Call for evidence on penalties and compliance for ISAs

Stakeholder feedback is sought on the following:

• Whether there are alternative ways in which non-compliance could be addressed without the need for financial penalties.
• Whether there should be different levels of penalty for different breaches and should penalties be charged irrespective of whether there is a tax loss.
• What sorts of errors are considered minor and which are more significant.  
• Whether the existing penalties were appropriate and proportionate.
• Whether there should be an appeal process or the consideration of mitigating circumstances when it comes to the imposition of penalties.

The consultation closes on 21 February 2022.

Useful guides on this topic

ISA guide
What is an ISA? What are the limits? How are ISAs taxed?

ISA limits
This a freeview 'At a glance' guide to ISA investment limits each year.

External Links

Individual Savings Accounts: Compliance and Penalties

ISA compliance and penalty proposals

Question 1 – Do you have any suggestions for ways in which rule-breaking behaviours might be addressed that are not penalty dependent?

Question 2 – Do you agree that there should be different levels of penalty applied to minor and significant breaches of the ISA regulations? What are your reasons?

Question 3 – Do you agree that HMRC should be able to charge a penalty on all breaches of the ISA regulations? What are your reasons?

Question 4 – Do you agree that HMRC should be able to charge a penalty regardless of whether the breach leads to a potential tax loss? What are your reasons?

Minor breaches of the regulations

Question 5 - Which types of ISA management errors would respondents consider to be minor. What are your reasons? Significant or persistent breaches of the ISA regulations

Question 6 – Are there any other specific breaches of the ISA rules which should be considered significant, and your reasons why?

Question 7 – Are the penalties appropriate and proportionate to each type of breach?

Question 8 – Do respondents favour the calculation of penalties by reference to a set amount per account or a percentage of account value?

Question 9 – If respondents consider different amounts or formulae should be applied please describe them and explain why you think they would give a better compliance behaviour outcome than the proposals above?

Question 10 – How should a combination of minor and significant breaches be dealt with? Do respondents agree with the approach suggested?

Question 11 – Should the amount of the penalty be reduced by mitigating circumstances?

Question 12 – Do you agree that any penalty should have a right of appeal?

Question 13 – Do you agree that there should be a minimum penalty? What are your reasons?

Question 14 – Do you have any thoughts on how a minimum penalty should be calculated for minor and significant breaches? 

Question 15 – Should the amount of the minimum penalty be reduced by mitigating circumstances? If so, would that reduce the impact of a minimum penalty?

Investor compliance

Question 16 – Where investors are non-compliant should HMRC introduce a financial penalty, or are there any alternative sanctions that could be imposed that would act as an effective deterrent?

Other compliance issues and questions

Question 17 – Should it be mandatory to report any breaches discovered by ISA managers? What are your reasons?

Question 18 – Should HMRC have the power to suspend ISA manager approval?

Question 19 – Where ISA managers have not conducted any ISA business in a period of 12 months, should HMRC withdraw their ISA manager approval?

Other related issues and questions

Question 20 – Are the proposals a fair and proportionate approach to ISA breaches?

Question 21 – Would the suggested penalties for being in breach of the ISA rules encourage better compliance with the rules?

Question 22 – Will any administrative or other burdens be created if the proposed ISA penalties are introduced? If so, what are they?

Question 23 – What is the likely estimate of costs of any additional burdens?

Question 24 – Are there any other points you would like to raise or suggestions you would like to make to improve compliance with the ISA regulations?