ISA losses

[GW]

Hi, hope someone can advise me.

My wife has a structured (ie fixed term) product held within an ISA. The investment is due to mature in tax year 2012/13 and will almost certainly make a loss (invested in the Nikkei225 index in 2007 - before the crash and more recent events). My question is this: I know that losses on ISA investments cannot be off-set against other (non-ISA) gains.

However, is there any reason (ie would HMRC allow it, and assuming the product provider also allows it) why this ISA cannot be converted to a "direct" (ie non-ISA) investmet in (say) this tax year, so that any losses can be off-set against other gains in 2012/13?

Thanks

[Tax Champion]

If the investment is taken out of the ISA wrapper, the CGT clock is re-started, so that the allowable loss on sale would be calculated by reference to the value on the date it became non-ISA - the original investment cost becomes irrelevant.

[section 44]

It would be unusual for any tax purposes for losses to be allowable where profits are exempt.

[GW]

Many thanks.

It seems from Tax Champion's response that my wife cannot establish a loss, relative to the initial cost, if the investment is taken out of the ISA wrapper - although any subsequent losses would be allowable.

I assume that the same "rules" apply in the event of death (when investments held in ISA's effectively revert to "direct" investments). In other words, the "base cost" for calculation of any subsequent CGT liability is that which pertained at the date of death (ie when the ISA's ceased to exist).

Much appreciate your help.

GW