# The Individual Savings Account (Amendment No. 3) Regulations 2016 S.I. 2016/977 · made 10 October 2016 These regulations amend the Individual Savings Account Regulations 1998 (S.I. 1998/1870) (“the ISA regulations”). Made under: Income Tax (Trading and Other Income) Act 2005 (Section 694, Section 695, Section 696, Section 699, Section 701); Taxation of Chargeable Gains Act 1992 (Section 151) PDFs: Printed copy https://openlegislation.uk/individual-savings-account-amendment-no-3-regulations-2016/pdf/uksi_20160977_en.pdf; UK Explanatory Memorandum https://openlegislation.uk/individual-savings-account-amendment-no-3-regulations-2016/pdf/uksiem_20160977_en.pdf ## Introductory text Income Tax Capital Gains Tax Made 10th October 2016 Laid before the House of Commons 10th October 2016 Coming into force 1st November 2016 The Treasury make these Regulations exercising the powers in sections 694, 695, 696, 699 and 701(1) and (5) of the Income Tax (Trading and Other Income) Act 2005 and section 151 of the Taxation of Chargeable Gains Act 1992. ## 1 Citation and commencement These Regulations may be cited as the Individual Savings Account (Amendment No. 3) Regulations 2016 and come into force on 1st November 2016. ## 2 Amendment of the Individual Savings Account Regulations 1998 The Individual Savings Account Regulations 1998 are amended as follows. ## 3 Amendment of the Individual Savings Account Regulations 1998 In regulation 2(1)(a) (interpretation)— (a) for the definition of “outstanding principal balance”, substitute— ““outstanding principal balance” means, in respect of a qualifying investment for an innovative finance component, the amount in respect of the investment owing to the account investor at any time;”; (b) at the appropriate places insert— ““charity” has the meaning given in paragraph 1(1) of Schedule 6 to the Finance Act 2010;”; ““debenture” includes any instrument creating or acknowledging indebtedness within the meaning of article 77(1) and (2) of the Regulated Activities Order 2001 but with the omission of the words “such of the following as do not fall within article 78;”; ““transferable security” has the meaning given in section 102A(3) of FISMA 2000;”. ## 4 Amendment of the Individual Savings Account Regulations 1998 In regulation 4(6)(c) and (d) (general conditions for accounts and subscriptions to accounts) after “stocks and shares component,” insert “qualifying investments for an innovative finance component”. ## 5 Amendment of the Individual Savings Account Regulations 1998 In regulation 5DDA (additional permitted subscription to an account other than a junior ISA account) — (a) in paragraph (3A), for “article 36H agreements”, substitute “qualifying investments for an innovative finance component”; and (b) in paragraph (11)(b), after sub-paragraph (iii) insert— “(iv) those investments specified in regulation 8A(2)(ca); and ”. ## 6 Amendment of the Individual Savings Account Regulations 1998 In regulation 6(2) (general investment rules), in paragraph (2), omit “by an account manager”. ## 7 Amendment of the Individual Savings Account Regulations 1998 In regulation 8A (qualifying investments for an innovative finance component)— (a) after sub-paragraph (2)(c), insert— “(ca) debentures where the conditions in paragraph (4) are met;”; (b) after paragraph (3), insert— “(4) The conditions in this paragraph are— (a) the debenture is a transferable security issued by a company or a charity; (b) the investment in the debenture is facilitated by a person carrying on an activity of the kind specified in article 25 of the Regulated Activities Order 2001 through an electronic system operated by that person in an EEA State for such purpose; (c) that person or another, acting under an arrangement with that person or at that person’s direction, in respect of the investment, treats the account investor as its client and undertakes on behalf of the account investor to— (i) receive payments in respect of the debenture; (ii) make payments, when due, in respect of the debenture to the account investor; and (iii) exercise, or facilitate the exercise of, rights in respect of the debenture; (d) the investment in the debenture is not part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax; (e) the debenture is not made available to the account investor by reason of their or of another’s status, whether past, present or prospective, as an employee, director, partner, trustee or the holder of any office; (f) the account investor is not connected with the issuer of the debenture, and for this purpose “connected” has the meaning given in section 170 of ITA 2007 with the omission of the reference to “in period A” in sub-section (7); (g) the debenture must not be connected with any other investment held outside an account by the account investor or any other person, and for this purpose an investment is to be treated as connected with another if— (i) either was made with reference to the other or with a view to enabling the other to be made on particular terms; (ii) the terms on which either investment was made would have been significantly less favourable if the other investment had not been made; and (h) the investment in the debenture is made on genuine commercial terms.”. ## 8 Amendment of the Individual Savings Account Regulations 1998 In regulation 31 (returns of information by account manager)— (a) in paragraph (3)(d)— (i) for “specified at regulation 8A(2)(a)”, substitute “specified in regulation 8A(2)(a) or 8A(2)(ca)”; (ii) for “article 36H agreements in respect of which payments are due to be made to the account manager”, substitute “qualifying investments for an innovative finance component in respect of which payments are due to be made”; (b) at the end of paragraph 4(d)(ii) substitute the full-stop with “, and”; and (c) after paragraph 4(d)(ii) insert— “(iii) the outstanding principal balance under those investments specified in regulation 8A(2)(ca) in respect of which payments are due to be made.”. ## Signature Stephen Barclay David Evennett Two of the Lords Commissioners of Her Majesty’s Treasury 10th October 2016 ## Explanatory note (This note is not part of the Regulations) These regulations amend the Individual Savings Account Regulations 1998 (S.I. 1998/1870) (“the ISA regulations”). These regulations extend the range of securities that can be held in an Individual Savings Account (“ISA”) (see regulation 7 which amends regulation 8A of the ISA regulations). They provide for debentures issued by companies and charities to be held in an innovative finance account where they satisfy applicable conditions and will enable those made available through crowdfunding offers to be eligible to be held in an innovative finance account. Interest and gains from these investments will be tax free. Conditions are provided concerning the issuer and availability of the debentures including appropriate safeguards for the investor and to prevent abuse of the tax free arrangements (see regulation 7(b)). Minor consequential amendments are made to the ISA regulations by the other regulations (see regulations 3 to 6 and 8) including to regulations 2 (interpretation), 4 (general conditions for accounts and subscriptions to accounts), 5DDA (additional permitted subscription to an account other than a junior ISA account), 6(2) (general investment rules) and 31 (returns of information to HM Revenue & Customs by the account manager). 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. --- Source: https://www.legislation.gov.uk/uksi/2016/977 (the official version) Page: https://openlegislation.uk/individual-savings-account-amendment-no-3-regulations-2016 Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.