Posted on: 13 June 2016
What is Additional Permitted Subscription Allowance (APS Allowance)?
The Additional Permitted Subscription Allowance was introduced by the Government in 2015 to allow the surviving spouse (or civil partner) of a deceased ISA holder to make additional subscriptions on top of their annual ISA limit (currently at £15,240 for the 2016/17 tax year) - enabling them to place any ISA investments/cash in a tax-free environment, essentially continuing the ISA(s).
Mr Anon holds a Cash ISA of £50,000 and he dies on 25 February 2016. As long as his surviving spouse was his married/civil partner, and they were living together on the date of his death, the surviving spouse is eligible for an Additional Permitted Subscription of up to £50,000 which can be used on an ISA of his/her choice.
It is important to note that the surviving spouse is not inheriting the balance of Mr Anon’s ISA i.e. the £50,000 – but the value of the funds contained within the tax-free ‘wrapper’ instead.
Further, the Additional Permitted Subscription is not limited to just one of the deceased spouse’s ISAs – the APS Allowance is calculated as the combined total of all the deceased’s ISAs at their date of death.
Who is eligible to use the Additional Permitted Subscription Allowance?
Anyone who is a UK resident, aged 16 or over and the surviving spouse (or civil partner) of a deceased ISA holder (who died on or after 3 December 2014), is eligible for an APS Allowance. However, they must have been living with the deceased ISA holder at the date of death and not separated under a court order, deed of separation or in circumstances where the marriage or civil partnership has broken down. A couple who are living apart at the date of death due to a partner living in a care home, are not considered to be separated under this rule.
How does the Additional Permitted Subscription Allowance work?
If the deceased held various ISAs with different managers, the surviving spouse will have separate APS Allowances with each ISA manager. However, he or she can choose to apply the total APS Allowance with the original ISA provider(s) or transfer it to a provider(s) of his/her choice. The surviving spouse may fund their ISA(s) with the new Allowance using cash already held or perhaps inherited. Where an ISA provider does not accept Additional Permitted Subscriptions, they must allow a transfer of the APS Allowance to another provider.
The APS Allowance is independent of the assets held in an ISA. So even if another member of the family inherits the deceased spouse’s ISA(s) itself (i.e. the balance or assets contained within), the surviving spouse is eligible to apply for the APS Allowance.
How do I apply for an Additional Permitted Subscription Allowance with Duncan Lawrie?
If both you and your spouse have a relationship with us at Duncan Lawrie, then we shall of course be aware of the situation in dealing with your partner’s estate, and your Private Banker or Investment Manager will be in contact with you to guide you through the process. We will send you the required documentation to complete and return to register your eligibility. If your partner had an ISA relationship with us, your APS Allowance will automatically be with us.
If your partner did not have an ISA relationship with us, or has an additional ISA(s) with another provider(s), then please contact your Private Banker or Investment Manager who will provide you with the required documentation and a transfer authority form which will allow us to contact the other ISA manager(s). We will ask them to provide us with all of the information that we will need in order to process your APS Allowance.
If you wish to apply your APS Allowance to a Stocks and Shares ISA, you can choose to apply this to your existing Stocks and Shares ISA account with us (if applicable) or you can open a new Stocks and Shares ISA account.
If you wish to apply your Additional Permitted Subscription to a Cash ISA at Duncan Lawrie, you will be required to open a new Fixed ISA Reserve Account.
How do I transfer my Additional Permitted Subscription allowance from Duncan Lawrie to another provider?
If your partner held an ISA(s) with Duncan Lawrie, your APS Allowance will automatically be with us. However you may, if you wish, apply this APS allowance to another manager of your choice. You simply need to contact your chosen ISA manager(s) who will provide you with the necessary documentation for the transfer of the Allowance. Once we are in receipt of the transfer request from your chosen ISA manager, we will provide them with information on your APS allowance that can be transferred within 30 days.
What if I have also inherited the balance/assets of my partner’s ISA(s)?
