School Fee Planning Practical Aspects

If shares in a private company are gifted to a minor grandchild to be held in bare trust such that dividends can be received by a minor and utilise their personal allowance and £2k dividend allowance and utilised to pay school fees, how does this work in practice as to documenting and tax returns?

  1. Does the grandparent act as trustee and open a bank account in trust for the grandchild and arrange to pay the school fees from the dividends received and to submit a tax return for the grandchild each year? How do you register online and get a UTR for a child?
  2. Is a gift-holdover election made under s165 TCGA ? who signs for the minor child, their parent or the same grandparent that is trustee and donor of the shares?
  3. Are any other practical aspects to look out for?

Dave Smith
Meston Reid & Co

Minors are required to file a tax return in their own right if they are entitled to any income as would be the case if a minor is a beneficiary of a bare trust.

Grandparent could gift shares to minor’s parent(s) to be held on bare trust.

A UTR for the minor can be obtained from HMRC by a request in writing by the parent (I think attempting on-line may prove problematic).

If minor is, say, a teenager then prima facie he/she should sign the tax return [TMA 1970 s8(2)]. If minor is younger, then probably more sensible for parent to sign minor’s tax return indicating that they are signing “on behalf of” the minor [CA 1989 ss 2 & 3; s3(1) provides “In this Act “parental responsibility” means all the rights, duties, powers, responsibilities and authority which by law a parent of a child has in relation to the child and his property”.]

Re s165 claim, both transferor and transferee have to sign; as above either minor or parent signs together with grand-parent.

Malcolm Finney

Surely a tax return is only required if minors have TAXABLE income over and above their personal allowance?

Geoff Parker

If a Notice to make a Return has not been issued there may still be a requirement to Notify HMRC of any changeability to income tax and/or capital gains tax.

However, if “taxable income” falls within an individual’s personal allowance (ie there is no liability to tax) and no Notice has been served no Return is necessary.

Malcolm Finney

Just to refine this slightly, a self-assessment tax return needs to be filed if savings and investment income is more than £10,000 regardless.

Stephen Kings
Kilsby Williams

Thanks to everyone for your replies. With regards to the personal allowance is this an allowance that has to be claimed? Could it be the case that if the PA is not claimed (in a return) the income remains taxable as it has not been offset by the allowance?

Dave Smith
Meston Reid & Co