Imaginative tax planning - interest on a childs bank account

[minsky1]

One ex-colleague who thought of himself as a bit of a Ken Dodd style tax evader gave his exact same name to his son with a view of opening up a few bank accounts in the boy's name and muddying the waters with HMRC a bit.

Often wondered what scope there was in doing this and how far this could be taken. Obviously the DOB would make the accounts unique, but if your running a largely cash business or banking cheques, who knows.

[Mailman]

Yes, HMRC already knows and has access to everything it needs from the banks here.

Mailman

[Churchill]

HMRC paid £100k for details of 100 high value accounts owned by British nationals.

Edit: And they got them on appro first apparently.

Do you not think that HMRC know all there is to know about your UK based bank accounts already?

[ASB]

ensure no more treacherous little weasels sell tax details to the Krauts.

HMRC paid £100k for details of 100 high value accounts owned by British nationals.

Edit: And they got them on appro first apparently.

[ASB]

If I gifted my child a large sum of money, how will the they know it came from me and not a relative?

Thinking hats on please....

Ok, it's £100 per parent per child in income before you get taxed on it (so you may be able to give a little more than you think).

As to the question, they won't until they do the investigation. When I had mine that started with the company, expanded into mine, and then went to cover the children [because of transactions from my bank accounts to theirs].

Fortunately I had the sense to open account for them from which gifts from parents went into and another one which gifts from grandparents etc went into. The majority of the funds they had were demonstrably not sourced from me or their mother.

If you've just got everything in one pot it can be a nightmare to sort it out. Also with large gifts it's wise to ensure you get a note or something from the donor (great "thanks for the 10 grand dad, but could you just write me a note explaining it's from you etc for the tax man").

There is no point trying to stuff it in some sort of roll up vehicle either, since any tax paid is non reclaimable. Only really leaves offshore or formal a+m etc type trusts really if the sums are large.

[Tex]

I'll open and administer one on your behalf for £200 a year. But you don't get any interest on it.

Lichtenstein

Liechtenstein

[NotAllThere]

What's the smallest deposit you need to open a Swiss bank account?

P.S. Maybe Lechtenstein (sp?) would be safe now, and eager to let you open a new account even with a modest deposit, as they'll no doubt be taking extra precautions to ensure no more treacherous little weasels sell tax details to the Krauts. Lightening doesn't strike twice in the same place, and all that

I'll open and administer one on your behalf for £200 a year. But you don't get any interest on it.

Liechtenstein

[TheFaQQer]

My parents do it every year - split a chunk of cash between my siblings and I.

When we were buying our houses, they did the same - lump sum that was then written off over the seven years to help get on the property ladder.

[DimPrawn]

I would never dream of doing it.

[malvolio]

http://www.hmrc.gov.uk/taxback/childsavings.htm





Hooray, so I can give my little boy enough money to make him £5,035 pa in interest tax free. BUT....

http://www.moneysavingexpert.com/sav...vings-tax-free





So, anyone working round these rules and using your childrens tax allowance for interest above £100?

If I gifted my child a large sum of money, how will the they know it came from me and not a relative?

Thinking hats on please....

Ermm... S660a specifically prevents you doing this. You can do it, but the tax liablility is strictly yours. Aim to step around that and you're doing the illegal tax evasion thing. Highly not reccommended.

[Marina]

What's the smallest deposit you need to open a Swiss bank account?

P.S. Maybe Lechtenstein (sp?) would be safe now, and eager to let you open a new account even with a modest deposit, as they'll no doubt be taking extra precautions to ensure no more treacherous little weasels sell tax details to the Krauts. Lightening doesn't strike twice in the same place, and all that

[DimPrawn]

http://www.hmrc.gov.uk/taxback/childsavings.htm

Children, like adults, can have a certain amount of income before they start paying tax. They are entitled to the same personal allowance as other people. So, for the tax year 2006-2007, they can claim back the tax on their savings income if their total taxable income is less than £5,035.

Hooray, so I can give my little boy enough money to make him £5,035 pa in interest tax free. BUT....

http://www.moneysavingexpert.com/sav...vings-tax-free

Children can earn £100 interest per year before you're taxed on it


However, don't assume you can dunk fortunes in your kid's name. If a child generates more than £100 interest in the course of the year from money specifically given by each parent, this income is taxed at that parents' tax rate.


In practical terms this means you could put up to £1,850 in the 5.7% top paying children's account, and it wouldn't be taxed, as that would generate around £105. Just to clarify, this doesn't mean £1,850 every year; it's the interest generated from all cash given in this and previous years.


Yet these rules only apply to parents, not grandparents, aunties, uncles or friends – they may all give your children as much as they like and, providing it's a genuine gift, it counts as the child's money without a £100 limit.


The only other tax implications of making cash gifts is the possible spectre of inheritance tax if the donor dies within seven years of making it. And a quick warning, for those bright sparks thinking, “if I gave my brother's kids £10,000 and he gave mine the same….”, well good thought, but no cigar. If the Inland Revenue spots you, you're in trouble.

So, anyone working round these rules and using your childrens tax allowance for interest above £100?

If I gifted my child a large sum of money, how will the they know it came from me and not a relative?

Thinking hats on please....