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Bare Trust registration for grand/child

Practical Issues
rhys
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Bare Trust registration for grand/child

#520207

Postby rhys » August 5th, 2022, 7:42 pm

The stockbroker platform notified me that a bare trust for my son needs to be registered by 1 September.

My late dad bought an OEIC for both my sons. I subsequently opened a broking account in sons' names, and transferred OEIC into that, sold it and reinvested in ITs. Just £15k worth so some income is produced.

1. I understand that as the beneficiary is a minor, he has his own personal allowance and so could reclaim any tax paid on income received. But he receives no income, it's all accumulated within the trust. It appears that I should pay the trustee rate of tax on all the income to which the child is benficially entitled? Seems unfair.

2. Since funds were purchased by the grandparent, in the name of "Son Re. Grandson", was this trust settled by the grandparent, or by the parent when I set up the broking account? This is not semantics, since bare trusts settled by a parent are liable to tax on all the child's income if it exceeds £100.

scrumpyjack
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Re: Bare Trust registration for grand/child

#520215

Postby scrumpyjack » August 5th, 2022, 8:18 pm

rhys wrote:The stockbroker platform notified me that a bare trust for my son needs to be registered by 1 September.

My late dad bought an OEIC for both my sons. I subsequently opened a broking account in sons' names, and transferred OEIC into that, sold it and reinvested in ITs. Just £15k worth so some income is produced.

1. I understand that as the beneficiary is a minor, he has his own personal allowance and so could reclaim any tax paid on income received. But he receives no income, it's all accumulated within the trust. It appears that I should pay the trustee rate of tax on all the income to which the child is benficially entitled? Seems unfair.

2. Since funds were purchased by the grandparent, in the name of "Son Re. Grandson", was this trust settled by the grandparent, or by the parent when I set up the broking account? This is not semantics, since bare trusts settled by a parent are liable to tax on all the child's income if it exceeds £100.


A bare trust is not a separate taxable entity and the income is taxable as the child's income and the child has the normal personal and capital gains tax allowances. This is of course subject to limitation if the source of the money was a parent. The fact that the income remains in the broker's account is irrelevant. The child is the beneficial owner of that account and the bare trustee is a mere nominee. I'm not sure what income tax has been paid on this income as dividends do not have tax deducted, except for some overseas dividends and I think that withholding tax can only be offset against UK income dividend tax liability, which would only apply if income was sufficient to pay additional dividend tax.

tjh290633
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Re: Bare Trust registration for grand/child

#520328

Postby tjh290633 » August 6th, 2022, 3:04 pm

rhys wrote:The stockbroker platform notified me that a bare trust for my son needs to be registered by 1 September.

My late dad bought an OEIC for both my sons. I subsequently opened a broking account in sons' names, and transferred OEIC into that, sold it and reinvested in ITs. Just £15k worth so some income is produced.

1. I understand that as the beneficiary is a minor, he has his own personal allowance and so could reclaim any tax paid on income received. But he receives no income, it's all accumulated within the trust. It appears that I should pay the trustee rate of tax on all the income to which the child is benficially entitled? Seems unfair.

2. Since funds were purchased by the grandparent, in the name of "Son Re. Grandson", was this trust settled by the grandparent, or by the parent when I set up the broking account? This is not semantics, since bare trusts settled by a parent are liable to tax on all the child's income if it exceeds £100.

I have had a similar notification from Columbia Threadneedle, since they took over BMO Management for UK shares.

As I recall, F&C were a bit pernickety about this in the first place. Jump Savings and Alliance Trust Savings just required a designated account. I asked Hargreaves Lansdowne what to do when my granddaughter got to 18. They told me that I could continue to subscribe to the nominated account, but if she wished, she could open an account in her own name, then they could just transfer the holdings into that account. I now have three grandchildren over 18 and I am minded to get each to open accounts and move the assets into share ISAs. I can still gift them cash, which they can then use to top up their pots. The fourth is just 13, so I guess that I should register his trust as instructed.

TJH

helfordpirate
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Re: Bare Trust registration for grand/child

#521352

Postby helfordpirate » August 10th, 2022, 1:47 pm

rhys wrote:The stockbroker platform notified me that a bare trust for my son needs to be registered by 1 September.

My late dad bought an OEIC for both my sons. I subsequently opened a broking account in sons' names, and transferred OEIC into that, sold it and reinvested in ITs. Just £15k worth so some income is produced.

1. I understand that as the beneficiary is a minor, he has his own personal allowance and so could reclaim any tax paid on income received. But he receives no income, it's all accumulated within the trust. It appears that I should pay the trustee rate of tax on all the income to which the child is benficially entitled? Seems unfair.

2. Since funds were purchased by the grandparent, in the name of "Son Re. Grandson", was this trust settled by the grandparent, or by the parent when I set up the broking account? This is not semantics, since bare trusts settled by a parent are liable to tax on all the child's income if it exceeds £100.


As already stated, the income accumulated in the account is the income of the grandsons and unless they have other sources of income is not going to be over their annual allowance.

On the other point, I assume there is no formal trust deed or documentation? A trust need not be written, but there must be "three certainties" - the subject of the trust (in this case the OEIC your father bought), the object of the trust (your sons i.e. the beneficiary), and the intention to form a trust. Assuming you had some conversation with your father where he said he wanted you to hold the OEIC in trust for your sons, then the three aspects would seem clear. Your father was the settlor, the OEIC was the initial trust property, you are the trustee and your sons are the beneficiaries.


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