Northern Rock Savers to be Allowed to Restore Lost Cash ISA Tax Advantage
Personal_Finance / ISA's Oct 25, 2007 - 01:01 AMBy: Submissions
The Economic Secretary, Kitty Ussher, has announced that the Government would allow people who during the recent financial market disruption withdrew cash from Individual Savings Accounts (ISAs) held at Northern Rock – and in the process lost their tax advantages – to re-deposit that money into a cash ISA with Northern Rock or any other provider, restoring their tax advantages.
Kitty Ussher said: “To ensure that Northern Rock ISA savers are not penalised by the financial instability in the market. I can announce today that in these exceptional circumstances, the Government will allow the people affected to re-invest their money into any cash ISA, including Northern Rock's, and thereby restore their tax advantages.”
Savers wishing to restore their lost cash ISA tax advantage must by 5 April 2008 either:
a) return their funds to a Northern Rock ISA, or
b) obtain from Northern Rock a certificate for the amount of cash ISA savings withdrawn between 13 and 19 September, and present this to a new cash ISA provider when depositing the money.
This announcement applies to funds withdrawn from Northern Rock ISAs between Thursday 13 September and Wednesday 19 September inclusive.
Northern Rock ISA Tax Advantage Restoration Notes:
1. Under the terms of this announcement, individuals will be able to re-deposit in a cash ISA with Northern Rock or any other ISA provider up to the whole amount withdrawn from their Northern Rock ISA between 13 and 19 September, subject to one exception. If;
a) the sum withdrawn includes subscriptions made to the Northern Rock ISA in the current tax year (6 April 2007 to 5 April 2008), and
b) subscriptions have been made to another cash ISA in the current tax year.
then the amount which can be reinvested is limited if necessary to comply with the £3000 overall annual subscription limit. For example:
- £15,000 was withdrawn from a Northern Rock ISA on 15 September. This included £1,000 subscribed in May 2007. The investor subscribed £2,000 to another cash ISA in 2007/08 using the funds withdrawn. As the investor would not exceed the £3,000 subscription limit for 2007/08 by doing so, all of the £15,000 can be re-deposited. The investor can make no further subscriptions to any cash ISA in 2007/08.
- In the same example if £2,500 has been subscribed to another cash ISA, the overall subscription limit for 2007/08 would be exceeded by £500, if the full amount was re-deposited. In this case the investor can only re-deposit £15,000 - £500 = £14,500. HMRC will monitor the subscriptions made and contact investors who exceed the limits.
2. Where the whole amount withdrawn from a Northern Rock cash ISA between 13 and 19 September 2007 can be reinvested, the investor can make further subscriptions up to the £3000 overall annual subscription limit. For example, £15,000 was withdrawn from a Northern Rock cash ISA on 15 September. This included £1000 subscribed in May 2007. The investor has not subscribed to another cash ISA in 2007/08, and all of the £15,000 can be re-deposited. The investor can also make further subscriptions to the account in 2007/08 of up to £2,000 (£3,000 - £1,000).
3. Individuals wishing to make deposits under the terms of this announcement will be sent a certificate from Northern Rock showing their:
- Full name;
- Permanent address including postcode;
- Date of birth;
- national insurance number (If they have one);
- The total amount withdrawn from the Northern Rock ISA; and
- The date on which the withdrawal was made.
4. Northern Rock will be writing shortly to all ISA savers affected by this announcement with a certificate containing these details. Providers wishing to receive deposits under the terms of this announcement will need to obtain, and retain, the individual's certificate from Northern Rock. They will need to treat the amount deposited as a transfer.
5. The Government will legislate for this by retrospective ISA Regulations, to be made under a power that will be included in the 2008 Finance Bill. The Regulations will have retrospective effect back to 13 September 2007.
6. Savers can transfer funds from one ISA manager to another whenever they see fit. Individuals can usually transfer simply by asking a new ISA manager to arrange the transfer. An existing ISA manager is obliged to implement a transfer, but there may be a charge for doing so.
7. Under the ISA Regulations an ISA must be transferred directly between the two managers. Individuals cannot transfer their ISA by closing it and opening a new ISA with the new ISA manager, except in very limited circumstances. These rules continue to otherwise hold.
8. Further information on the ISA rules are available on the HM Revenue and Customs website (external link)
9. Media enquiries should be addressed to Richard King in the Treasury Press Office on 020 7270 4420 and Claudine Lashley in the HMRC Press Office on 020 7147 2319.
10. Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk .
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