£3,000 Annual allowance

I have a client HNW who has done a lot of life time giving already so doesn’t want to directly give away his £3,000 (£6,000, with his spouse) but did like the idea of maybe setting up accounts for his 2 grandchildren (they live on mainland Europe though so may be a problem logistically but that aside!) so he and has spouse can each pay in in £3,000 a year. They are likely to live 10 + years so 40% saved on £60,000 sounds rather good to them!

My question is would this satisfy HMRC? Ie if he set the account up or would they argue that as he has control over it he’s not really given it away?

My only other thought is he send it to his daughter every April say & she pay it into an account for the children so he has no control over it whatsoever?

Any thoughts much appreciated!

Rachael Waring
Frodshams Solicitors

It would be a bare trust wouldn’t it? To make certain they could do a simple bare trust document.
Lorna Sansom
Blandy & Blandy LLP

I see no reason from a UK perspective why the grandparents cannot, say,
set up an account in their names and marked as being held for each
grandchild, provided that they at least let the parent know and enable
the parent to complete any returns to the relevant tax authority for the

The old Taylor case, involving an Isle of Man bank account in favour of
the daughter, failed as knowledge of the gift had not been communicated
to her.

I wonder, though, if the clients might have sufficient surplus income
for s.21 IHTA to be appropriate, mindful of the long term nature of the
proposal. If not then, as suggested, the gifts to the grandchildren need
to be made as early as possible in the UK tax year to ensure that should
any of the gifts become taxable, they secure the benefit of the annual

As an aside, I note the grandchildren live in Europe. It might be
appropriate for advice to be secured in the country in which they are
tax resident to identify if, as the recipients of gifts, they may be
liable to tax.

Paul Saunders

I am confused by this question. Is your client giving the money away to his grandchildren or not?

I can set up an account called My_Utility_BIll_Account and in the same way I can set up an account called GrandsonP account, but it is still my money. I am then taxed on any interest. I can then leave the monies in the relevant designated accounts to the relevant grandchildren in my will.

I can set up an account for GrandsonP and it is then it is GransdsonP’s money. The interest is then taxed on the grandchild.

Who’s account is it going to be? Who is the account holder? I do not think that you can or should try to fudge this.

Ian McKeever

Ian McKeever & Co Consulting actuaries.

Having looked at this recently, Natwest, Barclays and Lloyds all offer Children’s Saver accounts of varying names where the terms and conditions make it clear that the account holder is holding the cash on bare trust for the children. Lloyds is slightly less attractive because the child gets control of the funds at 16 rather than 18.

This should certainly satisfy HMRC that the funds belong to the children.

HSBC were less clear.

Andrew Goodman
Osborne Clarke LLP

Many thanks to all of you who replied I am either going to go down the bare trust route & then use a suitable bank or as one post suggests, suggest my client utilise one of the accounts where it really is clear that it is the grandchildrens money.

I will also have a further chat re gifts out of income.

Rachael Waring