The Individual Savings Account Regulations 1998

Changes over time for: Section 7

Version Superseded: 07/12/2004

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Qualifying investments for a stocks and shares componentU.K.

7.—(1) This regulation specifies the kind of investments (“qualifying investments for a stocks and shares component") which may be purchased, made or held under a stocks and shares component, and in this regulation and regulations 31 and 34, “shares" without more includes stock.

(2) Qualifying investments for a stocks and shares component to which paragraph (1) refers are—

(a)shares, not being shares in an investment trust, issued by a company wherever incorporated and, subject to paragraph (3), officially listed on a recognised stock exchange;

(b)securities (“qualifying securities")—

(i)issued by a company wherever incorporated,

(ii)which satisfy at least one of the conditions specified in paragraph (5) and the condition specified in paragraph (6), and

(iii)in the case of securities of an investment trust, purchased or acquired by the account manager in circumstances where the trust satisfies the conditions specified in paragraphs (7) and (8);

[F1(c)gilt-edged securities which satisfy the condition specified in paragraph (12);

(ca)any securities issued by or on behalf of a government of any EEA State, which satisfy the condition specified in paragraph (12);

(cb)any securities which–

(i)in relation to a security mentioned in sub-paragraph (ca), would be a strip of that security if “strip” had the same meaning as in section 47 of the Finance Act 1942, with the omission of the words “issued under the National Loans Act 1968”, and

(ii)satisfy the condition specified in paragraph (12);]

(d)shares in an investment trust, listed in the Official List of the Stock Exchange, in circumstances where the trust satisfies the conditions specified in paragraphs (7) and (8);

[F2(e)units in, or shares of, a securities scheme or a warrant scheme, in circumstances where the [F3units or shares satisfy the condition specified in paragraph (15)];]

(f)units in, or shares of, a relevant UCITS, in circumstances where the [F4units or shares satisfy the condition specified in paragraph (15)];

[F5(g)units in, or shares of, a fund of funds scheme, in circumstances where the [F6units or shares satisfy the condition specified in paragraph (15)];]

[F7(ga)units in, or shares of, a Chapter 5 UCITS, in circumstances where the units or shares satisfy the condition specified in paragraph (15);]

(h)subject to the conditions specified in paragraph (10)[F8—

(i)shares which the qualifying individual has exercised the right to acquire in accordance with the provisions of a savings-related share option scheme,

(ii)shares which have been appropriated to the qualifying individual in accordance with the provisions of an approved profit sharing scheme, or

(iii)plan shares of an approved employee share ownership plan which cease to be subject to the plan but have remained in the beneficial ownership of the participant,]

and such shares shall be treated as fulfilling the condition as to payment of cash in regulation 4(1)(h);

[F9(ha)a depositary interest;]

(j)cash deposited in accordance with regulation 6(4) to (6) which an account manager holds for the purpose of investment in investments which are qualifying investments for a stocks and shares component.

[F10(k)investments which—

(i)were held under a stocks and shares component on 28th November 2001,

(ii)on that date were admitted to trading on a recognised stock exchange in an EEA State and were not listed by a competent authority in an EEA State for the purposes of Council Directive 2001/34,

(iii)since that date have not ceased to be so admitted and have not become so listed,

(iv)do not fall within any of the other sub-paragraphs of this paragraph, and

(v)are not investments which, having fallen within any of those sub-paragraphs, have ceased so to fall on or after that date.]

[F11(l)investments which—

(i)were held under the stocks and shares component on 6th April 2004; and

(ii)immediately before that date, fell within sub-paragraphs (e), (f) or (g), or sub-paragraph (ha) so far as the relevant investments (within the meaning in the definition of “depositary interest”) fell within any of those sub-paragraphs.]

