Guidance

Tax-free savings newsletter 1 – April 2021

Updated 19 April 2021

1. Introduction

This is the first publication of the tax-free savings newsletter. HMRC will use this newsletter to provide updates, information and links to let you know what you need to do as an Individual Savings Accounts (ISA) manager or a Child Trust Fund (CTF) provider.

You can sign up to receive email alerts each time a newsletter is published.

2. Changes to the list of approved ISA managers

Changes to the list of approved ISA managers include:

• updated guidance on the purpose of the list
• ISA manager details shown in alphabetical order
• additional information for each ISA manager
• additional warnings for investors

We’ll continue to keep the list of approved ISA managers updated. Updates will be published on the first working day of each month.

The list of approved ISA managers is, and always has been, a list of financial institutions approved by HMRC to manage ISAs. HMRC ISA manager approval is not an endorsement of a firm or its products.

The link for the list of approved ISA managers has been updated. If you had the link for the previous list saved as a favourite, this may no longer work.

3. ISA manager notification of changes

3.1 Trading names

The updated list of approved ISA managers now shows trading names. Where we hold current details of trading names, these have been included.

If your company manages ISAs under a trading name and it’s not on the list, you’ll need to tell us by completing the ISA manager notification of changes form.

Once received, your ISA manager trading name will be published in the next monthly update of the list.

Send completed ISA manager notification of changes forms to:

Wealthy and Mid-sized Business Compliance
HM Revenue and Customs
BX9 1GH

This address is shown on the updated form.

3.2 ISA Components

You can no longer request approval for additional ISA components on the ISA manager notification of changes form. If you’re an approved ISA manager and want to offer new ISA components, you’ll need to complete a new ISA manager application for approval form and receive approval from HMRC before offering these components to investors.

4. Changes to the ISA manager application form

We’ve updated the ISA manager application for approval form. Make sure you fully complete the form before sending this to the updated address.

Send ISA manager applications to:

Wealthy and Mid-sized Business Compliance
HM Revenue and Customs
BX9 1GH

This address is shown on the updated form.

From 6 April 2021, ISA manager applications for approval using the old form will be rejected.

5. Audits of ISA managers

From Autumn 2021, ISA compliance processes will be reinforced with an expanded programme of audits of ISA managers.

We’ll provide further information on audits and what you can expect in a future newsletter.

6. Lifetime ISA (LISA) withdrawal charge

For the period 6 March 2020 to 5 April 2021, the government made a temporary reduction to the LISA withdrawal charge, reducing it from 25% to 20%. This helped investors withdraw funds from their LISA during coronavirus (COVID-19).

From 6 April 2021, LISA withdrawal charge will change back to 25%. This applies to all unauthorised withdrawals from a LISA on or after 6 April 2021.

A withdrawal charge is deducted from the amount withdrawn from a LISA account. The charge should always be deducted at the time when the withdrawal is made, not the date it’s requested.

You can find further information on withdrawals from a LISA at LISA digital service reports.

7. Changes to the Child Trust Fund annual return

From 1 September 2020, the first CTF accounts started maturing on the 18th birthday of the account holder. Changes have been made to the CTF annual returns for 2021 to allow for the reporting of:

• matured CTF accounts that have now closed
• protected CTF accounts that have continued at 5 April 2021

From May 2021, you’ll be able to report 4 account types on your CTF annual return. These are a:

• stakeholder account (type 1)
• non-stakeholder account (type 2)
• account matured on 18th birthday of account holder (type 3)
• matured CTF account that continues after 18th birthday of account holder (type 4)

Type 1 and 2 accounts should only be reported for current CTF accounts that have not matured because the child is not yet 18.

All accounts that have matured during the tax year should be reported as type 3 accounts. You should report the market value at the date of maturity or the market value at any other date, not falling earlier than 5 October 2020.

Where a CTF account has been converted into an ISA because no instructions were provided at maturity, this should be reported as a type 3 account only. The ISA will need to be included on the ISA return of information.

