ISA / Junior ISA Comparison Version 1 (May 2012) Page 1 of 7

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1 ISA / Junior ISA Comparison Version 1 (May 2012) Page 1 of 7 ISA Reg Adult ISA (ISA) ISA Reg Junior ISA (JISA) Launch: 6 th April st November 2011 Name: Individual Savings Account usually abbreviated to ISA. Since November 2011 often referred to as adult ISA (although this is not a term used anywhere in the ISA Regulations). Types: 4(1A) There are two types of ISA: Cash ISA - usually cash deposit accounts etc. Stocks & Shares ISA - investing in stock market investments either directly or through collectives 2B Junior ISA (JISA) an ISA opened pursuant to a Junior ISA application so long as it is held by a child (i.e. until child s 18 th birthday when it becomes an adult ISA) [Same as ISA] Who can open the account? 10 A qualifying individual - Cash ISA: A person 16 or over who has not subscribed to another Cash ISA in that year and who is resident and ordinarily resident in the UK or treated as such for tax purposes e.g. Crown employee or the spouse/civil partner of such a person. Stock & Shares ISA: As above where person is 18 or over. 12A(4) 2(1)(a) eligible child A person with parental responsibility for an eligible child (or the eligible child, if over 16) - A child (person under 18) born on or after 3 rd January 2011 (or, if older, who does not have a Child Trust Fund) and who is resident and ordinarily resident in the UK or treated as such for tax purposes e.g. Crown employee or the spouse/civil partner or dependant of such a person. Who can subscribe? 10 Subscriptions can only be made with the qualifying individual s own cash whilst they remain UK resident. Anybody. (Subscriptions can be made by any person irrespective of whether or not they are related to the child. Subscribers do not have to be UK resident.) Subscription Limits: 4ZA(1) Cash ISA: 5,640* Stocks & Shares ISA: 11,280* Overall Limit: 11,280* 4ZB(1) 3,600* * These limits apply for the tax year 2012/13. They are due to be increased in April 2013 by a rounded amount calculated using the Consumer Prices Index (CPI) figure for September The increased limits for 2013/14 are expected to be announced in an ISA Bulletin from HMRC in October 2012 with a corresponding amendment to the ISA Regulations laid in time to have effect from 6 April 2013.

2 ISA / Junior ISA Comparison Version 1 (May 2012) Page 2 of 7 Subscription restrictions: 4(1B) Subscriptions may only be made to a single Cash ISA and/or a single Stocks & Shares ISA in any particular tax year. (Where an ISA is transferred from one manager to another during the current year, subscriptions made to the old manager before the date of transfer, and to the new manager after the date of transfer, are treated as being subscriptions to a single ISA.) An individual may hold a number of ISAs with different managers at any one time so long as this requirement is met. An eligible child may only ever have a single Cash JISA and/or a single Stocks & Shares JISA. Account: 4 & 2(1)(a) A scheme of investment to which a subscription may be made that is either a Cash account or a Stocks & Shares account. In addition, Personal Equity Plans (PEPs) as at 6 April 2008 were treated as Stocks & Shares ISAs from that date onwards. 2B An account opened as a JISA at any time when it is held by a child. (This definition means that, on the child s 18 th Birthday, the account ceases to be a JISA and automatically becomes an adult ISA.) Account investor: 2A(2) The qualifying individual who opened the ISA and has subscribed to it. 2A(4) 2A(5) In Regs 5C, 6(3), 7, 8, 9 [other than Reg 9(3)(b)(iii) and (6)], 21A(1) [other than its first occurrence therein], 21A(2) and (3), 22, 24, 28, 31, 34, 35 [other than regulation 35(10)] and 36 - the named child. In Regs 4, 9(6), 15, 17, 19, 20, 21A(7), 35(10) and its first occurrence in regulation 21A(1) - the registered contact. Registered contact: (Not applicable) 2C Initially the person who opened the account. Thereafter another person with parental responsibility may apply to become the RC. From age 16, the child may become the RC in which case the parent no longer has any control over the JISA.

