISA

ISA applications in writing
ISA applications not in writing
Applications made through third parties
ISA terms and conditions
Enquiries and further advice
Imaging application forms and written declarations
Model application form (stocks and shares ISA)
Model application form (cash ISA)
Model telephone application script
5.
2.1
2.13
2.24
THE INVESTOR
Who can subscribe to an ISA?

The one-ISA-of-each-type-a-tax-year rule
Investors tax returns
Death of an investor
4.
1.1
1.2
1.3
1.5
1.11
1.18
1.19
6.1
6.6
6.19
6.51
6.77
6.92
6A
Contents
7.
STOCKS AND SHARES ISAS
Qualifying investments for stocks and shares ISAs

Shares being brought to listing
Shares paid for in instalments
Changes to investments held in a stocks and shares ISA
Rights issues and other offers to shareholders
Bonus issues
Recognised Stock Exchanges
Qualifying Security check flow chart
8.
CASH ISAS
Qualifying investments for cash ISAs

Connected accounts
9.
10.1
10.3
10.7
10.15
10.32
10.38
10.40
10.45
10.47
10.47a
10.48
10.56
10.59
10.60
TRANSFERRING AN ISA
Transferring an ISA
ISA subscriptions after transfer
Claims for payment of tax
Cancellation of a transfer
Flexible ISA transfers
04/2016
9A.1
9A.5
9A.11
9A.12
MANAGING AN ISA
Delegation of the managers functions

Investment rules
The open market price rule
Withdrawals from an ISA
Uninvested cash held in a stocks and shares ISA
Compensating investors
Blank
Pre-funding UK income tax reclaimable from SSO to an ISA
Managers fees and charges
Reimbursed fees and charges
Using an ISA as security for a loan
Stock lending
Child Maintenance Deduction Orders
HMRC Direct Recovery of Debts
11.
9.1
9.2
9.14
9.18
9.26
INNOVATIVE FINANCE ISAs
Innovative finance ISAs

Qualifying investments
Transfers and withdrawals
Payments when loans default
10.
8.1
8.6
LIFE INSURANCE POLICIES IN ISAs
Policies of life insurance
Connected policies
Loans
Voiding and removing policies of life insurance in ISAs
9A.
7.1
7.56
7.60
7.62
7.68
7.71
7.74
7.76
11.1
11.20
11.30
11.33
11.34
Contents
12.
CLOSING AN ISA
When can an ISA be closed?

Repair and voiding
13.
ANNUAL RETURNS AND CLAIMS
What managers can claim

How to claim
Information to be supplied before claims are made
Basis of annual return and claims
Assessments and recovery of tax and charges
Repayment of foreign tax
14.
12.1
12.7
12.23
13.1
13.5
13.8
13.10
13.38
13.41
RETURNS OF INFORMATION
The requirement to make a return

What period must be covered?
What must be returned?
How to make returns of information
14.1
14.3
14.4
14.6
Submission of returns
Penalties
14.19
14.22
15.
ANNUAL RETURNS OF STATISTICAL INFORMATION (market value)
The requirement to make a market value return

How to make market value returns of statistical information
How to complete form ISA14(Stats) and form ISA14a(Stats)
Submission of annual returns of statistical information
Penalties
16.
ANNUAL RETURNS OF STATISTICAL INFORMATION (subscriptions)
The requirement to make a return

How to make annual returns of statistical information (subscriptions)
How to complete form ISA25(Stats) and ISA14a(Stats)
Submission of annual returns of statistical information (subscriptions)
Penalties
17.
16.1
16.3
16.5
16.8
16.9
16.10
16.12
THE HM REVENUE & CUSTOMS INSPECTION
Introduction
Before the inspection
The inspection
After the inspection
Breaches in the ISA rules
Strict treatment of breaches in the ISA rules
Simplified voiding
04/2016
15.1
15.2
15.4
15.6
15.7
15.11
15.12
17.1
17.7
17.9
17.19
17.24
17.28
17.38
Contents
Audit protection
Breaches outside audit
Simplified voiding flow chart
18.
JUNIOR ISA - INTRODUCTION
Overview of the JISA

The legislation
Who can provide JISAs
19.
04/2016
21.1
21.2
21.3
21.4
21.5
21.6
21.7
21.8
SUBSCRIPTIONS TO A JISA
Who can subscribe to a JISA?

