Business Franchising
rds are kept by the plan manager, so the ISA holder does not need to keep any records for tax purposes. However the ISA holder is the legal owner of all the shares in the portfolio, and he has all the legal rights of an ordinary shareholder, although it costs him more to exercise them.
The Rules
1 The shares must be in a separate portfolio, known as the equity plan.
2 The portfolio must be managed by an authorised plan manager.
3 The plan manager must keep proper records and make an annual return to the Inland Revenue.
4 The ISA holder must be at least 18 years old.
5 The ISA holder must be resident in the UK.
6 Subscriptions to the ISA must be made in cash. Existing shareholdings cannot be transferred into it.
7 The investment is limited to £12400 (plus any interest and dividends received) in any calendar year.
8 For a minimum period of one year, interest and dividends received must be 'rolled up', i.e. held or reinvested, not paid out in cash.
9 A person may have only one ISA. He cannot, for example, have two ISAs each for £11200. He can however change his ISA manager each calendar year.
10 Shares held must be ordinary shares of UK-incorporated companies listed on the UK Stock Exchange. Unit trusts must be authorised. Shares cannot be included for unlisted companies. Neither may a ISA invest in preference shares, debentures, fixed interest stock, options, futures, or gilts.
11 The holding in unit trusts is limited to the lower of 25% of the investment and £1420.
12 Partly paid shares are valued at the amount actually paid and are included for the years in which the payment is made.
13 The amount of the plan which may be held in cash is limited to the greater of 10% of the plan and £1240.
14 All dealings must be at open market price. Trading on margin and going 'short'are not allowed.
15 The investments must be held for at least one year before being sold. If the proceeds of any sale are reinvested within 28 days, the reinvestment does not count as part of that year's investment limit, and the sale proceeds are free of capital gains tax. The reinvestment must be made in qualifying securities.
16 The ISA holder can withdraw his money at any time, but if the minimum conditions have not been met, the tax reliefs are lost.
17 The ISA holder must always have the opportunity to exercise shareholder's rights.
For a list of plan managers whose ISA schemes have been approved by the Inland Revenue see https://www.hmrc.gov.uk/international/nr-l
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