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Budget 2008: Implications for savers and saving

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12th Mar 2008
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Reduced burdens for providers

The ISA administrative burden is to be reduced. Statistical reports filed by ISA managers and finance companies are to be submitted annually instead of quarterly. Neither will they have to retain the actual application if the information within is recorded elsewhere and its accuracy confirmed by the customer.

Similarly, providers or distributors of Child Trust Funds (CTF) will no longer be required to collect the CTF voucher from parents who wish to open an account. The use of a unique reference number makes this requirement redundant, and also allows for internet and phone applications. This is largely a result of an earlier public consultation paper.

Community investment tax relief

Banks that invest in a community development finance institution (CDFI) were eligible for relative amount of Community Investment Tax Relief (CITR). If the CDFI makes payment or returns value to the investor, this sum reduces the amount of relief available. Anti-avoidance measures in this field will be softened so that as long as the money represents "deposits made in the ordinary course of banking arrangements", such transactions will not affect relief.

Investor management exemption

At present, certain non-residents (whether companies, individuals or funds) can appoint UK-based investment managers to carry out transactions on their behalf without being exposed to UK tax, providing the transactions in question qualify for the investor management exemption (IME)

From now on qualifying transactions will have to be designated "investment transactions" by HMRC. This list will replace a range of different statutory provisions in varying pre-existent legislation, which will be repealed.

One advantage to the investor is that previously an investment manager might carry out several transactions for a non-resident, and if one is non-exempt the rest would be by default. The new measure will prevent that outcome and allow for a greater proportionality.

Implications for ISAs

The ISA allowance is to increase to a total of £7,200, with a cash limit of £3,600, as of April.

Northern Rock withdrawers can re-invest in any ISA if they withdrew between 13 and 19 of September 2007 inclusive. The ISA rules will be amended to allow this.

At present they prevent the reinvestment of withdrawn funds, though amendments will mean that re-investments will have no impact on an individual's annual ISA investment limit.

The new rule will only affect those who withdrew their money between 13 and 19 of September last year. Re-investment must be completed by 5 April 2008, and where made to a different provider, will be treated as a money transfer rather than an investment.

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