View more on these topics

Use of Bare Trusts

Regardless of what may emerge in respect of the CTF it is worth remembering that ordinary “private trusts” in bare or nominee form already offer the opportunity to use the child&#39s (beneficiary&#39s) capital gains tax exemption each year regardless of who the settlor is – parent or otherwise. The parent could also be the trustee. These trusts are however caught by the income tax anti-avoidance rules in s660B ICTA 1988 where the income exceeds £100 gross in a tax year. Under this rule, where this income limit is breached all of the income is assessed on the parental settlor for a minor unmarried child. One method of avoiding this problem is to invest in non-income producing assets and focus on securing growth through capital gains.

Children cannot have stocks and shares ISAs but ordinary collectives (unit trusts, OEICs or investment trusts) held on bare trust for children can give the same capital gains tax advantages for gains up to the annual exempt amount. And, remember, taper relief also applies to reduce long-term gains.

An even easier way of ensuring that a child&#39s annual CGT exemption is fully used in connection with collective investments is for a parent to invest in, say, growth oriented collective investments, e.g. unit trusts or OEICs or investment trusts, that are designated for the benefit of the child. In this way a combination of taper relief and the annual exemption can ensure that over the long term no (or substantially reduced) capital gains tax is payable on gains. This could be an attractive way of funding for the increasing costs of further education. Clearly, as for all savings, the most effective results will be secured if investment can be made over a relatively long period.

Like the trust, the designated account route is one that necessitates a willingness to give up beneficial access to the investment used in the strategy from outset. The gift would normally be exempt for inheritance tax purposes or, to the extent it is not exempt, constitute a potentially exempt transfer.


Gifts at age 18 and over

Where the donor does not wish to make an immediate gift of the assets in question, perhaps because he or she wishes to maintain access to the funds, then a “deferred” gift of a collective investment will trigger a potential CGT liability on the donor when the gift is actually made, eg. when the child […]

Beard&#39s a gooner

The old City dictum, never trust a man with a beard, is being challenged by yet another financial services mover and shaker, Darragh Leeson of Prudential. He was spotted at last week&#39s Money Marketing boat party sporting the beginnings of a peppery grey goatee.But all is not what it seems. Leeson&#39s real intention is to […]

FSA fines Abbey Life £1m for endowment misselling and other failings

The FSA has fined Abbey Life Assurance Company £1 million for mortgage endowment misselling and other deficiencies in compliance procedures and controls between 1995 and 1999.Between 42,000 and 46,000 mortgage endowment and 3,000 to 4,000 other customers may be due compensation currently estimated to be between £120m and £160m.Abbey Life closed to new business in […]


The Pre-Budget Report (and the Press Release Rev/C&E1 in particular) makes reference to the first phase of consultation on corporation tax reform following the issue of the consultation document in August 2002. Once these responses have been analysed the Government are committed to consulting further. The following is a reminder of the issues The Inland […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm