This article will cover the following topics:
Why have I been contacted about investments in my ISA?
Saxo has identified investments within your ISA which do not meet HMRC’s criteria for investments that can be held in a Stocks & Shares ISA.
In simple terms, investments which meet HMRC’s criteria are called “qualifying investments” and those which do not meet the criteria are “non-qualifying”.
Where an investment inside an ISA is considered non-qualifying, the ISA regulations require us to take action to remove the investment from your account. If this is not done, your ISA account may be made void and you could lose your ISA tax benefits.
What are qualifying investments?
Qualifying investments for a Stocks & Shares ISA are based on a set of criteria defined by HMRC.
In general terms, this covers investments such as:
- Shares
- Unit trusts and investment funds
- Corporate bonds and loan-type securities
- Government bonds
Each investment type has a specific set of rules in order to make it ISA eligible.
With regards to shares, these are qualifying investments if:
- They’re issued by a company that is incorporated anywhere in the world.
- They’re either:
- officially listed on a recognised stock exchange; or
- admitted to trading on a recognised stock exchange in the UK or the EEA.
HMRC designate what is considered a recognised stock exchange as well as the various markets and sub-markets on an exchange. For example, when looking at an investment on the Hong Kong Stock Exchange, HMRC has decided that those listed on the Main Board Market will be qualifying investments, whereas those listed on the Growth and Enterprise Market (GEM) will not be.
Why is my investment non-qualifying?
Unfortunately, your investment does not meet HMRC’s qualifying investment criteria.
See What are qualifying investments?
When the investment is non-qualifying, the following action must be taken:
- Sell the investment (in which case the proceeds can remain in the Stocks & Shares ISA). See How do I place a trade;
OR
- Remove the investment from your ISA as soon as possible.
It is possible to transfer the investment to a non-ISA account, including a Saxo trading account. If you do not have a Saxo trading account, you can open an account here.
If you have a Saxo trading account available, please email isasupport@saxobank.com and request the positions to be removed from your ISA. Alternatively, if you have a trading/investment account with another broker, you may be able to transfer to them. See How do I transfer my position to another broker/provider?
Please note: When moving an investment to a non-ISA account, it ceases to retain the benefits of being held in an ISA, i.e. it will potentially be subject to Capital Gains Tax and/or Income Tax, depending on your personal tax situation.
Due to the ISA regulations, if you do not take action to complete either option (a) or (b) above, Saxo will do so on your behalf by either selling or writing off the position (as appropriate), or moving it into a Saxo trading account in your name (if available).
My investment is delisted, what action can I take?
Delisted investments are non-qualifying. There is generally an exception to this where the delisting has occurred due to sanctions placed on the exchange or investment.
Non-qualifying investments must be removed from your ISA as soon as possible. The following action must be taken:
- Transfer the investment to your Saxo trading account.
If you do not have a Saxo trading account, you can open an account here. If you have a Saxo trading account available, please email isasupport@saxobank.com and request the positions to be removed from your ISA.
Please note: When moving an investment to a non-ISA account, it ceases to retain the benefits of being held in an ISA, i.e. it will potentially be subject to Capital Gains Tax and/or Income Tax, depending on your personal tax situation.
OR
- Request Saxo to write-off the instrument at nil value. Please see What can I do if my stock is delisted.
Please note, Saxo will not charge to write-off investments within an ISA.
Due to the ISA regulations, if you do not take action to complete either option (a) or (b) above, Saxo will do so on your behalf by either selling or writing off the position (as appropriate), or moving it into a Saxo trading account in your name (if available).
My investment is traded OTC. Why is it non-qualifying?
Investments listed on United States OTC (Over The Counter) are not qualifying investments as the market is not designated as an HMRC recognised exchange. The exception to this is when the same investment is dual listed on an HMRC recognised exchange.
It is possible that your investment was qualifying when it was bought i.e. it was listed on an HMRC recognised exchange such as NYSE (New York Stock Exchange) or Nasdaq, however it has subsequently changed it’s listing to OTC.
Another possibility is that your investment has undergone a change since it was originally bought. See My investment was qualifying when I bought it, why is it now non-qualifying?
The investment must now be removed from your ISA as soon as possible. The following action must be taken:
- Sell the investment (in which case the proceeds can remain in the Stocks & Shares ISA). See How do I place a trade
OR
- Transfer the investment to a non-ISA account, including a Saxo trading account.