(3) An investment in shares fulfils the condition as to official listing in paragraph (2)(a) or (d) if—

(a)in pursuance of a public offer, the account manager applies for the allotment or allocation to him of shares in a company or trust which are due to be admitted to such listing within 30 days of the allocation or allotment, and which, when admitted to such listing, would be qualifying investments for a stocks and shares component, and

(b)the shares are not allotted or allocated to the account manager in the circumstances specified in paragraph (4).

(4) The circumstances specified in this paragraph are where—

(a)the allotment or allocation of the shares was connected with the allotment or allocation of—

(i)shares in the company or trust of a different class, or

(ii)rights to shares in the company or trust of a different class, or

(iii)shares or rights to shares in another company or trust, or

[F12(iv)units in or shares in, or rights to units in or shares in, an authorised fund or a part of an umbrella scheme[F13, or]]

(vi)securities or rights to securities of the company or trust, or of another company or trust,

to the account manager, the account investor or any other person; and

(b)the terms on which the first-mentioned shares in this paragraph were offered were significantly more favourable to the account manager or account investor than they would have been if their allotment or allocation had not been connected as described in sub-paragraph (a).

(5) The conditions specified in this paragraph are—

(a)that the shares in the company issuing the securities are listed on the official list of a recognised stock exchange;

(b)that the securities are so listed;

(c)that the company issuing the securities is a 75 per cent. subsidiary of a company whose shares are so listed.

(6) The condition specified in this paragraph is that, judged at the date when each of the securities is first held under the account, the terms on which it was issued do not—

(a)require the loan to be repaid or the security to be re-purchased or redeemed, or

(b)allow the holder to require the loan to be repaid or the security to be repurchased or redeemed except in circumstances which are neither certain nor likely to occur,

within the period of five years from that date.

(7) The condition specified in this paragraph is that the investment trust has no eligible rental income, in its most recent accounting period to end before the date on which the shares in, or securities of, the investment trust first become investments under the account, provided that the shares or securities shall cease to be qualifying investments for a stocks and shares component if the investment trust has any eligible rental income, in subsequent accounting periods, during which the shares or securities are held.

(8) The condition specified in this paragraph is that not more than 50 per cent. in value of the investments of the trust, [F14scheme] or UCITS, or investments subject to the trusts of the scheme, as the case may be, are [F15either–

(a)securities which would not be qualifying securities, or

(b)securities which would not fall within any of sub-paragraphs (c) to (cb) of paragraph (2),

if paragraph (6), or paragraph (6) as it applies with the modifications in paragraph (12), as the case may be,] required the terms on which they were issued to be judged at the date when they first became investments of the trust, [F14scheme] or UCITS or, as the case may be, investments subject to the trusts of the scheme.

[F16(9) The condition specified in this paragraph is that not more than 50 per cent. in value of the investments of the scheme, or subject to the trusts of the scheme, are—

(a)units in, or shares of, a securities scheme or a warrant scheme, or

(b)units in, or shares of, a relevant UCITS,

where the securities scheme, warrant scheme or UCITS does not satisfy the condition in paragraph (8).]

(10) The conditions specified in this paragraph are—

(a)in relation to shares which the individual has exercised his right to acquire in accordance with the provisions of a savings-related share option scheme, that the shares are transferred to the account manager or his nominee before the expiry of the period of 90 days following the exercise of that right;

(b)in relation to shares appropriated to the individual in accordance with the provisions of an approved profit-sharing scheme, that the shares are transferred to the account manager or his nominee before the expiry of the period of 90 days following the date when the individual directed the trustees to transfer the ownership of the shares to him or, if earlier, the release date in relation to the shares;

[F17(ba)in relation to plan shares mentioned in paragraph (2)(h)(iii), that the shares are transferred to the account manager or his nominee before the expiry of the period of 90 days following the date when the plan shares ceased to be subject to the plan;]

(c)that the aggregate market value at the date of transfer of any shares transferred to the account manager or his nominee in accordance with sub-paragraphs [F18(a), (b) or (ba)] in any year, and the individual’s cash subscriptions in that year which are allocated to the stocks and shares component of that account—

(i)in the case of a maxi-account do not together exceed the subscription limit in regulation 4(2) in that year, reduced by the cash subscriptions in that year which are allocated to a cash component, or an insurance component, of the account; and

(ii)in the case of a mini-account, do not together exceed the subscription limit in regulation 4(3)(c) in that year.

