Using a child's bank account as a tax fiddle....

steerpike

Hypothetical question:-

If someone was using their own child's bank account to pay money into, and this <cough>the-ex</cough> person has a limited company - what might be the ruse going on here and is it legit ?<cough>as if</cough>

gethinceri

The ruse would be fraud. It is not legit.

steerpike

Gethinceri wrote:

The ruse would be fraud. It is not legit.

No doubt you're right - but *what* is the benefit of doing it?

markhewitt1978

steerpike wrote:

Gethinceri wrote:

The ruse would be fraud. It is not legit.

No doubt you're right - but *what* is the benefit of doing it?

Hiding the money presumably.

arran77

markhewitt1978 wrote:

steerpike wrote:

Gethinceri wrote:

The ruse would be fraud. It is not legit.

No doubt you're right - but *what* is the benefit of doing it?

Hiding the money presumably.

In a child's account would the money be safe from creditors if things go tits up?

markhewitt1978

Safer perhaps. But more likely they don't want the money to be discovered at all?

VTech

There is nothing illegal with paying money into your childs account.
If you do it to hide your own money then that is illegal.

Anyway, who would really do this as a fiddle ? there is no profit in savings accounts of any kind.

steerpike

maybe if someone is taking cash in hand and doesn't want to declare it to the taxman but also doesn't want bundles of cash around the place.

If it's money that's paid by the recipient of services - to the provider by bank transfer then surely that's traceable and there's no benefit of 'hiding it' in a child's account.

VTech

Every account with £5000+ is automatically reported to hmrs, as is PayPal when more than £5000 is transferred in any given year.
Money laundering isn't easy these days.

sloppyschleckonds

Doesn't really matter where the money ends up, an accountant will just look at income and expenditure.

If Director of said company isn't fully declaring income then thats a different matter.....

me-109

My understanding of this is that you would open the account and the account would be 'in trust' - that is it is essentially in your name and you can pay into, and withdraw, from that account. As a child's account it will be given interest tax free. Therefore you could pay money in and make more interest than you would in a private or business account. Of course on the self-assessment or accounts you might have to make the capital disappear or appear in a low/non-interest earning account.

metronome

VTech wrote:

Every account with £5000+ is automatically reported to hmrs, as is PayPal when more than £5000 is transferred in any given year….

Interesting. I have often contemplated if Paypal is used to secretly move money.

sloppyschleckonds

metronome wrote:

VTech wrote:

Every account with £5000+ is automatically reported to hmrs, as is PayPal when more than £5000 is transferred in any given year….

Interesting. I have often contemplated if Paypal is used to secretly move money.

Yes, from your missus usually to buy new bike bits.

Downward

VTech wrote:

There is nothing illegal with paying money into your childs account.
If you do it to hide your own money then that is illegal.

Anyway, who would really do this as a fiddle ? there is no profit in savings accounts of any kind.

4% currently for a santander kids account

alan_sherman

Person's assets are lower, so I'd they split with partner, or need to go to the CSA or something they are 'poor'. Also applies to old age care to avoid paying for it (something like a 16k limit on savings - If you have more then the gov takes it to cover the cost of your care).

Maybe planning ahead to avoid inheritance tax. Our they want the kid to be able to afford to go to university our buy a house in future

VTech

Downward wrote:

VTech wrote:

There is nothing illegal with paying money into your childs account.
If you do it to hide your own money then that is illegal.

Anyway, who would really do this as a fiddle ? there is no profit in savings accounts of any kind.

4% currently for a santander kids account

When you account for inflation your hardly breaking even.
No serious investor or indeed anyone serious about saving for the future would use the standard banking system. It simply isn't designed for people to invest in their future.

drlodge

It was my understanding you can only "gift" into a child's account about £100 per year i.e. parent paying directly into child's account. Therefore any sizable deposit will be against the law.

pdstsp

drlodge wrote:

It was my understanding you can only "gift" into a child's account about £100 per year i.e. parent paying directly into child's account. Therefore any sizable deposit will be against the law.

It's not against the law but there may be tax consequences - the transfer is a Potetntially Exempt Transfer for Inheritance tax purposes, so if the parent dies within 7 years of the gift then the amount is added back into the parents estate for IHT purposes, after allowing for the annual gift allowance.

drlodge

pdstsp wrote:

drlodge wrote:

It was my understanding you can only "gift" into a child's account about £100 per year i.e. parent paying directly into child's account. Therefore any sizable deposit will be against the law.

It's not against the law but there may be tax consequences - the transfer is a Potetntially Exempt Transfer for Inheritance tax purposes, so if the parent dies within 7 years of the gift then the amount is added back into the parents estate for IHT purposes, after allowing for the annual gift allowance.

Ah, that sounds about right, thanks for clarifying.