HM Revenue and Customs is considering softening proposals to levy charges on cash held in stocks and shares ISAs.

• Talks have taken place between HMRC and financial services firms regarding draft ISA legislation.

• Discussions indicate potential changes to proposed interest charges and the definition of “cash-like” assets.

• Industry representatives report increased optimism following negotiations with HMRC.

• Final decisions are pending further technical consultation and legislative revisions.

• The Chancellor’s Budget introduced a £12,000 annual cap on cash ISA contributions for savers under 65.

• HMRC proposed anti-avoidance measures to prevent savers bypassing the cash ISA cap.

• Earlier proposals included restricting transfers from other ISA products into cash ISAs.

• Draft measures proposed tests to determine whether assets are excessively “cash-like” for inclusion in stocks and shares ISAs.

• Draft measures included applying a levy on interest earned from cash balances within investment ISAs.

• Industry figures estimated the proposed interest charge could reach up to 20%.

• Before July 2014, investments returning at least 95% of their value or maturing within five years were classified as cash-like and barred from stocks and shares ISAs.

• A compromise under discussion would involve platforms voluntarily monitoring excessive cash balances and cash-like assets.

• Proposed voluntary measures could include encouraging customers to move funds into equities and limiting high interest rates on ISA cash balances.

• Michael Healy stated that platforms already monitor ISA cash balances and interest levels.

• IG Group operates investment platforms in the UK and Ireland.

• Tom Selby warned that strict anti-avoidance measures could undermine stocks and shares ISAs.

• AJ Bell provides investment and pension services.

• Money market funds typically invest in short-term government or corporate bonds.

• Building societies have supported tighter restrictions on cash-like assets within ISAs.

• Representatives from building societies were outnumbered by investment platform and asset management participants in discussions.

• HMRC is considering targeted safeguards rather than a full ban on money market funds within ISAs.

• Alex Campbell described cash-like securities as an entry point for retail investors.

• Freetrade offers retail investment services.

• Isobel Gordon stated that safeguards are needed to prevent misuse of cash-like investments.

• Building Societies Association represents UK building societies.

• Further technical clarification from HMRC is expected before final legislation is introduced.

• The final policy is expected to affect ISA product design, compliance systems, and saver behaviour.