(11) In paragraph (4)(a), “company" means any body corporate having a share capital.

[F19(12) The condition specified in this paragraph is the condition specified in paragraph (6), omitting sub-paragraph (b) of that paragraph and the word “or” after sub-paragraph (a).]

[F20(13) The references to “shares” in paragraphs (2)(h) and (10) shall include references to a depositary interest where the relevant investments in question (referred to in paragraphs (a) and (b) of the definition of “depositary interest”) are shares falling within both paragraphs (2)(h) and (10).]

[F21(14) Qualifying investments for a stocks and shares component falling within sub-paragraph (ha) of paragraph (2), so far as the relevant investments (within the meaning given in the definition of “depositary interest”) fall within any of sub-paragraphs (e), (f), (g) or (ga) of that paragraph, must satisfy the condition specified in paragraph (15).

(15) The condition specified in this paragraph is that, during the period of five years from the date on which the qualifying investments in question were first held in the account, there was no time when—

(a)the contract under which the investments were acquired, or any other transaction entered into at any time by the account investor or any other person, or

(b)the nature of the underlying subject matter of the investments,

had the effect that the account investor was not exposed, or not exposed to any significant extent, to the risk of loss from fluctuations in the value of the investments exceeding 5% of the capital consideration paid or payable for the acquisition of those investments.

(16) In this regulation references, in relation to qualifying investments, to—

(a)the underlying subject matter are references to or to the value of the investments, currencies or other matters to which, or to the value of which, those qualifying investments or their value is referable;

(b)the capital consideration paid include the incidental costs of acquisition; and

(c)the value are to be construed applying regulation 6(2), but deducting the incidental costs that would be incurred by a disposal.]

Textual Amendments

F1Reg. 7(2)(c)-(cb) substituted for reg. 7(2)(c) (6.4.1999) by The Individual Savings Account (Amendment) Regulations 1998 (S.I. 1998/3174), regs. 1, 5(2)

F2Reg. 7(2)(e) substituted (1.12.2001) by The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629), arts. 1(2)(b), 172(2)(a)

F3Words in reg. 7(2)(e) substituted (17.11.2003 with effect in accordance with reg. 1(3) of the amending S.I.) by The Individual Savings Account (Amendment) Regulations 2003 (S.I. 2003/2747), regs. 1(1), 5(a)

F4Words in reg. 7(2)(f) substituted (17.11.2003 with effect in accordance with reg. 1(3) of the amending S.I.) by The Individual Savings Account (Amendment) Regulations 2003 (S.I. 2003/2747), regs. 1(1), 5(b)

F5Reg. 7(2)(g) substituted (1.12.2001) by The Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629), arts. 1(2)(b), 172(2)(b)

F6Words in reg. 7(2)(g) substituted (17.11.2003 with effect in accordance with reg. 1(3) of the amending S.I.) by The Individual Savings Account (Amendment) Regulations 2003 (S.I. 2003/2747), regs. 1(1), 5(a)

F7Reg. 7(2)(ga) inserted (17.11.2003 with effect in accordance with reg. 1(2) of the amending S.I.) by The Individual Savings Account (Amendment) Regulations 2003 (S.I. 2003/2747), regs. 1(1), 5(c)

F8Words in reg. 7(2)(h) substituted (21.8.2000) by The Individual Savings Account (Amendment No. 2) Regulations 2000 (S.I. 2000/2079), regs. 1, 4(2)

F9Reg. 7(2)(ha) inserted (13.12.2000) by The Individual Savings Account (Amendment No. 3) Regulations 2000 (S.I. 2000/3112), regs. 1, 4(a)