Maturing Child Trust funds to retain tax advantaged status

Maturing Child Trust funds to retain tax advantaged status

Matthew Barrand Investment

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.

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.