If you do not have a Saxo trading account, you can open an account here. If you have a Saxo trading account available, please email isasupport@saxobank.com and request the positions to be removed from your ISA. Alternatively, if you have a trading/investment account with another broker, you may be able to transfer to them. See How do I transfer my position to another broker/provider?
Please note: When moving an investment to a non-ISA account, it ceases to retain the benefits of being held in an ISA, i.e. it will potentially be subject to Capital Gains Tax and/or Income Tax, depending on your personal tax situation.
Due to the ISA regulations, if you do not take action to complete either option (a) or (b) above, Saxo will do so on your behalf by either selling or writing off the position (as appropriate), or moving it into a Saxo trading account in your name (if available).
My investment is in a fund or ETF. Why is it non-qualifying?
Units or shares in undertakings for collective investments in transferable securities (UCITS) schemes are qualifying if they meet certain criteria.
Since January 2021, for units/shares of UCITS situated in another EEA state to be qualifying investments, the provider should have joined the FCA’s Temporary Marketing Permissions Regime.
My investment was qualifying when I bought it, why is it now non-qualifying?
It is possible that the investment has changed since it was originally bought.
The most common examples of a change to an investment are:
- takeovers
- demergers
- capital reorganisations (other than a rights issue or bonus issue)
- rights issues
- bonus issues
Whether the resulting investment can be held in the ISA will depend on whether it is meets HMRC’s qualifying investment criteria.
Where the new investments are non-qualifying investments, the following action must be taken:
- Sell the investment (in which case the proceeds can remain in the Stocks & Shares ISA). See How do I place a trade
OR
- Transfer the investment to a non-ISA account, including a Saxo trading account.
If you do not have a Saxo trading account, you can open an account here. If you have a Saxo trading account available, please email isasupport@saxobank.com and request the positions to be removed from your ISA.
Alternatively, if you have a trading/investment account with another broker, you may be able to transfer to them. See How do I transfer my position to another broker/provider?
Please note: When moving an investment to a non-ISA account, it ceases to retain the benefits of being held in an ISA, i.e. it will potentially be subject to Capital Gains Tax and/or Income Tax, depending on your personal tax situation.
Due to the ISA regulations, if you do not take action to complete either option (a) or (b) above, Saxo will do so on your behalf by either selling or writing off the position (as appropriate), or moving it into a Saxo trading account in your name (if available).
My investment is a Warrant, Right or Bonus Issue. Why is it non-qualifying?
HMRC considers Warrants to be non-qualifying investments unless, exceptionally, they are attached to shares in an investment trust which are purchased by an ISA manager in the course of a public offer.
Therefore, any other type of Warrant subsequently offered to existing shareholders to subscribe for shares are non-qualifying investments.
Rights, such as Contingent Value Rights (CVR), which have been issued as part of a re-organisation/merger/takeover, are a form of option and are therefore non-qualifying investments.
To confirm, Rights allocated via a traditional Rights Issue – whereby existing shareholders are given the opportunity to buy a set number of new shares – are qualifying investments as the original shares to which they are linked meet HMRC’s qualifying investment criteria.
The same is true of Bonus Issues.
My investment is in an ADR/GDR (American/Global Depository Receipt) listed on a Recognised Stock Exchange. Why is it non-qualifying?
A depository receipt can be held in an ISA providing the underlying shares represented by the depository receipt are themselves ISA qualifying.
In simple terms, the shares being represented by the ADR/GDR must also be listed on an HMRC recognised exchange.
Should the underlying shares delist from an HMRC recognised exchange and become non-qualifying, the ADR/GDR will, in turn, become non-qualifying.
How do I transfer my position to another broker/provider?
If you would like to transfer your position to another broker, please complete their transfer form/request.
Please use isasupport@saxobank.com as the contact email address.
Please note: When moving an investment to your broker’s non-ISA trading/investment account, it ceases to retain the benefits of being held in an ISA, i.e. it will potentially be subject to Capital Gains Tax and/or Income Tax, depending on your personal tax situation.
If your broker is unwilling to accept the transfer, you may need to move the investment to a non-ISA Saxo trading account or sell / write-off the investment. If you do not have a Saxo Trading account, you can open an account here. If you have a Saxo trading account available, please email isasupport@saxobank.com and request the positions to be removed from your ISA.
Do you have questions?
If you have questions or do not agree that your investment is non-qualifying, please contact isasupport@saxobank.com.
If you are unsure as to any tax implications in relation to your ISA account, we recommend that you seek independent professional advice.