HMRC U-turns on kick-outs
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HM Revenue & Customs has issued an update to Isa managers confirming that kick-out plans where the trigger event is conditional on a financial index reaching a pre-determined point are Isa-eligible.
In April, Money Marketing revealed that structured product providers were reviewing kick-out plans after a HMRC’s warning that some plans may have been wrongly promoted as Isa-eligible.
In ISA Bulletin 19, HMRC told managers offering stocks and shares Isas to check whether they were holding ’kick-out’ plans within the Isa wrapper, and if so, to get in touch. It would not reveal the implications for the tax status of any investments which have been wrongly offered as Isas, prompting many providers to put Isa options for new launches on hold.
After several representations from the industry HMRC called for no action from managers until it had completed its review.
In its latest bulletin on May 20, HMRC says: “In Bulletin 19 we expressed the view that certain ’kick-out’ plans did not meet the requirements of Isa regulation 7(6).
“We have received a number of representations from managers and their advisers so we have taken the chance to look at this issue again. We have now reconsidered and can confirm that kick-out plans where the trigger event is conditional on a financial index reaching a pre-determined point, are within Regulation 7(6) and are therefore qualifying investments for the stocks and shares Isa.”
Providers including Barclays Wealth and Gilliat have welcomed the news.
Gilliat managing director Adrian Neave says: “It is nice to have clarification. They raised a query and have listened to representation and accepted there is no certainty of early repayment and therefore they do meet the rules.”
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Readers' comments (3)
Sean | 21 May 2010 8:32 am
Credit where credits due as they say. Well done to HMRC for reviewing the position. Lets hope they take a similar pragmatic view regarding clients in drawdown pre age 55 who want to annuitise funds or move to a new provider.
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Anonymous | 24 May 2010 8:46 pm
Stocks and Shares ISa's are defined as such because they have in built into them a controlled risk. That is you cash it in when you want. Kick out plans are not that - they are simply jumped up deposit accounts "linked" to stock market performance sold by woefully inadequete salesmaen and saleswomen.
And regulated by the same calibre.
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Anonymous | 27 May 2010 7:59 am
"inadequete salesmaen"
I believe what you are trying to say is sold by " poeple thatt doos reserch and what's donut folo mantraa ov Sir Hargreaves of Bristol"
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