The Regulations amend the Individual Savings Account Regulations 1998 (S.I. 1998/1870) (“the ISA Regulations”).
The Regulations establish a new Individual Savings Account (ISA), the Lifetime ISA, from 6 April 2017.
The Regulations make consequential amendments to the ISA Regulations to take account of the Lifetime ISA (regulations 2 to 29). The principal provisions relating to the new account are set out in a new Schedule to the ISA Regulations, which is inserted by this Instrument (regulation 31).
An account in respect of which the account holder has notified closure within 30 days of the cancellation period start date set out in Financial Conduct Authority rules and one from which, other than in specified circumstances, a withdrawal is made in 2017-18, is to be disregarded for the purpose of the ISA Regulations (regulation 6).
The overall Lifetime ISA payment limit in respect of current year payments for any Lifetime ISA qualifying individual for any year is £4,000, (regulation 7), which must be within the overall subscription limit for an ISA in that year (regulation 21). An amount held in a Help to Buy: ISA on 5 April 2017 can also be transferred to a Lifetime ISA during the year 2017-18 without the amount counting towards the limit (regulation 21).
The Regulations set out eligibility conditions for opening and paying into the new account, including a requirement that an account can only be opened by an adult younger than 40 years old and that, subject to specified exceptions, an individual can only pay into an account if they are younger than 50 years old (regulations 21 and 24), they provide for the amount (regulation 7) and type of payments that can be made into an account, and which investments can be held in the account (regulations 6 and 19).
The Schedule inserted into the ISA Regulations sets out details in relation to the operation of a Lifetime ISA.
Paragraphs 1 and 2 of the Schedule provide for how an account provider claims a government bonus that is due, including specifying claim periods and the due date for claims, and they provide for a 25% government bonus to be payable on qualifying additions paid into the account.
Paragraph 3 sets out arrangements for cases in which a claim is rejected, including for review and appeal.
Paragraphs 4 to 6 specify circumstances in which sums may be withdrawn from an account without a charge being made, including on a first-time residential purchase, on an individual reaching 60 years old and on the account manager receiving written evidence from a medical practitioner that the account investor is expected to live for less than one year and provide for the application of a 25% charge on certain other withdrawals.
Paragraphs 6 to 8 set out the conditions which must be satisfied for a withdrawal in relation to a first-time residential purchase not to be subject to a withdrawal charge. These paragraphs also set out the process and information requirements that must be satisfied by an account holder and their conveyancer in relation to the withdrawal.
Paragraph 10 provides that withdrawn funds must be returned to a Lifetime ISA if a first-time residential purchase has not been completed within 90 days of receipt of the funds by the conveyancer. Any funds not returned may be subject to a withdrawal charge. The 90 day period, as well as other time periods provided for in the Schedule may be extended by HMRC under paragraph 18.
Paragraphs 10 and 12 to 14 provide for the collection and payment of withdrawal charges or other amounts due and provision of information to HMRC.
Paragraph 11 provides for other circumstances in which removal of sums from a Lifetime ISA will not be subject to a withdrawal charge.
Paragraph 15 provides for late payment and repayment interest and paragraph 16 provides for appeals.
A Tax Information and Impact Note covering this instrument has been published on the HM Government website at:https://www.gov.uk/government/collections/tax-information-and-impact-notes-tiins.