When can subscriptions to a JISA be accepted?
Subscription year
Feeder accounts
Subscriptions between ages 16 and age 18
Direct debit indemnity scheme
Generation of a cash subscription by disposal of existing investments
Building Society bonus payment
23.
20.1
20.2
20.3
20.4
20.5
20.6
20.7
20.8
20.9
20.10
20.11
20.12
20.13
20.14
THE REGISTERED CONTACT
The registered contact

Applying to be the registered contact
Applying to be the registered contact
Non-written applications to be the registered contact
Imaging registered contact applications
Change of registered contact existing registered contact
Application to be a registered contact
Phone application to be a registered contact
22.
19.1
19.2
19.3
19.4
JISA APPLICATIONS
Applications to open a JISA

JISA applications in writing
Personal information
Declaration
Authority
The management agreement
JISA applications not in writing
Applications made through third parties
JISA terms and conditions
Enquiries and further advice
Completion of applications
Imaging application forms and written declarations
Example of written application form
Phone applications
21.
18.1
18.2
18.3
TYPES OF JISA
Cash and stocks and shares

Means of payment of subscriptions
Minimum subscriptions
Charges
20.
17.58
17.61
17.64
22.1
22.2
22.3
22.4
22.5
22.6
22.7
22.8
QUALIFYING INVESTMENTS FOR THE JISA

8
Contents
Qualifying investments for the JISA
24.
MANAGEMENT OF THE JISA
Common management rules

Repairing JISAs
Repairs removal of excess subscriptions
Repair incomplete or incorrect application form
Repair non-qualifying investments
Using a JISA as security for a loan
JISA rollover at age 18
25.
28.1
28.2
ANNUAL STATISTICAL RETURNS
Annual statistical returns
30.
27.1
RETURNS OF INFORMATION
Overview
Reporting at age 18
29.
26.1
26.2
26.3
26.4
26.5
26.6
26.7
ANNUAL RETURN AND CLAIM
Annual return and claim
28.
25.1
25.2
25.3
25.4
25.5
25.6
25.7
25.8
25.9
25A
WITHDRAWALS FROM A JISA
When can investments be withdrawn from a JISA?

Closure of the JISA
Death of the child
Childs 18th birthday
Void JISAs
Void life insurance policies and chargeable events
Terminal illness
27.
24.1
24.2
24.3
24.4
24.5
24.6
24.7
TRANSFERRING A JISA
General
Internal transfer
External transfer
External transfer forms
Refusal to accept an external transfer
Example of written external transfer application
External transfer phone applications
JISA external transfer form
Transfer of a CTF to a JISA
26.
23.1
29.1
AUDIT
Audit
30.1
APPENDICES
Appendix A
04/2016
Blank
9
Contents
Appendix B
Appendix C
Appendix D
04/2016
Cash ISA to cash ISA transfers suggested best practice

Sample S975 ITA 2007 certificate
Blank
10
Chapter 1
Introduction
CHAPTER 1
INTRODUCTION
What is an ISA?
1.1
What was a PEP?
1.2
1.3 to 1.4
HMRC contact addresses and phone numbers
1.5 to 1.7
How the ISA scheme works
1.11 to 1.17
The legislation
1.18
Investor enquiries
1.19 to 1.20
04/2016
11
Chapter 1
Introduction

