Childrens savings interest

Childrens savings interest

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My daughter who is five years old has a savings account on which she receives interest tax free-an R 85 was submitted to facilitate this. I understand that the Inland Revenue deems the children’s income as the parents if the interest received is more than £100, and the capital producing this interest was received from the parents.

My daughter's uncle would like to put a largish capital sum of around £15,000 in my daughter's account for a couple of years and let the interest accrue to her. From my reading of the legislation it seems that my daughter can earn interest up to the personal allowance on any capital that is put into her account as long as it has not been put there by the parent.

Firstly I seek confirmation that I'm correct in my interpretation and secondly what simple measures need to be undertaken to ensure that when the revenue get round to trying to impose the hundred pound threshold, mistakenly in this case, what should we have done in order to establish the sources of the funds.

Is it sufficient to demonstrate that the funds were received either by way of cheque or bank transfer from the uncle's account, or are more stringent and demanding tests required?

Has anybody got experience of this type of issue from a practical point of view or can think of other relevant points?

Thanks in advance for your help.

Allan Duff

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By peter.blatch
26th Jan 2007 16:30

"In my Daughters account for a couple of years"
If the uncle is going to give the money outright it is fine and a letter confirming the gift is adequate . However if the uncle is expecting the money back technically the income will be his and not your daughter's - S660A TA 1988.

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