Is this legal?

chelseablue

I've been trying to find a new home for the money in my rubbish paying ISA.

Then I realised my son has a savings account that pay's 3% gross (he gets interest tax free as he's under 18)

I am the person named on the account to operate it for him as he's too young.

Can I put my own money in there therfore getting tax free interest on it?

TCA

This might help:

http://www.which.co.uk/money/tax/guides/tax-and-your-children/children-and-tax/

chelseablue

Thank you

The way I read it is that if the money is paid in from me he would pay tax on interest above £100.

But if someone else paid the money into his account the interest would be tax free?

xylophone

(he gets interest tax free as he's under 18)

No, he gets interest tax free because his income (presumably) is below his tax free allowance.

If he were a child star say and earned £12000 a year, he would be paying some tax.

See http://www.which.co.uk/money/tax/guides/tax-and-your-children/children-and-tax/

The £100 rule applies to money given by parents. See
http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/families/babsi.htm

Be aware that any money paid into your child's account belongs to your child absolutely - you are holding it in bare trust for him.

chelseablue

xylophone wrote: »

No, he gets interest tax free because his income (presumably) is below his tax free allowance.

If he were a child star say and earned £12000 a year, he would be paying some tax.

See http://www.which.co.uk/money/tax/guides/tax-and-your-children/children-and-tax/

The £100 rule applies to money given by parents. See
http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/families/babsi.htm

Be aware that any money paid into your child's account belongs to your child absolutely - you are holding it in bare trust for him.

Regarding this part: Be aware that any money paid into your child's account belongs to your child absolutely - you are holding it in bare trust for him

As Im the named person on his account obviously I have to make withdrawals as he's only a baby

Unlimited withdrawals are allowed on his account. How can they actually police what parents do with the withdrawals?

xylophone

http://www.hmrc.gov.uk/forms/r85.pdf

This is the form you complete on behalf of the saver - by signing the form you are declaring that the money in the account (and the interest arising) belongs to the saver and that he is entitled to receive that income gross.

I am sure that nobody would wish to make a fraudulent declaration....

IronWolf

chelseablue wrote: »

Unlimited withdrawals are allowed on his account. How can they actually police what parents do with the withdrawals?

With difficulty, but you asked if it was legal, not what the chances you'd get caught were

I'm no lawyer so take the following with a pinch of salt:

AIUI the money would legally be the baby's, and you could only get it back once the baby was old enough to be of a mind to give you the money back.

If you take the money back because its 'yours' then you are open to accusations of tax evasion, fraud and/or theft.

chelseablue

IronWolf wrote: »

With difficulty, but you asked if it was legal, not what the chances you'd get caught were

I'm no lawyer so take the following with a pinch of salt:

AIUI the money would legally be the baby's, and you could only get it back once the baby was old enough to be of a mind to give you the money back.

If you take the money back because its 'yours' then you are open to accusations of tax evasion, fraud and/or theft.

Thousands of people must operate savings accounts for their children, I suppose that when you go in to withdraw money from it, the bank must presume that the child is going to buy something with the money?

jimjames

chelseablue wrote: »

I've been trying to find a new home for the money in my rubbish paying ISA.

Then I realised my son has a savings account that pay's 3% gross (he gets interest tax free as he's under 18)

I am the person named on the account to operate it for him as he's too young.

Can I put my own money in there therfore getting tax free interest on it?

Rather than trying to fiddle the rules why not just open an account yourself that pays 5%, 4% or 3%? Plenty of places better than an ISA

IronWolf

chelseablue wrote: »

Thousands of people must operate savings accounts for their children, I suppose that when you go in to withdraw money from it, the bank must presume that the child is going to buy something with the money?

Probably, I don't even know whether a bank has any incentive to care what you are doing. They care about money laundering but probably couldn't care less about you evading taxes.

xylophone

Rather than trying to fiddle the rules why not just open an account yourself that pays 5%, 4% or 3%? Plenty of places better than an ISA

mentioned to the OP before......https://forums.moneysavingexpert.com/discussion/comment/66875720#Comment_66875720