Guidance: How to open an ISA as an ISA manager

When you can open an Individual Savings Account (ISA)

You can open an ISA when an investor agrees to your terms and conditions and applies to subscribe.

Investors with a matured Child Trust Fund (CTF) can open an ISA if they agree to your terms and conditions and apply to transfer by subscription the investments in their matured Child Trust Fund account.

An ISA can be opened if you manage a matured Child Trust Fund, but no instructions have been given by the account holder. All the investments in the matured Child Trust Fund will be transferred by subscription to the ISA. The account holder does not have to be resident in the UK.

Investments not held in cash must be transferred in their actual form from the matured Child Trust Fund to the ISA.

You must ignore subscriptions to an ISA transferred from a matured Child Trust Fund for the overall ISA subscription limit. A subscription made to a Lifetime ISA from a matured Child Trust Fund is subject to the overall Lifetime ISA payment limit.

Before you can open the ISA that an investor has applied for, you must hold all of the following:

• a valid application, which you have accepted (read the section ‘Signature’)
• a valid ISA subscription
• the date on which you accept the application form
• the date on which the subscription is made (read Date of subscription)

You may accept an application before a subscription is made, but the ISA does not begin until a subscription is made.

You should record the date they accepted the application (which may not be before the date of application) in your records.

An ISA application received near the end of the tax year will be regarded as opened in that tax year if both of the following apply:

• you have accepted the application before the end of the tax year
• the subscription is made before the end of the tax year

If the account is not set up until after the end of the tax year, the ISA should be shown as opened on 5 April. We therefore recommend that you make arrangements to examine, before the end of the tax year, all applications received to ensure that they are complete (read section ‘Completion of application forms’), and that a valid subscription has been made.

Example of an invalid subscription made at the end of the tax year:

Cancellation

Keeping to the section on ‘Withdrawal’ in this guidance, you may, in their terms and conditions, allow investors the right to cancel their cash subscription to an ISA, or packaged product within an ISA, within a set period after the receipt by the investor of the notice of the right to cancel.

Provided that the cancellation period does not exceed 30 days (after the notice has been received), investors who cancel their subscription within the cancellation period are exempt from UK income and Capital Gains Tax on any income or gains arising from the subscription in the period (but see the 2017 to 2018 rule for Lifetime ISA).

Investors who withdraw their subscriptions from an ISA by exercising their right to cancel have made a subscription to an ISA. But where the subscription is cancelled within the set period, investors will be treated as though they have not subscribed to an ISA.

Read the guidance on treatment of requests to cancel Lifetime ISA subscriptions.

Where a subscription is cancelled within the set period, you should both:

• notify investors that the cancelled subscription does not count as a subscription to an ISA
• exclude the cancelled subscription from their annual return of information

Where a subscription is cancelled after the set period, you should:

• tell investors that the cancelled subscription counts as a subscription to an ISA (and that they cannot subscribe to another ISA of the same type in that tax year)
• include the cancelled subscription on their annual return of information

Where a purchase of a packaged product in an existing ISA is cancelled, the ISA remains valid, and the subscription may then be used to purchase other qualifying investment(s).

See the guidance in respect of treatment of requests to cancel Lifetime ISA subscriptions.

Withdrawal

Instead of providing cancellation rights, you may allow investors the right not to proceed with the ISA contract (a pre-contractual right to withdraw). The withdrawal period is 7 to 14 calendar days from when you receive the application to open an ISA.

Where withdrawal rights are offered:

• the ISA can only begin on the expiry of the withdrawal period, therefore you must receive application by 22 to 29 March of the tax year for which the application is made (depending on whether the withdrawal period is 7 to 14 days)

• during the withdrawal period the client money rules of your regulatory body will apply to the cash subscription

• any interest which is paid at the end of the withdrawal period will not be exempt from tax and will count towards the subscription limit if it is paid into the ISA.

Investors who use their right to withdraw from the ISA contract are free to subscribe to another ISA in the same tax year.

Completion of applications

You should examine applications and ensure they are fully completed.
Applications may be accepted provided you have no reason to believe that the investor:

• is not, or might not be, entitled to subscribe to an ISA

• has given false information in the application

Name

Applications must contain the investor’s full name (which does not have to include a middle name or initial). An application showing Mr John Joseph Bloggs, Mr John J Bloggs or Mr John Bloggs is acceptable, but Mr J J Bloggs or Mr Bloggs is not.

Address

Applications must contain the investor’s permanent residential address. You may hold other addresses on your systems for correspondence purposes.

Applications with an incomplete address, or with a ‘PO Box’ or ‘care of’ address, are not acceptable. But where the address is a retirement home, nursing home, hospice or hospital, this address can be accepted. British Forces Post Office (BFPO) addresses can also be accepted.

Investors who do not have a permanent residential address (because, for example, they live on a houseboat that does not have a home mooring), cannot subscribe to an ISA.

However, by concession we’ll allow such investors to subscribe to an ISA. In place of the permanent residential address, the investor should provide a correspondence address. You should get confirmation that the investor does not have a permanent residential address and keep that confirmation with the application.

The permanent residential address should include the postcode (see personal information). Where in this case, an investor does not have a postcode, for example, where the investor lives on a new estate and a postcode has not been allocated, the application can be accepted.

Confirmation that a postcode does not exist must be obtained and kept with the application. And the postcode must be obtained as soon as it’s allocated.

Date of birth

Applications must contain the investor’s date of birth (personal information)

Where in this case, the investor does not know their date of birth, the year of birth must be given. This exception does not apply to Lifetime ISAs where the applicant must provide a full date of birth.

