Not the great train robbery or Brinks Mat but is it legal

whambamboo

ReportInvestor wrote:

Why can a parent give £1,200pa tax free to a 4 year old but not to their 6 year old sibling? This is a policy nonsense

The government needs to allow a Child Trust Fund [without dishing out £250 or £500 vouchers given to the 0-5s] for children 6-18 so that parents can save up to £1,200 into a tax free account for their children in preparation for university.

My son is 4, and is not entitled to any Child Trust Fund. He is a few months too old. I didn't mind so much not getting the free money, but it took me quite a while before I realised I couldn't open one for him.

Milarky

whambamboo wrote:

My son is 4, and is not entitled to any Child Trust Fund. He is a few months too old. I didn't mind so much not getting the free money, but it took me quite a while before I realised I couldn't open one for him.

Yes, a better system would have made the CTF accounts available to any child under 16 at the date of introduction (why 1st September 2002 and not 6th April 2003?) and allowed so much to be saved per annum up until the 5th April after their 16th birthday - as that's when ISAs are permitted, I believe. In other words there would be de facto extension of ISA saving to birth with a seamless system if they had wanted one. (But instead I suspect that someone at the HRMC spotted that this would entirely circument the £100 income rule - as parents would be using a legal means to deposit cash in their kids' names throughout their lives) The ''Child Individual Saving Account'' - 'CISA' need not have the same annual limit either - £100 per month is perfectly adequate - and children of all ages (and their parents) could have cause to thank Gordon Brown. (If only!!)

And governtment payments could then be restricted to those with children on a certain level of income or tax credits - not just sprayed around to everyone.

However- before Dunstonh arrives to defend them - CTFs seem to have been designed to push investments towards the marketeers rather than offer better options to 'save'. As such they needed to give the payments as widely as possible for as long as possible - with a long future maturity date stamp (CTFs don't have to payout until 2020 as you realise) on them. It's like: "You messed up with pensions and endowments - so here's another long term savings product designed to get you out of the stew - please don't mess up again!" :eek:

whambamboo

Milarky wrote:

However- before Dunstonh arrives to defend them - CTFs seem to have been designed to push investments towards the marketeers rather than offer better options to 'save'. As such they needed to give the payments as widely as possible for as long as possible - with a long future maturity date stamp (CTFs don't have to payout until 2020 as you realise) on them. It's like: "You messed up with pensions and endowments - so here's another long term savings product designed to get you out of the stew - please don't mess up again!" :eek:

I haven't looked at CTFs. Is it possible to choose your investment spread?

Robert_Sterling

Hereward wrote:

After re-reading your OP it will depend on where Sibling A and B get their money from to give to each other: if you are supplying the money then HMRC will probably deem it as evasion as the sibling's have no money of their own. On the other hand if they money is coming from their own savings then the HMRC will be probably deem it ok, but in this scenario neither sibling’s savings increase so the transactions are fairly pointless.

The point of the scheme is that the children get the money from aunts and uncles rather than from their parents. As a result the interest up to about £5000 per annum is tax free. If money comes from parents only £200 of interest at most is tax free.

Robert_Sterling

Milarky wrote:

why 1st September 2002 and not 6th April 2003? :

I agree that your idea is logical.
I do not know what the reason was for choosing 01 Sep 2002 but it is in fact the start of an academic year.