Your partner may have left to you, the balance of his/her Cash ISA(s) and/or the assets held within their Stocks and Shares ISA(s). With the balance held in the Cash ISA, it is very straightforward to transfer this as you wish, either into an ISA of your choice using your APS allowance with it, or into an alternative account.
If you inherit the assets held within your partner’s Stocks and Shares ISA and decide you’d like to continue the investment using your APS allowance, you will need to make an ‘in-specie’ transfer to a Stocks and Shares ISA in your name with the same provider. So if your partner held a Stocks and Shares ISA with us and you decide you’d like to continue this investment, you may only apply an Additional Permitted Subscription if it is transferred to a Stocks and Shares ISA in your name with Duncan Lawrie.
Once your APS Allowance has been used, you may then transfer the full ISA to another manager of your choice. You should then contact your ISA manager who will guide you through the process.
How long do I have to use any Additional Permitted Subscriptions?
Additional Permitted Subscriptions can be made straightaway (from the date of death of your partner). Please note, it can take some time to complete the application for probate that would allow companies to release information and valuations which would be needed if your partner had one or more Stocks and Shares ISAs.
You can use your APS Allowance for up to three years after the date of death. If the administration of the estate takes longer than three years from the date of death, you can make cash subscriptions using your APS Allowance within 180 days of completion of the administration of the estate.
Where you inherit a Stocks and Shares ISA and wish to transfer it ‘in-specie’, i.e. transfer the investments to an ISA in your own name and use them to subscribe to your APS Allowance, you can do so within 180 days of being informed about the beneficial ownership of the assets being passed to you. We advise you to check with the ISA provider(s) of the deceased on their rules regarding the 180 days for ‘in-specie’ transfers.
If you are applying for Cash ISA using your APS Allowance with Duncan Lawrie within three years of the date of death, please contact your Private Banker or Wealth Manager to obtain the necessary forms. If you are applying after three years, we will count 180 days from completion of the administration of the estate. Your solicitor/executor will confirm the dates, in writing, along with a copy of the grant of probate.
If you are applying for a Stocks and Shares APS ‘in-specie’ transfer with Duncan Lawrie, we would count 180 days from the date the executor informs/instructs us, in writing, along with the copy of grant of probate, to transfer the ownership of the assets in your name.
There are some important considerations when applying for an APS allowance:
- Did your partner hold ISAs? Where would you like your inherited ISA investments/cash to be held?
- If you’ve inherited investments in your partner’s Stocks and Shares ISA, do you want to transfer them to an ISA in your name (‘in-specie’) or do you want to liquidate these investments?
- Are you happy to use the same type of ISA or do you want to look at alternative options?
- Do you want to use your partner’s provider or transfer the APS Allowance to another ISA provider? Please note, if you’ve used some of your APS Allowance already, you won’t be able to transfer any of that remaining APS Allowance to another provider. You’ll need to continue using the remainder of that APS Allowance with your existing provider. However, once you have made full subscriptions using your APS Allowance, you can then transfer your ISA balance to another provider under the normal transfer rules
- Once you open an APS account with an ISA provider, you can subscribe lump sum or in parts, within the timeframes as described above. Any further additional subscription to APS must be made with this same ISA provider
- APS subscriptions cannot be made to (or from) a Junior ISA (JISA)
- Tax rules may change so any decision made concerning APS must be based on your individual circumstances at the time
- Once an ISA provider is informed about the death of an ISA holder, the ISA wrapper is removed. Any interest/dividends/returns earned post the date of death will not be exempt from tax. Some providers cease to accrue interest on ISAs, and some may transfer the funds to another account. We advise you to check with the individual ISA provider(s) regarding the treatment of the ISA in such an event.
If you have any further questions about the APS Allowance, please do not hesitate to contact us. We would be happy to help you and will do everything possible to make this process as smooth as possible for you.
All data has been compiled by Duncan Lawrie from sources believed to be reliable. Full details of sources are available on request.
The comments and figures in this document are generally applicable but you should always take specific advice to suit your individual circumstances before taking any action. Errors and omissions excepted.
The value of investments and income generated may fall as well as rise, and investors may not get back the amount invested. Past performance is not a reliable indicator of future results.