Explanatory note

These Regulations amend the Individual Savings Account Regulations (S.I. 1998/1870) (as amended) (“the principal Regulations”).

Regulation 3 of these Regulations inserts a new regulation 5A into the principal Regulations. The new regulation applies to an investor who had an individual savings account (an “ISA”) with Northern Rock plc during the 2007-08 tax year, and who withdrew amounts from that account during the period of financial instability in September 2007. The new regulation provides that if such an investor subscribed funds to an ISA during the period beginning on 13th September 2007 and ending on 5th April 2008, the investor will not be penalised by making the earlier withdrawal. The new regulation accordingly has effect in relation to events taking place on and after 13th September 2007 (before these Regulations were made) and makes provision which does not impose or increase any liability to tax. In these circumstances, authority to make provision in these terms is conferred by section 701(4) of the Income Tax (Trading and Other Income) Act 2005 (inserted by section 40 of the Finance Act 2008).

Regulation 4 of these Regulations restates regulation 8(2)(a) of the principal Regulations to take account of the enactment of the Income Tax Act 2007; regulation 5 of these Regulations amends regulation 23(2)(a) of the principal Regulations to take account of the abolition of the lower rate of income tax; and ; regulation 6 of these Regulations amends regulation 36 of the principal Regulations to take account of provisions in the Finance Act 2008 amending the legislation relating to the taxation of gains from life insurance policies and to take account of the abolition of the lower rate of income tax.

A full regulatory impact assessment of the effect that this instrument will have on the costs of business and the voluntary sector is available and is annexed to the Explanatory Memorandum which is available alongside the instrument on the OPSI website.