National Insurance number

Applications must contain the investor’s National Insurance number, or confirmation that they do not have one (see personal information). This exception applies only in respect of applications for cash ISAs, stocks and shares ISAs, or innovative finance ISAs, but does not apply to Lifetime ISAs where a National Insurance number must be provided.

National Insurance numbers consist of nine characters (for example QQ123456C). Characters 1 and 2 must be alpha and must be one of the issued National Insurance number prefixes. Characters 3 to 8 must be numeric. Character 9 must be alpha in the range A to D or a space.

Your validation checks are limited to checking that the format is AB123456C and that the final character is an A to D or a space.

National Insurance numbers can usually be found on:

• pay slips (provided for current employment and pensions received from former employers)
• forms P60 (provided at the end of each tax year for current employment and pensions received from former employers)
• forms P45 (provided by employers when someone leaves a job)
• notices of coding, tax returns or other letters from the investor’s tax office
• letters from the Department of Work and Pensions (DWP)
• unemployment benefit books
• pension books (on the front cover)
• medical cards issued in Scotland

An investor may only have a National Insurance number that is an old format and therefore not in the format above. Such investors should be treated as though they do not have a National Insurance number.

Where an investor does not have a National Insurance number, has one in an old format, or has a temporary National Insurance number and your system requires the capture of a National Insurance number, you should use the ‘universal dummy National Insurance number’ — QQ999999A.

No other dummy or substitute National Insurance number should be used, but see specific guidance for Junior ISAs and Lifetime ISAs.

Some individuals are given temporary National Insurance numbers — usually where they have recently commenced employment and have lost their National Insurance number, or where they have returned from a period abroad.

A temporary National Insurance number consists of ‘TN’ plus date of birth, plus gender (for example, TN110948M or TN161054F).

Temporary National Insurance numbers must not be used for Lifetime ISAs.

Some HMRC letters to taxpayers include a ‘temporary reference’ consisting of 2 numbers, 1 letter and 5 numbers (for example, 63T12345).

Investors who enter a temporary National Insurance number or a temporary reference on their application form should be treated as though they do not have a National Insurance number.

You may find it useful to include the following text on applications to ask applicants whether or not they have a National Insurance number:

Where an application is received without all the required personal information, you may wish to open the ISA on a provisional basis.

Where you open an ISA on a provisional basis, the ISA will be valid from the date it was opened provided that, within 30 calendar days of that date you obtain the missing personal information.

The missing information can be provided either by the investor, by the investor’s agent, or from your own records, and should be added to, or retained with the application form. If the application form is amended the person making the entry should initial the amendment.

You should explain to the investor that:

• the application could not be accepted because it did not contain all the personal information required under the ISA rules

• before the application can be accepted, the investor must provide the missing personal information

• in the meantime, an ISA has been opened on a provisional basis

• if the missing personal information is not received within 30 calendar days of the date on which the ISA was opened, all of the following will occur:

You must enter all details of personal information on returns of information.

Signature

Applications made in writing must contain the signature of the investor or the person holding the power of attorney for the investor.

The signature of a power of attorney will only be acceptable if:

• the investor is physically incapable of signing the return, in which case the signatory must be an attorney acting under a general or enduring power.
  • if the person is unavailable to sign the return, for example because of absence abroad, the signature of the attorney is not acceptable
• a registered lasting power of attorney is in place

Find out whether a person acting in a capacity has the authority to sign the application before accepting the application.

A photocopy or fax of a signature is not acceptable and a name that is printed is not an acceptable signature.

Applying for an ISA on behalf of someone else

The investor must make all ISA applications. But you may accept an application from someone holding a lasting power of attorney (LPA). The applicant should be registered with the Office of the Public Guardian, which gives the attorney the power to make financial decisions on someone’s behalf.

Once registered, lasting power of attorney is effective whether or not the donor of the power retains mental capacity.

You must:

• see the lasting power of attorney (or a certified copy of it) and retain a copy for their records in case the account is checked by HMRC auditors

• check any restrictions on the lasting power of attorney to see that it is broad enough to cover the opening of an ISA

Where a person lacks mental capacity to complete an application and no lasting power of attorney is in place, you may accept an application from someone appointed as a property and financial affairs deputy by the Court of Protection.

You must:

• see the Court of Protection deputy order (or a certified copy of it) and retain a copy for their records in case the account is queried by HMRC auditors
• check any restrictions to see that it is broad enough to cover the opening of an ISA

If you have any queries about the registration of the lasting power of attorney, the deputy order matters, or its scope, these must be referred to the Court of Protection.

The Court of Protection is the arbiter of all matters arising in relation to the lasting power of attorney, or deputy order matters relating to people who lack mental capacity.

Alternatives to a registered LPA that can be used to open an ISA

In England and Wales, an enduring power of attorney made and signed before October 2007 that has been registered with the Office of the Public Guardian.

You may also accept applications signed under a general or ordinary power of attorney.

In Scotland, equivalent authorities can be used, for example an intervention order, a guardianship order or a continuing power of attorney.

In Northern Ireland, equivalent authorities can be used, for example, an enduring power of attorney or appointment as a controller.

These are the only circumstances in which you may accept an application from someone other than the investor. It may be that acceptable documents are already in place following closure or transfer of Child Trust Fund or Junior ISA accounts.

In all cases you must report the full name (which does not have to include a middle name or initial as in personal information), permanent residential address (including postcode), date of birth and National Insurance number of the incapacitated person on returns of information.