1.3
04/2016
The Guidance Notes are for ISA managers. They provide guidance on how to
operate the ISA scheme. This version provides guidance on the rules to be applied
from 1 November 2016.
12
Chapter 6
ISA Subscriptions
CHAPTER 6
ISA SUBSCRIPTIONS
Subscription limits
6.1 to 6.5
Cash subscription
6.6 to 6.9
Direct debit indemnity scheme
6.10 to 6.11
Generation of a cash subscription by the disposal of existing investments
6.12 to 6.18a
Subscription by transfer of shares
6.19 to 6.24
Documentary evidence of shares from Schedule 3 SAYE option scheme, 6.25 to 6.30
approved profit sharing schemes, and Schedule 2 Share Incentive Plans
Time limit for transfer of shares from Schedule 3 SAYE option scheme, 6.31 to 6.34
approved profit sharing schemes and Schedule 2 Share Incentive Plans
Matching offer arrangements
6.35
Valuation of shares transferred from Schedule 3 SAYE option schemes, 6.36 to 6.40
approved profit sharing schemes or Schedule 2 Share Incentive Plans
Company reconstructions
6.41 to 6.42
Stock dividends
6.43
Subscriptions that do not count towards the annual subscription limits

Defaulted cash account subscription (cash manager in default)
6.51 to 6.56
Defaulted investment subscription (compensation paid in respect of a 6.57 to 6.62

stocks and shares component)
Flexible ISAs
6.77 to 6.85
Help to Buy ISA reinstatement
6.92
Additional Permitted Subscriptions
04/2016
6A
13
Chapter 6
ISA Subscriptions
6.18a
Peer-to-peer loans and crowdfunding debentures held outside of the ISA wrapper
cannot be sold, and repurchased inside an innovative finance ISA except where the
loans are available for purchase, at the same price, by any lender in the open
market (see paragraph 9A.8).
6A
Additional permitted subscriptions following the death of account holder

Additional permitted subscription non cash assets
6A.10
Where a surviving spouse inherits non-cash ISA assets, these may be used to
make an additional permitted subscription in specie (without having to be sold and
the subscription made in cash) provided these assets were the ones held at the
date the manager was notified of the death of the investor. The option of an in
specie subscription is not available if the spouse decides to make additional
permitted subscriptions to a manager other than the one who held the ISA of the
deceased.
Non-cash assets are
any stocks and shares ISA qualifying investments other than cash deposits
the following cash ISA qualifying investments
o National Loans Act securities
o depositary interests
o short-term money market funds
o money market funds
any innovative finance ISA qualifying investments other than cash
investments (see paragraph 9A.10)
Only inherited non-cash ISA assets can be used to make an additional permitted
subscription in specie. For non-innovative finance ISA assets title to those assets
must have remained with the ISA manager or his nominee. If title has moved from
the ISA manager or his nominee, the assets cannot used to make an additional
permitted subscription. The subscription must be made in cash instead. For
innovative finance assets, the peer-to-peer loans agreements and crowdfunding
debentures must have remained under the management of the deceaseds ISA
manager at all times.
For stocks and shares ISAs, the value of the assets at the time the additional
permitted subscription is made counts towards the additional permitted
subscription limit (the value of the deceaseds ISA at their date of death). The
assets should be valued in accordance with paragraphs 10.20 10.22a. Where
shares held by the deceased have gone x-dividend (XD), the value of the
dividend payments should be included in the value of the shares. Innovative
finance ISA non cash assets should be valued at their date of death value, that is,
the capital amounts outstanding plus interest due on the loans(s) but unpaid at the
date of death.
The additional permitted subscription limit is not affected by any change in asset
value during the administration period, so if the value of the assets increase during
administration it will not be possible to subscribe them all to the ISA unless
04/2016
the deceased held a combination of ISAs with the same manager and the
surviving spouses single combined additional permitted subscription limit
with that manager (see paragraph 6A.3(i)) is sufficient to frank the increase
in value
14
Chapter 6
ISA Subscriptions
the surviving spouse transfers in an additional permitted subscription limit

