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Isa dilemma for client with two plans

We were recently consulted by someone who had inadvertently subscribed to

two Isa plans of the same category in the same year, which has thrown up

something I do not think is widely known.

The subscriber was paying £250 a month to company A as a Pep and, as

performance was not brilliant, decided to change to another provider. A

letter was sent to company A asking them not to proceed.

However, what happened was that a payment of £250 went into the

1999/2000 year and was used to start a maxi Isa. In the meantime, a new

plan had been started with company B.

Having chatted with a really helpful man at the Inland Revenue, the

situation is not as straightforward and logical as may be thought.

Logic and a brief reading of the rules would indicate that the second

1999/2000 Isa would be null and void but continuing monthly payments into

the 2000/01 and 2001/02 tax years would be okay. Not so.

The second plan is invalid for all subsequent tax years until a new

application is made.

Anyone finding themselves in this position should write and close their

accounts and then make a new application for the current year so that a

valid application is made for the current year. Hopefully, they may also be

able to switch the money, which would now be held in an Oeic or unit trust

outside the Isa into the new plan at minimal cost, provided that

subscription limits are not breached.

Single-contribution plans would not be affected as a new application must

be made each year.

JL Kirby

Consultant,

WD Gill (Insurance Brokers),

Nottingham

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