3 ISA / Junior ISA Comparison Version 1 (May 2012) Page 3 of 7 NINo: 12(4)(c) All applications must quote the applicant s NINo or include a declaration that they do not have a NINo. 12A(8)f) 2C(7)(b)(v) A JISA application must include the child s NINo, if the child is 16 or over and has been issued with a NINo. An application to become the new registered contact (RC) must include the child s NINo, if the child is 16 or over and has been issued with a NINo. Beneficial owner: 4(6)(a)(i) The account investor. 4(6)(a)(ii) The named child. Title (Account investments): 4(6)(b)(i) The account manager or his nominee (alone) or the account manager or his nominee and the account investor (jointly). 4(6)(b)(ia) The account manager or his nominee (alone) or the account manager or his nominee jointly with either the registered contact or the named child (as the account manager considers appropriate). This does not apply to Cash ISAs/JISAs which are deposit accounts with a bank, building society, or credit union, a share account with a building society or savings deposits with NS&I or insurance policies. Withdrawals: 4(6)(f) Must be allowed. (This does not prevent a manager offering an ISA product with term conditions so long as withdrawal is still possible, albeit usually at some penalty such as loss of interest. 4ZD 4ZD(c) 4ZE Not allowed under normal circumstances (other than to meet due management charges, dealing expenses etc.) Exceptions: The death of the child. Where the named child is terminally ill. Qualifying investments: 8 7 Cash ISA: as per Regulation 8 Stocks & Shares ISA: as per Regulation 7 8 7(2)(h) Cash JISA: as per Regulation 8 Stocks & Shares JISA: as per Regulation 7 with the exception of shares acquired through an approved SAYE option scheme or a Share Incentive Plan.

4 ISA / Junior ISA Comparison Version 1 (May 2012) Page 4 of 7 Child over 16: 10(2) & 10(3) 10(2)(a) May subscribe to a Cash ISA (whether or not they have subscribed to a Cash JISA) 4ZB & 10(3) 4ZB & 10(3) May subscribe to a Cash JISA (whether or not they have subscribed to an adult Cash ISA) May not subscribe to a Stocks & Shares ISA. May subscribe to a Stocks & Shares JISA (whether or not they have subscribed to Cash JISA and/or an adult Cash ISA) Applications: 12 30(1) The ISA Regulations assume that applications will be continuous which means that they will be valid for each successive tax year so long as a subscription is made in each consecutive year. Managers are required to send reminders to investors as explained in the Guidance Notes from paragraph Alternatively, managers may use annual applications that apply to a single specified tax year only, in which case a new application will be required for every subsequent year in which the investor wishes to subscribe. In this case annual reminders are not required. 12A The application to open a JISA remains valid throughout the life of the account i.e. until the child becomes 18 (is terminally ill or dies). There is no requirement to issue any reminders. (Reg 30 specifically applies only to ISAs that are not Junior ISAs.) Residency: 12(3)(f) & 4ZA(5) Applicant must be resident (etc.) to open the ISA and to make the initial and any subsequent subscriptions. A change of residency status to non-resident does not invalidate the ISA but will prevent any further subscriptions being made until residency conditions again satisfied. 12A(7)(d) The named child must be resident (etc.) at the time the JISA is opened. There is no other residency requirement. (This means that the parent opening the account need not be resident, the JISA is not affected if the child s residency status subsequently changes and there is no requirement for any subscribers to be resident.) Address: 12(4)(b) Application must give the applicant s permanent residential address. (Incomplete, c/o or PO Box addresses are not acceptable although they can be used separately for correspondence purposes Guidance 5.11) 12A(8)(b) & 12A(8)(e) Application must give the applicant s permanent residential address and additionally (where the applicant is not the child) the child s permanent residential address. (Providers should query any application which quotes a non-uk address for the child.)

