The move is designed to reduce the tax liability and simplify the transfer of funds for those administering the person’s estate. Subject to certain time limits, personal representatives and beneficiaries or legatees should not face income tax or capital gains tax on investments retained in an ISA during the administration of a deceased saver’s estate.

The legislation also modifies the additional ISA allowance available to surviving spouses or civil partners of deceased ISA savers to take account of this change.

As a result, investments held in an ISA after the death of the account holder are deemed as ‘administration-period investments’ held in a ‘continuing deceased’s account’ until the earlier of the administration of the estate being finalised, or three years after the account holder’s death.

It also confirms that no new subscriptions can be made to a continuing deceased’s account after the death of the account holder, and the account cannot be transferred between ISA providers, other than in specified circumstances.

These modifications will allow personal representatives to give instructions to account providers in relation to these accounts, and will also allow them to benefit from ISA tax advantages.

The legislation also introduces new capital gains tax rules in relation to administration period investments, in place of those at section 62 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992), which treats the acquisition of assets by a personal representative of a deceased person as if it had been made by a legatee.

In particular, it sets out rules concerning when a legatee is treated as having acquired the investment, and the point at which the value of these investments is considered, for the purposes of any future chargeable gains of the legatee.

The rule change also modifies the additional permitted subscription (APS) available to spouses and civil partners of deceased ISA holders.

The value of the APS available is currently equivalent to the value of ISA savings held by the deceased account holder on the date of death. The new legislation will allow the APS to be set at the higher of the value of ISA investments held on the date of death, or at the point when the account ceases to be a continuing deceased’s account.

The draft regulations have been published together with a draft explanatory memorandum for a period of technical consultation which closes on 7 April 2017.

The draft statutory instrument on Individual Savings Account (Amendment NO.XX) Regulations 2017 are here

The explanatory memorandum on draft Individual Savings Account (Amendment NO.XX) Regulations 2017 is here

Report by Pat Sweet, online reporter, CCH Daily