Maturing Child Trust Funds to retain tax-advantaged status
Maturing Child Trust Funds will keep their tax-advantaged status on maturity under draft regulations that have been published for consultation.
A Child Trust Fund (CTF) is a tax-advantaged savings account which provides children born between 1 September 2002 and 2 January 2011 with an asset when they reach adulthood.
CTFs begin maturing in September 2020 when the first children reach 18. Without legislative change the investments will lose their tax-advantaged status at maturity.
An announcement was made at Budget 2018 that consultation would take place on draft regulations which would ensure that the funds in maturing CTF accounts could retain their tax-advantaged status after maturity.
The government has now published draft legislation, together with a tax information and impact note, for technical consultation.
The CTF Regulations will be amended to provide that where a CTF provider has received no instructions on the future of the investments from the account holder those investments are placed, at maturity, in a ‘matured account’ pending instructions. The ‘matured account’ can be a continuing CTF account or a cash ISA or stocks and shares ISA, offered by the original CTF provider. Funds in either ‘matured account’ will retain their tax advantaged status, and the terms and conditions which applied before maturity. No subscriptions can be made to the account, which must be retained by the original provider.
The ISA Regulations will be amended to provide that funds transferred from a CTF or matured CTF account will be disregarded for the purposes of the overall ISA subscription limit. Funds transferred to a Lifetime ISA will be subject to the Lifetime ISA payment limit. This is consistent with the approach taken for maturing Junior ISAs.
The closing date for comments is 11 August 2019.
These changes make complete sense and will ensure a level playing field with maturing Junior ISAs.