Where a CTF account has continued as a protected CTF account because no instructions were provided at maturity, this should be reported as a type 4 account. You should report the market value at 5 April 2021 or the market value at any other date, not falling earlier than 5 October 2020.

This means that for CTF returns from 2020 to 2021 and onwards, a type 4 account will also have to be reported as a type 3 account in the year the account matures. Our systems will accept a unique reference number being reported twice with different account types. This means we can identify the number of accounts that have matured since 1 September 2020 and how many have continued as protected CTF accounts.

For account types 3 and 4, you do not need to tell us if the CTF was a stakeholder or a non-stakeholder account before it matured.

7.1 ISA return of information

Two new ISA types have been added to the return of information for 2021 to 2022 and onwards. These are:

• ISA Type S – a stocks and shares ISA with investments from a matured CTF account
• ISA Type T – a cash ISA with cash from a matured CTF account

You should use these types to report information on a CTF that was converted to an ISA on maturity.

7.2 Dates for submitting CTF returns for 2020 to 2021

Our systems will only be able to accept the revised CTF returns from 6 May 2021. You should not submit your 2020 to 2021 CTF return before 6 May 2021.

Due to the delay in being able to submit your CTF return, we’ve extended the filing deadline to 6 July 2021.

7.3 Test submissions and corrections

There’s no test service for the CTF annual return and you cannot submit an additional or replacement return of CTF account information, after submitting the original CTF return to us.

7.4 Technical specification

If you’ve not already had the updated technical specification documents, but you need these for your 2020 to 2021 submission, email [email protected].

Third party software developers can contact our Software Development Support team by emailing [email protected].

8. ISA manager returns of information and statistical information for 2020 to 2021

The deadline for filing your annual return of ISA account information and your ISA and Junior ISA (JISA) statistical returns for the tax year ending 5 April 2021 is 4 June 2021.

We’re aware that many ISA managers have staff working at home who cannot sign the print and post ISA and JISA statistical returns. We will accept returns with a digital signature or without a signature.

To help ISA managers meet the 4 June 2021 deadline, statistical returns can be emailed to: [email protected].

Find more information about making the annual returns of ISA account information, ISA statistical information and JISA statistical information.

9. Voiding of London Capital & Finance Innovative Finance ISAs

We have issued a communication to London Capital & Finance (LCF) ISA investors today through the administrator, Smith & Williamson to notify them that, following submission of new evidence we have reviewed the position on LCF ISAs. We are able to consider only the bonds issued by LCF to be void and not the ISA ‘wrapper’ (the subscriptions made or funds transferred to an LCF ISA).

This means that investors have the opportunity to use compensation paid to them by the Financial Services Compensation Scheme (FSCS) in respect of their LCF ISA to make a ‘defaulted investment subscription’ within 180 days of receiving that compensation.

Where FSCS compensation was received before 19 April 2021, we will treat the date the FSCS compensation was received as 19 April 2021. This makes sure that all investors have a full 180 days in which to make a ‘defaulted investment subscription’ if they so wish. Get more information on defaulted investment subscriptions.

We understand that a number of investors may have subscribed to an additional ISA in tax year 2018 to 2019 because of the voiding of LCF ISAs. If they subscribed to another ISA between 19 March 2019 and 5 April 2019, it would have resulted in an invalid combination of ISAs or total subscriptions being greater than the annual ISA allowance. We will exceptionally permit that subscription (and will continue to treat that subscription as a valid ISA subscription).

10. Contacting HMRC

Email: [email protected] if you want to:

• report errors in managing ISAs
• report non-compliance with ISA regulations
• send applications for approval to be an ISA manager
• ask about the new list of approved ISA managers

We may use this email address to contact you.

Email: [email protected] if you want to:

• ask about the CTF and ISA guidance notes and regulations
• ask about the ISA 10 and ISA 14 repayment claims
• submit your annual ISA and Junior ISA statistical returns