Carrying on with the example above. The interest earned on the money during the 360 or so days it is outside the ISA is taxable. But because of the amount involved and current interest rates, any interest earned will be well below my PSA so there will be no tax to pay.
By long-term ISA status I mean I do not have to re-subscribe the money to put it back into the same flexible ISA within the same tax year. In other words paying the money back in does not count as new ISA money and does not make use of my allowance for that year. If I did not pay the money back in during the same tax year it will lose this status. If I wanted to pay it back in a future tax year I would have to use part of my ISA subscription allowance in that year.