Holding investment from grandparents for kids
Hi tax friends
My folks want to gift £10K cash to each of our three children. The idea is it would be invested on their behalf and they would get control of all the funds when they turn 18. The children are aged 4-9.
The children don't have any bank accounts. Unfortunately the investment business that manages the particular investment fund that we would likely pick on their behalf does not accept applications from minors. It would be possible to open an account with another platform but that involves various platform fees and any transaction fees not to mention additional paperwork which we don't want to suffer unless really necessary.
In the following scenario :
1. Grandparents write a letter to me along the lines of " please find enclosed a £30K gift to the children " and enclose a £30K cheque payable out to me
2. We cash the cheque in our joint current account
3. I apply for the investment accounts in my name and designated in the children's names so the funds are clearly earmarked for them enclosing 3 x £10K cheques
From a tax perspective we would like to take the position that the accumulated income ( and gains ) arising would be beneficially owned by the children and taxable on them subject to their personal allowances and dividend allowances.
I suppose HMRC might view this as MY income and gains because of 1-3. above. I imagine they could receive automatic reporting information from the fund manager about the income and gains on the account in my name and wonder why it wasn't reported on my self assessment return. Or they might say it's some kind of implied accumulation and maintenance trust and as such I as the trustee am taxable.
I would be grateful for comments on whether the position above is common practice and would be supportable and if there is anything else that should be done to support the position. I appreciate the sums involved are not large but we are keen to ensure we are compliant.