from another ISA manager of the deceased (see paragraph 6A.3(ii))
sufficient to frank the increase in the value.
In these circumstances, the combined date of death values may be sufficient to

allow non-cash inherited ISA assets that have increased in value to be subscribed.
If the value of the non-cash assets decreases they can all be subscribed in specie
and a cash additional permitted subscription made to top up to the value at date
of death.
Where the assets change after the ISA manager is notified of the death of the
investor as a result of some corporate action, those new assets will be eligible for
in-specie transfer. However, any additional assets acquired for example,
through additional trading will not be eligible.
04/2016
15
Chapter 9A
CHAPTER 9A
INNOVATIVE FINANCE ISAs
Innovative Finance ISAs
9A.1
9A.5 9A.10
Peer-to-peer loans
9A.6
Crowdfunding Debentures
9A.9
Cash
9A.10
Transfers and withdrawals
9A.11
9A.12
04/2016
16
Chapter 9A
CHAPTER 9A
9A.5
The investments that managers may purchase, make or hold in an innovative

finance ISA (qualifying investments) are
peer-to-peer loans (paragraph 9A.6)
crowdfunding debentures (paragraph 9A.9)
cash (paragraph 9A.10)
Crowdfunding Debentures
9A.9
Crowdfunding debentures are those provided for in the Individual Savings Account
(Amendment No. 3) Regulations 2016 which extends the range of investments that
can be held in an innovative finance ISA. These are:
9A.9a
Eligible crowdfunding debentures must:
9A.9b
crowdfunded debt securities issued by companies

bonds issued by registered charities
be transferable
create indebtedness
be facilitated by a person with FCA permissions to arrange deals in
investments
be made through an electronic system operated by that person in the EEA
The ISA investor must be treated as the client of the person operating the
crowdfunding platform (or a person acting on behalf of the platform). This
arrangement offers the investor FCA regulatory protections and recourse to the
Financial Ombudsman.
The platform (or the person acting on their behalf) must receive payments, make
payments and exercise (or facilitate the exercise of) rights under or in respect of the
debentures.
9A.9c
Qualifying debentures must be invested in within an innovative finance ISA and

using cash subscriptions held by the ISA manager and must be entered into for
genuine commercial terms and not as part of a scheme or arrangement, the main
or one of the main purposes of which is the avoidance of tax
9A.9d
Within the meaning given in section 170 of ITA 2007 the investor must not be
connected with the issuer of the debenture. The investment must not be connected
to any other investment held outside the ISA wrapper. Investments made available
to an investor solely by reason of their employment or position within an issuing
company or charity are excluded from eligibility as a qualifying debt security.
04/2016
17
Chapter 9A

9A.12
04/2016
When peer-to-peer loans or crowdfunding debentures go into default, some ISA

managers allow access to a provisions fund to compensate lenders. Alternatively,
the loan may be paid up or purchased from the lender with the loan being taken
on by the ISA manager or a debt collection specialist. Where this compensation is
received outside of the ISA wrapper the investor will be able to make a defaulted
investment subscription (see paragraph 6.57).
18
Chapter 11
Transferring an ISA
CHAPTER 11
TRANSFERRING AN ISA
Transferring an ISA
11.1 to 11.11
What amounts can be transferred?
11.12 to 11.15
Transfer applications
11.15a
Internal transfers
11.15b
Cash ISA transfers
11.15c to 11.15e
Information to be provided to the new ISA manager
11.16 to 11.17
Transfer history forms
11.18
Date of transfer
11.18a to 11.18c
Income received by the old manager after the date of transfer
11.19
Bulk transfers
11.19a to 11.19c
Group transfers
11.19d
Subscribing to the ISA after the transfer
11.20 to 11.21
Reporting subscriptions made in the year of transfer
11.22 to 11.29
Claims for payment of tax in respect of income paid after the transfer date 11.30 to 11.32
11.33
Transfers in that cannot be accepted by the new manager
11.33a
Cash withdrawn in error as a result of incorrect transfer advice by an ISA

