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Technical View

Technical View

Welcome to this month’s Technical View, where we focus on the proposal announced in the 2014 Autumn Statement, which provides a surviving spouse with an additional ISA allowance on the death of their spouse.

For the purposes of this Technical View, spouse also refers to registered civil partner but not common law spouse.

Technical View aims to answer queries received by you, as a financial adviser for your use when you meet clients in similar scenarios. We hope that this provides useful, topical and valuable information.  If any of your colleagues would like to receive our newsletters, please e-mail us and we will be delighted to include them in our future communications.

The changes

The Autumn Statement 2014 announced that if a spouse dies on or after 3 December 2014 the surviving spouse will be entitled to an additional one off ISA allowance (Additional Permitted Subscriptions or APS) equal to the value of the deceased’s ISA at the date of death. The APS is on top of the investor’s normal annual ISA subscription allowance (£15,240 in 2015/16) and became available on 6 April 2015.

The APS can be made in the form of cash or, where the surviving spouse inherits the assets under the deceased’s Will, as an in-specie transfer. The in-specie transfer route will not be available where the spouse does not inherit the ISA assets.

It is possible to pay the APS as a lump sum or as a series of payments up to the APS limit. Where the payment is in the form of cash, the time limit to pay any APS is the latter of 3 years from the date of death or 180 days after administration of the estate is complete. For deaths between 3 December 2014 and 5 April 2015 the 3 year period begins on 6 April 2015.

Payments by in-specie transfer must be within 180 days of beneficial ownership passing to the surviving spouse. It will be possible for the APS to be made up by a combination of cash and in-specie payments, for example, when the value of assets are less when beneficial ownership passes to the spouse than at the value on the date of death. In such instances, the balance could be funded by cash.

HMRC have relaxed their initial view about where the survivor could pay their APS to and have now decided the survivor will be free to choose their preferred ISA manager. This relaxation was partly to avoid complications where the deceased had a number of ISAs with different managers and also as in some cases, the deceased’s ISA may be with a manager that no longer accepts new ISA subscriptions. Investors will be able to decide whether to apply their APS to a cash or stocks & shares ISA or a combination of the two.

What is Sanlam doing?

Given that there will be many spouses that have built up significant ISA funds over the years, it seems right that Sanlam should offer our investor’s the option to take advantage of this additional allowance.
There is a current project underway to assess how this will be implemented into our proposition and in what forms Sanlam will accept the APS payment. We will keep you updated to the progress and the launch of this in due course.

Additional ISA changes from tax year 2015/2016

There are several other ISA enhancements which are either imminent or pencilled in for later in the 2015/16 tax year, these are:-

  • The ability to transfer of Child Trust Funds (CTF) into a Junior ISA (JISA) became available on 6 April 2015.
  • Help to Buy ISA was announced in the March 2015 Budget with a view to launch in the autumn. This is for first time buyers and the government will add a bonus of 25% of the amount saved, up to a maximum of £3,000 paid when the saver buys their first home. Full details will become available in due course but early indications are that these accounts will be cash rather than stocks & shares type ISAs.
  • The Budget 2015 also announced the ability to withdraw funds from an ISA and put back into the ISA within the same tax year, without breaching the annual subscription allowance. This is also set for implementation in autumn 2015 and further details will be released in due course. 

Hopefully this edition has provided some answers for you on similar queries you may have. If you have further queries on the content of this edition or other technical queries then please contact the Technical e-helpdesk at technical@sanlam.co.uk.

Date Issued: May 2015

This note is to be used by Financial Advisers only. It is not intended for onward transmission to a private customer and should not be relied upon by any other person. Sanlam accepts no liability for any action taken or not taken by an individual or firm as a result of the contents of this material. The tax treatments and information contained in this document is based on current tax law and HMRC practice as at May 2015 and may be subject to change in the future. Whilst we have made every effort to ensure the accuracy of this material, we cannot accept responsibility for any consequence (financial or otherwise) arising from relying on it. This document is for information purposes only and should not be treated as advice and independent taxation advice should be always sought.

Past performance is no guarantee to future performance. The value of investments can fall as well as rise so investors could get back less than they invest.

Sanlam & Sanlam Investments and Pensions are trading names of Sanlam Life & Pensions UK Limited (SLP (Reg.in England 980142)) and Sanlam Financial Services UK Limited (SFS (Reg. in England 2354894)). SLP is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. SFS is authorised and regulated by the Financial Conduct Authority. Registered Office: St. Bartholomew’s House, Lewins Mead, Bristol BS1 2NH.

Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.