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Bare Trusts & CGT

Practical Issues
TurboukToo2
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Bare Trusts & CGT

#388602

Postby TurboukToo2 » February 22nd, 2021, 8:02 am

My two children each have a bare trust set up for them. Contains ETF index trackers only. As parents we have always declared dividend income on the bare trusts as if it was our own (per £100 rule).

Eldest child hit 18 mid last year. They are currently unaware of their bare trust.
Question1 : I believe dividend Income becomes their 'responsibility' and we no longer need to declare it on our self assessment. Its under the current £2000 allowance so no self assessment needed by the 18 year old?
Question2 : IS the CGT allowance for this child(adult) on these assets £12300 (20/21)?

Younger child is under 18. They are also currently unaware of their bare trust.
Question 3 : To manage the CGT for this child I have (mistakenly?) realised a gain of approx £9000 for 20/21 on the misplaced understanding they also have a £12300 (20/21) CGT allowance. Further reading now suggests this allowance is £6150. Assuming £6150 is correct what is the processto notify HMRC and pay the CGT due?

Many Thanks!

scrumpyjack
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Re: Bare Trusts & CGT

#388606

Postby scrumpyjack » February 22nd, 2021, 8:13 am

TurboukToo2 wrote:My two children each have a bare trust set up for them. Contains ETF index trackers only. As parents we have always declared dividend income on the bare trusts as if it was our own (per £100 rule).

Eldest child hit 18 mid last year. They are currently unaware of their bare trust.
Question1 : I believe dividend Income becomes their 'responsibility' and we no longer need to declare it on our self assessment. Its under the current £2000 allowance so no self assessment needed by the 18 year old?
Question2 : IS the CGT allowance for this child(adult) on these assets £12300 (20/21)?

Younger child is under 18. They are also currently unaware of their bare trust.
Question 3 : To manage the CGT for this child I have (mistakenly?) realised a gain of approx £9000 for 20/21 on the misplaced understanding they also have a £12300 (20/21) CGT allowance. Further reading now suggests this allowance is £6150. Assuming £6150 is correct what is the process to notify HMRC and pay the CGT due?

Many Thanks!


Children have their own full CGT allowance and AFAIAW it does not matter that the assets were gifted to them by parents. The rule that interest on funds given by parents is taxed on the parents only applies to income.

A bare trust is not like other kinds of trusts. You are simply a nominee holding the shares on behalf of the child, who is absolutely entitled to then at 18.
Other tax rules about reduced allowances for trusts do not apply to Bare Trusts (which is where I think you got the £6,150 reduced CGT allowance)

If the disposal proceeds were less than 4 x the 12,300 CGT allowance and the gain less than 12,300 you do not need to make a tax return for the child. The gain does not appear on your tax return.


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