manager
11.33b
Flexible ISA transfers
11.34
04/2016
19
Chapter 11
Transferring an ISA
Transferring an ISA
What amounts can be transferred?
11.12
An investor can transfer
all of the current years ISA subscriptions, the investments bought with those
subscriptions, and any income arising on those investments (current year
account),
and/or
some or all of the previous years ISA subscriptions, the investments bought
with those subscriptions, and any income arising on those investments (prior
years account).
In the case of an innovative finance ISA this means that a transfer of the cash is not
possible unless all the current year subscriptions are transferred, that is, by
liquidating the peer-to-peer loans and crowdfunding debentures or transferring in
specie.
04/2016
20
Appendix C
CHAPTER 12
CLOSING AN ISA
When can an ISA be closed?

Bankruptcy of an investor
12.6a
12.7 to 12.10
Interest on cash on deposit
12.11 to 12.14
Interest on ISA investments
12.14a
Information to be provided to personal representatives
12.15 to 12.15a
Rights conferred by insurance policies
12.16 to 12.22
Repair and voiding
04/2016
12.1 to 12.6
12.23 to 12.25
Repairs investor error
12.26 to 12.29
Repairs self transfer
12.30 to 12.33
Repairs disallowed combination of ISAs
12.34 to 12.35a
Repairs valid combination of ISAs but overall subscription limit

exceeded
12.36
Repairs removal of excess subscriptions
12.37
Repair action by manager
12.38 to 12.40
Repair identification of investments
12.41 to 12.46
Voiding
12.47 to 12.49
Repair and voiding transfers and withdrawals
12.50 to 12.51
Repair and voiding counting for tax
12.51a
Repair and voiding information to be provided to investor
12.52 to 12.54
21
Appendix C
12.15a
Subject to the ISA terms and conditions, ISA managers should advise the
personal representatives that they have the choice of having the ISA investments
transferred to them (or a beneficiary) or of the ISA manager selling the ISA
investments and paying the proceeds to them (but see paragraph 9.2 regarding
ISA policies of life insurance).
ISA managers should also advise personal representatives that non-cash ISA
assets inherited by a surviving spouse or civil partner can only be used to make
in specie additional permitted subscriptions provided
04/2016
for non-innovative finance ISA assets, the title to those assets has
remained with the ISA manager or his nominee (see paragraph 6A.10),
and
For innovative finance assets, the peer-to-peer loan agreements and

crowdfunding debentures have been managed by the deceaseds ISA
manager at all times. In any other circumstances the assets cannot be
used to make an additional permitted subscription, and the subscription
must be made in cash instead.
22
Appendix C
CHAPTER 15
ANNUAL RETURNS OF STATISTICAL INFORMATION (MARKET VALUE)
The requirement to make a market value return
15.1
15.2 to 15.3
15.4 to 15.5
How to make market value returns of statistical information
15.6
How to complete form ISA14(Stats) and form ISA14a(Stats)
15.7
Stocks and shares ISAs
15.8
Cash ISAs
15.9

Submission of annual returns of statistical information
15.10
15.11
Penalties
15.12
04/2016
23
Appendix C

15.4
Managers must return
in relation to stocks and shares ISAs, the aggregate market value of

investments under their management, together with separate figures for
qualifying shares listed on a recognised stock exchange (including shares
which are dual listed on a recognised stock exchange and listed/traded on
another market)
shares admitted to trading on a recognised stock exchange in the EEA
Qualifying securities issued by such a company where:
o
the securities
the shares in the company issuing the securities, or
the company issuing the securities is a 75% subsidiary of a company

whose shares
are officially listed on a recognised stock exchange .

Included here will be securities of investment trusts that are so listed
Qualifying securities issued by a company where

o
the securities
the shares in the company issuing the securities, or
the company issuing the securities is a 75% subsidiary of a company

whose shares
are admitted to trading on a recognised stock exchange in the EEA.

