Payment of income tax for a child

busygrandparent

Can anyone offer some advice please.
Fairly recently Martin wrote an article which mentioned income tax is payable on interest received by a child (if treated as their income [rather than parental income] because the capital had not been provided by the parents and was more than available tax allowances) but made no comment about how to pay.
Although the reason income tax is payable on behalf of my grandchild is more complicated than just interest received, it seems to me everybody will have the same difficulty paying the tax due and hence my request for help.
As a minor he does not have a National lnsurance number, so it's impossible to create a personal tax account and make payment online, which insists on this information. l have telephoned ** and written to HMRC asking for the correct way to deal with it, forms etc because obviously having made the payment l want to be sure it is properly recorded against him and the debt has been fully discharged - there has been no response. 
Finally, having passed the date payment should have been made by because it related to the previous tax year, in desperation l sent a cheque and further letter, repeating my request for advice on the correct way to deal with the matter. The cheque has since been cashed, but again there has been no response to this letter.
Further tax will probably be payable for the current tax year so l would be grateful to know how to proceed properly in the future.

** The gentleman l spoke to on the Helpline seemed to understand what l wanted to do, but when the form he organised arrived several weeks later, it was to RECLAIM income tax, not pay it.

Dazed_and_C0nfused

The tax due will have to be established by completing a Self Assessment return (for the minor).

And the tax can then be paid onto the Self Assessment account.

I presume you have factored in the minors Personal Allowance of £12,570?

Jeremy535897

The problem here is the bureaucracy. There appears to be very little online. There was a response from HMRC in 2015 to a FOI request:
https://www.whatdotheyknow.com/request/254232/response/626840/attach/2/1274 15 Costello.pdf?cookie_passthrough=1
I think you have to complete SA1. On looking at that, it asks whether the individual has a NI number, so it clearly envisages cases where there is no NINO.
https://www.gov.uk/register-for-self-assessment/not-self-employed

xylophone

Are you a Trustee of a bare trust for your grandchild?

How does his income arise?

Have you taken account of his Personal Allowance and interest on savings/dividend allowances?

busygrandparent

Thanks for these comments, l will try to get a Self Assessment return organised and update this thread with the result.
ln answer to the various questions asked
- minors Personal Allowance has been taken into account, but tax still due
- l am a Trustee of the Bare trust for him, which is where the tax liability actually arises, but as a Bare trust the tax treatment is for him personally, not under trust taxation
- the income comes from the gain in value of some investment funds (holding stocks and shares) when sold. We were advised (badly) to hold them on Isle of Man and as an Offshore trust, gains are taxed as income, whereas for a mainland trust they are taxed as a capital gain
Will this make completing the Self Assessment form more complicated ?

Jeremy535897

We were advised (badly) to hold them on Isle of Man and as an Offshore trust, gains are taxed as income, whereas for a mainland trust they are taxed as a capital gain

This needs further clarification, because you have said that there is only a nominee arrangement (you as nominee/bare trustee), which is not a trust for tax purposes, as you appreciate. What I think you mean is that the bare trust funds have been invested in an offshore income bond, which means that your grandson pays basic rate tax on the gain, whereas if the investment had been in a UK bond, there would have been a basic rate tax credit. (In both cases, should the gain be sufficient, higher rate tax would be payable, subject to top slicing relief.) This overlooks two things:

• in a UK bond, profits would have been reduced by tax within the bond, unlike an offshore bond
• your grandson will not pay basic rate tax on the first £12,570 income on the offshore bond, but would get no basic rate tax repayment on a UK bond.

In no circumstances would an investment in a bare trust be subject to UK income tax if it was offshore, but UK capital gains tax if it was onshore, unless you are getting into the anti-avoidance legislation concerning transfer of assets abroad.

busygrandparent

Sorry for my slow response but I've been away.
Unfortunately these complexities are really going over my head now.
lf it makes a difference, what l can advise is the investment was not in an offshore income bond. lt was actually in a number of different Unit trust funds (each holding stocks and shares) which are freely available onshore, but held offshore by an insurance company. The taxable gain arose from the difference between the cost of the Units sold and the proceeds.

xylophone

Unfortunately these complexities are really going over my head now.

Why not take professional advice from a chartered accountant specialising in tax and trusts?

https://pilot-portal.tax.org.uk/utilities/ciot/find-a-member

With the amount of money that seems to be involved, would this not be a wise course of action?