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HMRC internal manual

Repayment Claims Manual

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HM Revenue & Customs
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Reviewing the claim form: whether to accept that income is minor's

When you have `the details you need’ according to RM3720 use them to decide whether you can accept that the income is the minor’s income. Take the following steps

  • look at who provided the capital which produces the income
  • check that the name(s) on the vouchers agrees with what you have been told about the name(s) in which the capital is invested (RM4052)
  • see the following sub-paragraphs

    • `If the capital came from the parents’
    • `Which tables to use’
  • decide what action to take with the help of one or more of the tables.If the capital came from the minor’s parents special rules apply.

A gift from a parent to a child is called a settlement. It is a settlement even if the gift is a lump sum paid to the minor under a Court Order. Any income from a gift which is a settlement is treated as the parent’s income while the child is under 18 and not married. When the child reaches 18 or gets married before reaching 18 the income is treated as the minors own. This is explained at TSEM4300. The legal authority is ICTA88/S663.

The table(s) you follow will depend on the facts you obtained and any doubts you have

Facts or doubts Table to follow
   
You know all capital came from the parent  
First claims Table 1
Renewal claims Table 2
You are sure the capital did not come from the parents  
First claims Table 4
Renewal claims Table 5
You know or think part of the capital came from the parents Table 3
There is an unexplained difference between the name on the vouchers and the name in which the claimant says the investments are held Table 3
See ‘You have doubts or new information’

When you are checking a claim in detail for the first time and you know that all the capital came from one or both parents use the instructions in the following table. If both parents have provided capital apply the table to each parent’s capital separately.

Situation Action
   
The income is £100 a year or less Treat it as the minor’s income.
The income is more than £100 a year Treat it as the parent’s income. 

Do not repay tax suffered on the income. 

Give the parent’s GCD the following details

  • the amount of the capital gift
  • the income arising (the gross amount and the year.)Ask the parent’s GCD to do the following

  • make any necessary assessment under ICTA88/S663
  • explain the position to the parent(s) and their agents
  • make sure the income is returned by the parents until the child is 18 or marries, whichever happens first.If you receive any objection to this from the parent(s) submit the claim to HMRC Trusts Head Office Edinburgh.

If income is shown on the minor’s renewal claim instead of the parent(s) return(s) when you know that all the capital came from one or both parents use the instructions in the following table. If both parents have provided capital apply the table to each parent’s capital separately.

Situation Action
   
The income is £100 a year or less Treat it as the minor’s income
The income is more than £100 a year Continue to treat it as the parent’s income. See Table 1 ‘The income is more than £100 a year’. Submit any objections to HMRC Trusts Head Office Edinburgh.

If you know or think that part of the capital came from the parents use the instructions in the following table.

Situation Action
   
The income is £100 a year or less Treat it as the minor’s income.
The income is more than £100 a year  
You are not sure whether the capital came from the minor’s parents or not. Find out the source(s) of the capital. See RM3720 and ask for details of every source.
  The claimant tells you the amount of capital which came from
  • the parents and

  • others. Follow the instructions in
  • Tables 1 and 2 for the income from the capital which came from one or both parents
  • Tables 4 and 5 for the income from the capital which came from anyone else.    
      The claimant cannot tell you exactly how much the parents provided. Ask for the parent’s estimate.
      When you receive the parent’s estimate Follow the instructions in
  • Tables 1 and 2 for the income from one or both parents
  • Tables 4 and 5 for the income from the capital which cam from anyone else.    
      You know that some of the capital came from the parents and some came from other people If the claimant can tell you the amount from each sourceFollow the instructions in
  • Tables 1 and 2 for the income from the capital which came from one or both parents
  • Tables 4 and 5 for the income from the capital which came from anyone elseIf the claimant cannot tell you the amount from each sourceAsk for an estimate.  
      You have doubts or new information. For example you
  • receive information that income has been incorrectly treated as income of the minor or

  • have any reason to suspect that the amount of capital provided by the parents has been understated

or

  • think the capital was a gift arranged for the children in exchange for something from their parents. Do not adjust claims for earlier years.Submit the claim to HMRC Trusts Head Office Edinburgh.Send an R50 with your submission and the files of
  • the minor’s parents and

  • any other people who provided capital.

When you are checking a claim in detail for the first time and you are sure that the capital did not come from the parents use the instructions in the following table.

Situation Action
   
The income is £100 a year or less Accept that the income is the minor’s income.
The income is more than £100 a year  

and

it includes dividends from a private company (one not listed in EXTEL)

or

the investment income is more than 20 per cent of the invested capital Submit the claim to HMRC Trusts Head Office Edinburgh immediately with an R50 and the details set out at RM3720.
Do not express an opinion about the claim until you receive a reply from HMRC Trusts Head Office Edinburgh.    
  Any other Accept that the income is the minor’s income.

When you are dealing with a renewal claim and you are sure that the capital did not come from the parents use the instructions in the following table.

Situation Action
   
The income is £100 a year or less Accept that the income is the minor’s income.
The income is more than £100 a year  

and

it includes dividends from a private company (one not listed in EXTEL)

or

the investment income is more than 20 per cent of the invested capital

or

there has been a growth in income and you have doubts about how this growth occurred Submit the claim to HMRC Trusts Head Office Edinburgh immediately with an R50 and the details set out at RM3720.
Do not express an opinion about the claim until you receive a reply from HMRC Trusts Head Office Edinburgh.    
  Any other Accept that the income is the minor’s income.