Included here will be securities of investment trusts that are so admitted.
gilts
units in qualifying authorised unit trusts
shares in qualifying open-ended investment companies
shares in qualifying investment trusts
units and shares in qualifying non-UK collective investment schemes
the surrender value of qualifying policies of life insurance
cash, and
the total aggregate market value of all investments held in the ISAs.
04/2016
in relation to cash ISAs, the aggregate market value of investments under

their management, together with separate figures for
24
Appendix C

the surrender value of qualifying policies of life insurance
other investments (these will be investments that failed the 5% test before 1
July 2014 see paragraph 8.1)
cash, including cash in share and deposit accounts, and
the total aggregate market value of all investments held in the ISAs
Any investment represented by Depository Interests should be included in the
category representing the underlying investment. For example, the market value of
a DI representing qualifying shares should be included in the total for qualifying
shares.
In relation to innovative finance ISAs for 2016-17 and later years, the aggregate
market value of investments under their management, with separate figures for:
04/2016
the outstanding principal balance of peer-to-peer loans under management

(that is the amount in respect of the investment owing to the account
investor at any time)
The outstanding principal balance of crowdfunding debentures under

management (that is the amount in respect of the investment owing to the
investor at any time)
cash
25

ISA Guidance Notes Crowd Funding Extract

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ISAs

GUIDANCE NOTES FOR ISA MANAGERS

THE ISA MANAGER

Who can manage ISAs?

When can an ISA be opened?

APPLICATIONS AND TERMS AND CONDITIONS

Applications to subscribe to an ISA

Who can subscribe to an ISA?

STOCKS AND SHARES ISAS

Qualifying investments for stocks and shares ISAs

Qualifying investments for cash ISAs

Delegation of the managers functions

INNOVATIVE FINANCE ISAs

Innovative finance ISAs

LIFE INSURANCE POLICIES IN ISAs

When can an ISA be closed?

ANNUAL RETURNS AND CLAIMS

What managers can claim

The requirement to make a return

ANNUAL RETURNS OF STATISTICAL INFORMATION (market value)

The requirement to make a market value return

ANNUAL RETURNS OF STATISTICAL INFORMATION (subscriptions)

The requirement to make a return

THE HM REVENUE & CUSTOMS INSPECTION

JUNIOR ISA - INTRODUCTION

Overview of the JISA

Who can subscribe to a JISA?

THE REGISTERED CONTACT

The registered contact

Applications to open a JISA

Cash and stocks and shares

QUALIFYING INVESTMENTS FOR THE JISA

Qualifying investments for the JISA

MANAGEMENT OF THE JISA

Common management rules

ANNUAL STATISTICAL RETURNS

Annual statistical returns

ANNUAL RETURN AND CLAIM

Annual return and claim

WITHDRAWALS FROM A JISA

When can investments be withdrawn from a JISA?

Cash ISA to cash ISA transfers suggested best practice

What was a PEP?

Who are the Guidance Notes for?

HMRC contact addresses and phone numbers

How the ISA scheme works

Who are the Guidance Notes for?

Direct debit indemnity scheme

Generation of a cash subscription by the disposal of existing investments

Subscription by transfer of shares

Subscriptions that do not count towards the annual subscription limits

Defaulted investment subscription (compensation paid in respect of a 6.57 to 6.62

Help to Buy ISA reinstatement

Additional Permitted Subscriptions

Additional permitted subscriptions following the death of account holder

the surviving spouse transfers in an additional permitted subscription limit

In these circumstances, the combined date of death values may be sufficient to

Innovative finance ISAs

Innovative Finance ISAs

Transfers and withdrawals

Payments when loans default

Innovative finance ISAs

The investments that managers may purchase, make or hold in an innovative

peer-to-peer loans (paragraph 9A.6)