The Child Trust Fund (Amendment) - HM Revenue & Customs

The Child Trust Fund (Amendment) Regulations
2013
Who is likely to be affected?
Children who hold a Child Trust Fund (CTF) and banks, building societies and
other financial institutions who offer these accounts.
General description of the measure
The measure implements a previously announced increase to the annual
subscription limit for CTF, and removes the requirement on CTF managers to
provide fortnightly information returns to HMRC.
Policy objective
To ensure that CTF remains an attractive savings product and remove
unnecessary administrative burdens on businesses where possible.
Background to the measure
CTF is a tax-advantaged children’s savings account introduced in 2005 for
eligible children born on or after 1 September 2002. It allows savings for
children in a cash or stocks and shares account, without tax being due on any
income or gains arising from, or received in relation to, those savings.
The measure consists of 2 changes to the CTF rules:
An increase to the CTF annual subscription limit (from £3,600 to
£3,720), which was announced in the Chancellor of the Exchequer’s
Autumn Statement on 5 December 2012 http://www.hmrc.gov.uk/ctf/ctfbulletin66.pdf
Removal of the current requirement upon CTF managers to provide a
fortnightly information return to HMRC, including information relating to
the opening, transfer and closure of CTFs. As well as containing
information on CTFs held by the manager, this return also acts as a
mechanism for claiming government contributions to accounts.
Following the closure of new CTF eligibility in January 2011, the ending
of government payments to CTFs and the closedown of HM Revenue
& Customs’ (HMRC) CTF system, these fortnightly returns are no
longer be required by HMRC. This change was announced in
September 2012 and further details are available at
http://www.hmrc.gov.uk/ctf/ctf-bulletin65.pdf.

Detailed proposal
Operative date
The changes which provide for the increase in the subscription level
will apply with effect from 6 April 2013.
The changes which remove the requirement for CTF managers to
make certain returns to HMRC will apply with effect from 16 March
2013.
Current law
CTF subscription limits
CTF annual limits are prescribed in regulations 9(2)(b) and 9(3) of the Child
Trust Fund Regulations (SI 1450/2004) (CTF Regulations).
Fortnightly returns to HMRC
Regulation 30 of the CTF Regulations requires managers to make fortnightly
returns to HMRC containing information relating to the opening, transfer and
closing of CTF accounts.
Proposed revisions
CTF subscription limits
Legislation will be introduced by Statutory Instrument to amend the annual
subscription limits for 2013/14. With effect from 6 April 2013, the annual CTF
subscription limit will be raised to £3,720.
Fortnightly returns to HMRC
It is proposed to remove Regulation 30 of the CTF Regulations so that the
final fortnightly return will be for the period 1 st to 15 th March (and will be filed in
the period 16 th to 20 th March 2013).
Summary of impacts
Exchequer
impact (£m)
Economic
impact
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Negligible Negligible Negligible Negligible Negligible Negligible
This measure is expected to have a negligible impact on the
Exchequer.
The measure is not expected to have any significant economic
impacts.

Impact on
individuals
and
households
Equalities
impacts
Over 6.3 million children have a CTF. The increased subscription
limit will allow more money to be invested in these accounts. It will
benefit those account holders whose CTFs receive the maximum
amount that can be subscribed each year.
How many account holders will be affected will depend on the detail
of subscriptions to individual CTFs. No detailed estimates of the
number of individuals likely to be affected are available.
It is not anticipated that the changes will have a disproportionate
effect on individuals with protected characteristics.
Impact on
business
including
civil society
organisations
Operational
impact (£m)
(HMRC or
other)
Other
impacts
This measure is expected to have a negligible impact on
businesses and civil society organisations. Around 70 financial
institutions currently offer CTFs, each will receive a negligible
benefit in reduced annual administrative burdens, as they will no
longer be required to provide fortnightly returns to HMRC. The
change will result in a negligible one-off implementation cost for
some businesses, if they decide to dismantle systems supporting
the current fortnightly returns.
HMRC will no longer receive and process fortnightly returns from
CTF managers. This will contribute to the reduction in HMRC costs
that will arise from the closedown of the CTF system.
Competition: No competition issues have been raised in response
to the proposals but they should place CTF providers on a more
equal footing with providers of Junior ISAs who, in the absence of
Government contributions, do not have to provide such returns.
Small Firm Impact Test: All CTF managers, regardless of size,
should benefit from these changes, which remove information
requirements upon CTF managers.
Monitoring and evaluation
All aspects of CTF are subject to ongoing review through compliance work, as
well as discussions with account providers and other interested groups.
Further advice
If you have any questions about this change, please contact Simon Turner
on: 0300 054 6588 (email: simon.turner@hmrc.gsi.gov.uk).
Declaration
The Economic Secretary to the Treasury has read this Tax Information and
Impact Note and is satisfied that, given the available evidence, it represents a
reasonable view of the likely costs, benefits and impacts of the measure.