Guidance

Tax-free savings newsletter 2 – August 2021

Published 13 August 2021

1. Changes to the Guidance Notes for Child Trust Fund (CTF) providers

We’ve updated the Guidance Notes for CTF providers to make changes to the content and the format.

The CTF guidance notes are now in HTML format, with a hyperlinked index to the main sections of guidance. All the previous blank sections of guidance, including the blank chapter 14, have been removed.

The guidance does not have chapter and paragraph numbering. This will make it easier for HMRC to update the CTF guidance more frequently in the future, instead of annually as we have done in the past.

1.1 Introduction

The Introduction section now includes an overview of the CTF, updated HMRC contact details and the CTF definitions that were previously in an Appendix to CTF guidance notes.

1.2 Types of CTF

We’ve deleted all guidance regarding ‘lifestyling’ of CTFs under the Types of CTF section, which ceased to be a requirement from 6 April 2017.

1.3 Subscriptions to a CTF

We’ve made it clearer that Subscriptions to a CTF is a gift to the child and cannot be repaid if the subscriber changes their mind or the payment was made in error. The annual subscription limit has been updated to £9,000 for 2021 to 2022.

1.4 Management of the CTF

We’ve updated the Management of the CTF section under the heading ‘Repairs – removal of excess subscriptions’, by deleting the reference to the Tax Deduction Scheme for Interest which was abolished on 6 April 2016.

1.5 Transferring a CTF

We’ve updated the Transferring a CTF section under the heading ‘Total subscriptions in the previous year’, to include the current dates and amounts in the example.

1.6 Withdrawals from a CTF

We’ve inserted new guidance in the Withdrawals from a CTF section under the heading ‘What to do when a young person who lacks mental capacity turns 18’. This is the same as the Junior ISA guidance.

1.7 Returns of information

We’ve updated the guidance in the Returns of information section under the heading ‘The annual return’, following changes to the CTF annual returns for 2021.

2. CTF annual returns

The deadline for CTF providers to file their annual returns for this year was extended to 6 July 2021.

If you’re a CTF provider and have not yet submitted your return, you should do this without further delay. If you’re unable to submit the return you should email [email protected] and put ‘CTF Annual Return’ in the subject line.

3. Guidance for CTF registered contacts

HMRC’s guide for registered contacts on managing a CTF account explains what they should do if their child lacks the mental capacity to manage their CTF account when it matures at age 18.

This guide is also available in Welsh (Cymraeg).

4. List of approved ISA managers

The list of approved ISA managers shows the components offered by each ISA manager.

The list does not currently show all ISA managers that offer Junior ISAs to investors. This is because separate approval is not required for existing ISA managers who wish to offer Junior ISAs. There may also be ISA managers who have approval for components they no longer offer.

We’d like to ask ISA managers to check their details on the ISA managers list. If there are any changes required, email [email protected] and put ‘Approved list – component change’ in the subject line.

Include your ISA manager ‘Z’ reference and the Junior ISA components you’d like us to add or other components you’d like us to remove.

5. Reporting of flexible ISAs

We’d like to clarify the process for reporting flexible ISA accounts on the annual return of information.

For flexible ISAs, the ‘net’ subscriptions – that is, the total subscriptions in the year (disregarding any additional permitted and defaulted subscriptions) less any amounts withdrawn, should be reported on the annual return of information.

For example, investor A has a flexible ISA with a balance of £20,000 at 5 April 2021.

On 1 May 2021, investor A subscribed £20,000, then on 1 June 2021, withdrew £30,000.

On 1 July 2021, Investor A ‘replaced’ £25,000.

Investor A’s net subscription to be reported on the annual return of information is £15,000 (total subscriptions in the year of £45,000, minus £30,000 withdrawn).

Where the net subscriptions in the reporting year are a negative figure, for example because the investor has withdrawn previous year funds, the amount subscribed should be reported as nil.

For example, investor B has a flexible ISA with a balance of £20,000 at 5 April 2021.

On 1 May 2021, investor B withdrew £3,000, and on 1 June 2021 ‘replaced’ £1,000.

Investor B’s net subscription to be reported on the annual return of information is nil (total subscriptions in the year of £1,000, minus £3,000 withdrawn).

6. Audits of ISA managers

In the Tax-Free Savings Newsletter 1, we told you we’d be reinforcing ISA compliance processes with an expanded programme of audits of ISA managers. This programme will start later this year and we will provide more details in a future newsletter.

In the meantime, if you need to disclose or discuss anything with the HMRC savings compliance team, you should email [email protected].

7. Email alerts

You can sign up here to receive email alerts each time a newsletter is published and the list of approved ISA managers is updated.