Guidance

Tax-free savings newsletter 4 — December 2021

Published 14 December 2021

1. Call for evidence — Individual Savings Accounts: compliance and penalties

The government has published a call for evidence on proposals to enhance Individual Savings Account (ISA) compliance which will help determine how the current approach can be strengthened and modernised, to encourage ISA managers and investors to get things right first time.

The proposals apply to all types of ISAs — Cash, Stocks and Shares, Junior, Lifetime and Innovative Finance. Here’s a link to the Call for evidence — Individual Savings Accounts: compliance and penalties.

The consultation closes at 11:45pm on 21 February 2022. You can email your response to this call for evidence to [email protected].

2. Guidance for ISA managers

Make sure that you’re only using the ISA managers’ guidance published on GOV.UK.

We’ve noticed that some ISA managers still refer to previous versions of the guidance, which are out of date and should no longer be used.

It’s important that only the guidance on GOV.UK is used, as this is regularly updated to ensure the information is accurate and up to date.

3. Lifetime ISA — conveyancer requests for extensions where house purchases are delayed

We’d like to remind LISA managers that conveyancers need to request a 60 day (and additional 30 day if necessary) extension, if the completion of a house purchase is likely to be delayed beyond the initial 90 day period.

The LISA legislation requires a charge to be imposed if 100 days has passed since the initial withdrawal and no extension has been requested from the LISA manager. You should seek to agree to an extension, where possible, to ensure that the requirement to impose a charge does not arise.

4. London Capital & Finance (LCF) Government Compensation Scheme payments

ISA investors will be able to treat compensation paid to them by the scheme in respect of their LCF ISA as a ‘defaulted investment payment’. This is in accordance with Regulation 5DD(b), as announced in the Q&A section of London Capital & Finance (LCF) Compensation Scheme.

The communications from the Financial Services Compensation Scheme (FSCS) to LCF investors who receive compensation will detail the compensation paid in respect of their ISA investment. This is the amount that may be used to make a ‘defaulted investment subscription’ within 180 days of receipt. The communications that LCF investors receive from the FSCS should be used as proof of the compensation paid, in respect of the ISA investment, to support that subscription.

5. Ministry of Justice Consultation — Mental Capacity Act: Small Payments Scheme

ISA and Child Trust Fund managers may be aware that the Ministry of Justice is holding a consultation on the Mental Capacity Act: Small Payments Scheme. This is to seek views on potential changes to accessing or managing the finances and property of adults in England and Wales. These changes could allow limited access to funds belonging to individuals who lack mental capacity, without the requirement for a Lasting Power of Attorney or Court of Protection order.

The potential changes outlined do not extend to accessing funds held within Child Trust Funds or Junior ISAs, where access is only permissible when the account holder is terminally ill or has died.

6. Multi-factor authentication for Child Trust Fund providers

We’ve gradually been introducing multi-factor authentication as a requirement for all businesses and organisations when accessing their business tax account, to improve security across our services. This has now been rolled out for Child Trust Fund providers when submitting returns via their business tax account.

You do not need to do anything until we ask you to add a device to your business tax account. It’s quick and easy to set up and you’ll receive an access code that you’ll need to enter before accessing the service. You’ll have the option of saving this code for 7 days, or you’ll be sent an access code every time you sign in. You can choose to receive this code by text, voice call or to an authenticator app. If you do not receive your access code, you’ll have the option to request another.

If you need to delegate account access to employees, you can still do this with multi-factor authentication. In your business tax account, use the administrator and assistant functionality to create an additional user for each employee you wish to give access to. Each user will have their own set of credentials and can set their own multi-factor authentication to receive their access codes.

If you currently use purpose-built software that stores passwords and enables your employees to access HMRC services without needing to enter login details, this may not work after we add multi-factor authentication to your account. Please contact your IT department or the manufacturer of the software. This does not include commercial tax software products, which are designed to work with multi-factor authentication.

If you incur a problem when setting up multi-factor authentication you should use the ‘Get help’ or ‘Is there anything wrong with this page’ links in the online service they are using. If your contact details change and you require your multi-factor authentication to be reset, please contact HMRC Online Services.