5 ISA / Junior ISA Comparison Version 1 (May 2012) Page 5 of 7 Account manager: 14 Must make application to HMRC for approval to offer ISAs on the form which can be downloaded from the HMRC website at 14 Must make application to HMRC for approval to offer ISAs/JISAs on the form which can be downloaded from the HMRC website at Applicants for approval as new ISA providers, who also intend to offer JISAs, are required to declare that they will (a) publicise (and update where appropriate) statements of the minimum amount that may be subscribed to a JISA account on a single occasion, and the permitted means of payment of subscriptions; and (b) inform persons proposing to make a subscription to a Junior ISA account (other than the named child) that the subscription is a gift to the child 14(2)(aa) Permitted Transfers: 21(4) 21(4A) 21(4B) Cash ISA to Cash ISA Stocks & Shares ISA to - Stocks & Shares ISA Cash ISA to Stocks & Shares ISA 21B(5)(b) 21B(6)(b) 21B(5)(a) 21B(6)(a) Cash JISA to Cash JISA Stocks & Shares JISA to - Stocks & Shares JISA Cash JISA to Stocks & Shares JISA Stocks & Shares JISA to Cash JISA Transfers NOT permitted: Stocks & Shares ISA to Cash ISA ISA to JISA 2B JISA to ISA (On the child s 18 th Birthday, the JISA becomes an ISA simply because it is an ISA that is no longer held by a child) Interest on cash on deposit in Stocks & Shares account: 23 Any interest paid or credited in respect of cash on deposit in a Stocks & Shares ISA is subject to a flat-rate deduction equal to the basic rate currently in force. (Effectively this interest is currently subject to 20% tax, to discourage holding cash in an investment product.) In all other respects, the interest is not regarded as income for income tax purposes. Any interest paid or credited in respect of cash on deposit in a Stocks & Shares JISA is not subject to any deduction. (Because Reg 23 specifically applies only to ISAs that are not Junior ISAs, effectively this interest is received gross. As JISAs can be freely transferred from Cash to Stocks & Shares, imposing a charge for holding cash in either type of account would look odd.)

6 ISA / Junior ISA Comparison Version 1 (May 2012) Page 6 of 7 Returns of Information (ISACOM100 & magnetic media etc.) (c)(ii) Manager reports all accounts for which he acted as ISA manager at any time during the tax year apart from accounts transferred during the tax year to another ISA Manager All records should show the type of ISA and the total amount (if any) subscribed during the year. (If the investor held both Cash and Stocks & Shares ISAs with the manager, two separate records would be reported.) (c)(ii) Manager reports all accounts for which he acted as JISA manager at any time during the tax year apart from accounts transferred during the tax year to another JISA Manager All records should show the type of JISA and the total amount (if any) subscribed during the year. (If the investor held both Cash and Stocks & Shares JISAs with the manager, two separate records would be reported.) (c)(iii) On each record where a subscription amount is reported, the date of first subscription in that tax year must always be reported. 31(3B) On a record where a subscription amount is reported, the date of first subscription in that tax year must only be reported if the JISA was opened in that tax year. In subsequent years, the date of first subscription field MUST be left blank. (This means that returns for the tax year 2011/12 should all report a date because, by definition, all JISAs are in their first year. However in subsequent years, managers must ensure that the field is only populated in reports of JISAs opened in the year to which the report refers.) Where, during the year, a JISA has become an ISA with a different account number, the ISA must always be reported. (Guidance ) Where, during the year, a JISA has become an ISA with a different account number, the JISA must always be reported. (Market value will be nil.) (Guidance ) 31(3A) Where, during the year, a JISA has become an ISA retaining the same account number, the account number must be reported twice if subscriptions have been made both before and after the child s 18 th birthday. (Guidance /1) If subscription(s) were only made before, or only made after, the child s 18 th birthday, the ISA Manager need only make one return in respect of the account (Guidance /2), although he may optionally make two returns.(guidance /2a)

7 ISA / Junior ISA Comparison Version 1 (May 2012) Page 7 of 7 ISA must be reported (type A or B), amount subscribed since 18 th birthday and market value at 5 April. No requirement for a return (but see below). ISA is reported as type X and market value at 5 April. ISA must be reported (type A or B), amount subscribed since 18 th birthday and market value at 5 April. ISA must be reported as type X and market value at 5 April. Subscriptions to both JISA and ISA Subscription(s) only to JISA Subscription(s) only to ISA: No subscription to JISA or ISA during the year: JISA must be reported (type C or D), amount subscribed before 18 th birthday and market value nil. JISA must be reported (type C or D), amount subscribed before 18 th birthday and market value at 5 April. JISA must be reported (type C or D), amount subscribed before 18 th birthday and market value nil. No requirement for a return (but see below). JISA is reported as type Y and market value nil No requirement for a return (but see below). JISA is reported as type Y and market value nil (v) Where a Cash ISA has been closed during the year, the date of closure should be reported. Where a Stocks & Shares ISA has been closed during the year, the date of closure is not required (although if this field is populated by the manager s system with a date, that is acceptable). (Guidance 14.18) Only where a JISA has been closed in a case of death, terminal illness or when the value has become nil, should the date of closure be reported. In all other circumstances, the date of closure field MUST be left blank. (Guidance ) Compiled by TISA as a training aid, May 2012