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Updated HMRC guidance on the transfer of an ISA Allowance to surviving spouse/civil partner

The industry welcomed the announcement in the Autumn Statement that a surviving spouse/civil partner can inherit the value of their deceased spouse/civil partner’s ISA accounts.

The initial proposals stated that this allowance would only be available for use with the ISA provider with whom the deceased held their ISA account. However, on Thursday 12 March 2015 HMRC issued updated guidance confirming that the allowance can be moved to a new ISA manager who will accept the subscriptions which is great news for ISA investors.

The new allowance known as an “additional permitted subscription” is available where the deceased dies on or after 3 December 2014.

The key points:

  • The subscription can be made with the manager who held the deceased’s ISA or another manager who agrees to accept the subscriptions.
  • ISA Managers do not have to accept additional permitted subscriptions but must facilitate the transfer of an allowance to a new Manager.
  • There is no change to the treatment of the deceased’s ISA. Once notification of death is received the ISA wrapper must be removed.
  • The survivor may have a number of allowances where the deceased held multiple ISA accounts. Accounts held with the same legal entity will be aggregated to give one “Additional permitted subscription” amount.
  • The available allowance is limited to the value of the deceased’s ISAs at their date of death.
  • “In-specie” transfers are only available where the survivor inherits the non-cash ISA assets from the deceased and transfers them to an ISA in their own name with the same ISA manager.
  • Specific time limits:

- “in-specie” transfers - within 180 days of beneficial ownership passing to the surviving spouse.
- Cash subscriptions – within 3 years of date of death or if later, 180 days after the administration of the estate is complete.

  • The allowance is available even where the survivor is non-resident.

The subscriptions can be applied to existing ISA accounts or new ISA accounts in the name of the survivor and where new accounts are opened purely for the purpose of receiving these subscriptions they will not breach the “one ISA of each type per tax year” rule.

An important point is that once an additional permitted subscription is made with a Manager any further subscriptions to fulfil the sum available must be made with the same Manager. Any unused allowance cannot be used with another Manager, therefore if the account is transferred whilst there is an available allowance the remainder will be lost.

Example:

Joe dies leaving ISA assets valued at £100,000.
His wife Marie opens an account with the same provider to receive subscriptions and invests £60,000.

Marie transfers the account to Old Mutual Wealth before making any further investments – the remaining available allowance of £40,000 is lost.

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