S.I. 2004/2996: memorandum from
HM Treasury
Individual Savings Account (Amendment No. 2) Regulations
2004 (S.I. 2004/2996)
1. This
Memorandum is provided by the Treasury in respect of regulation
6 of these Regulations, in response to the letter from the Committee
dated 7th December 2004.
2. The
questions to be addressed in this Memorandum are:
(a) given the condition
in regulation 7(15) of the Individual Savings Account Regulations
1998 relates to the period of five years from the date mentioned
in that paragraph, explain the intended effect of regulation 4C(3)(a),
as inserted by regulation 6 of this instrument; and
(b) in particular, how will
it be possible to apply that condition on 6th April 2005.
3. Regulation
4C(3)(a) was intended to apply a "once and for all test,"
to certain policies of life insurance held within ISA insurance
components immediately before 6th April 2005, to determine which
component they will be held in thereafter. (The existing test
in regulation 7(15) of the 1998 Regulations looks at whether there
is a guaranteed investment return). The intention behind regulation
4C(3)(a) was that the test should not apply after the life policy
becomes held under another component (see regulations 7(2)(o)
and 8(2)(m) of the 1998 Regulations, inserted by 7 and 12 of this
instrument). These provisions have effect from 6th April 2005.
4. Having
considered the Committee's questions, we recognise that the interaction
between regulation 4C(3)(a) and regulation 7(15) in the 1998 Regulations
is insufficiently certain, in particular on the question how the
test would be applied if the terms of a policy falling within
regulation 4C(3)(a) provide, on 6th April 2005, for a future
guaranteed investment return, within 5 years of that date. We
will therefore be reconsidering the drafting of regulation 4C(3)(a),
with a view to making a replacement instrument as a matter of
urgency.
13th December 2004
