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Revenue snubs amnesty plea in Isa crackdown

The Inland Revenue is to crack down on illegal Isas despite pleas from the industry for an amnesty.

According to Revenue figures, the move, outlined in last week&#39s pre-Budget report, will affect about 85,000 Isa holders who took out two accounts in the same year.

Managers of the second Isas will be ordered to close down the accounts, return the investments to the inv estor and repay any tax relief to the Revenue.

The investment industry is angry at the news, as most of the illegal Isas are equity Isas held with fund management firms. It is believed that many investors had taken out mini-cash Isas with banks and building societies una ware it would affect their elig ibility to invest in equity Isas at a later stage.

The move will be bad news for investors, who are likely to lose far greater tax benefits from their equity Isas being annulled rather than their cash Isas. Fund managers were hoping that inv estors would be given the choice of which Isa to cancel.

Autif director general Phi lip Warland says: “Not granting an exemption for those who have mistakenly invested in two Isas but gained nothing by doing so could be damaging to the whole Isa concept and could possibly discourage people instead.”

Invesco UK sales director Stuart Alexander says: “The idea of bringing in mini and maxi accounts after Peps was very confusing. Consumers were not aware of the full facts. We would have liked to have seen them given the benefit of the doubt. I think it is a real shame that they are going to make the equity Isas invalid instead of the cash accounts.”

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