Tax free Children's allowance - £100 interest limit on savings

Phil5US

Can anyone advise with the following scenario?
Say a parent chooses to gift a child, who has a full tax allowance available to them, a solar panel installation or installations, earning them a FIT of say £2000 per year. This is then paid into a children's account in their name and a claim made for interest to be paid gross.

Would the interest generated be considered a parents gift if it earns interest of more than £100 per annum?

IanManc

The gifting of the solar panel installation would involve the assignment of the contract with the energy company. You would not be able to assign that contract to a minor. So your scenario falls at the first hurdle.

Phil5US

Let's assume this can be worked around. Contracts can be in parents name c/o child or as a trustee.

xylophone

It seems to me that the income arising on the panels is the gift of whoever first owned it or the right to it.
It would then follow that if that income was owned by the parent then the gift was that of the parent and therefore the £100 rule would apply.

It would be immaterial that the parent was acting as Trustee - parents do commonly act as Trustees of their gifts to minor children, usually through "re" accounts.
http://www.hmrc.gov.uk/tdsi/children.htm
http://www.lawdonut.co.uk/law/personal-law/family-trusts-and-inheritance-tax/trusts-for-children-and-other-family-22-faqs See question 6

IanManc

Phil5US wrote: »

Let's assume this can be worked around. Contracts can be in parents name c/o child or as a trustee.

Contracts cannot be "in the parents name c/o child".

If the assets were held in a trust then the trustees would have to complete a tax return for the trust and the trust's income would be taxed.

It can't be "worked around", so there's no point in assuming it can.

Phil5US

Thanks xylophone for getting to the heart of the matter. The gift would be that of the purchase of the panels in the name of the child.

So the panels are first owned by the child.

xylophone

But the parent would be providing the money (gifting capital) to buy an income producing asset for the child - this would equate to putting money into a deposit account for the child or even buying shares for a child or giving shares to a child?
I think HMRC would be taking an interest? And see post 5 above re contracts and trusts.
http://www.lawdonut.co.uk/law/personal-law/family-trusts-and-inheritance-tax/trusts-for-children-and-other-family-22-faqs

http://www.peplows.co.uk/viewlist.php?item=Art1113;PHPSESSID=a156a69e3e8dc130d32cdcc1c4002056