Frequently asked questions
Q Is the money easily available?
A Designated plan
If you designate the plan, the registered holder can sell some or all of the STOCKPLAN: A Flying Start holding at any time. All they need to do is telephone, or write to, the Administrator (Halifax Share Dealing Ltd). It costs £11.95 to sell some or all of your holding.
Bare trust
If the plan is set up as a bare trust, the investment cannot be sold until the child reaches the age of majority other than at the discretion of the trustees, for purposes listed in the terms of the bare trust. Sale instructions must be given by the trustees jointly and in writing.
Q How do I set up a bare trust?
A Complete the STOCKPLAN: A Flying Start application form and the bare trust form and send to our Administrator.
Investors should advise HM Revenue and Customs (HMRC) that a bare trust has been established. Further guidance can be obtained from the HMRC website www.hmrc.gov.uk/trusts/index.htm or your local tax office.
Q Can a donor be a trustee?
A Yes. One or both donors can be trustees. However, you must appoint at least one other trustee in addition to the donor(s).
Q Do donors and trustees have to be UK residents?
A Yes they do. All donors (whether for a designated plan or a bare trust) and trustees must be UK residents.
Q What happens if the trustees of a bare trust move abroad?
A If the trustees of a bare trust move abroad they will be required to resign as trustees and appoint new ones who are UK residents.
Q Does the child beneficiary have to be a UK resident?
A It is possible for the child who is the beneficiary not to be a UK resident and to live abroad. However, the donor(s) and trustees must be UK residents.
Q How can new trustees be added to the plan?
A The donor can appoint a new trustee(s) by completing a new bare trust form and sending it with written instructions to the Administrator. If there are joint donors, they must appoint jointly. After the donor's death (or the death of the surviving donor if there is more than one donor), the majority of the trustees have the power to appoint new or additional trustees.
Q Can I vary the amount I put in for my children?
A Yes. You can adjust the level of regular payments at any time. You may also invest lump sums - again at any time. There are no maximum limits - only the minimum of £25 for monthly investors and £250 for a lump sum investment.
Q Who can put money into a STOCKPLAN: A Flying Start opened on behalf of a child?
A Investment can only be made by the account holder(s) for a designated account and the donor(s) for a bare trust. First-named account holders and donors can invest by cheque, by debit card and/or set up monthly investments by Direct Debit. Second-named account holders and donors can invest by cheque only.
Q What happens when the child becomes 18 (or 16 in Scotland)?
A At any time after the child reaches the age of 18, the shares built up under a designated plan can be transferred to a STOCKPLAN account in his or her own name, free of charge, by the investor writing to the Administrator and the child completing a STOCKPLAN application form.
If the plan is set up as a bare trust, when a child reaches 18 the child can then ask the trustees to hand over the investment and the trustees are obliged to do so.
However, the child may choose to leave all or part of the money invested. In this case the child can opt for the bare trust to continue, or to have the plan transferred to a STOCKPLAN in their own name, free of charge, whichever they prefer. The plan can be transferred to the child's name by the child completing a STOCKPLAN application form and the trustees writing to the Administrator to request the transfer of shares to the child's account.
In Scotland the age of majority is 16. If the child then asks the trustees to hand over the investment, it would have to be encashed as a STOCKPLAN cannot be held by anyone under the age of 18.
Q What are the tax implications?
A We recommend you talk to your professional adviser or accountant on the tax implications of investing for children in STOCKPLAN: A Flying Start. The information below is for general guidance only and should not be regarded as financial, tax or legal advice.
Designated plan
As a designated plan remains in the ownership of the investor, all tax on it is the investor's liability.
Bare trust
In terms of a bare trust, HM Revenue and Customs takes into account the source of money invested for a child, if he or she is under 18 years old and not married or in a civil partnership.
If a parent is the source of investment, any income arising from the investment counts as the child's income if it amounts to £100 gross or less per tax year. If this sum is exceeded, all the income will be treated as belonging to the parent for tax purposes and will be taxed at the parent's rate of tax. In the latter case the income would only be treated as the child's once the child reached the age of 18 - or got married or entered into a civil partnership if earlier.
However if the source of the investment into the bare trust is someone other than the child's parent, for example: grandparent, godparent, other relative, family friend, the income generated is regarded as belonging to the child and the £100 limit would not apply. The income would be offset against the child's own allowance limit - which this year is £7,475 (single person's tax-free personal allowance 2011/2012).
All income and capital gains arising from the investment into the bare trust will be assessed as the child's from age 18; there is no further possibility of the parent being taxed, regardless of who the original investor was. Proper records should be kept by the donors at all times.
Please note that tax laws are subject to change and their application depends on individual circumstances.
Q Can setting up a SIT plan help to minimise my eventual Inheritance Tax liability?
A Bare trust
For inheritance tax purposes, setting up a bare trust creates a potentially exempt transfer (PET). In this case, if the donor lives for seven years after making the transfer, it is no longer subject to Inheritance Tax. If the donor dies before the seven year period is completed the funds could be subject to Inheritance Tax if the estate exceeds the nil rate band, (for 2011/2012 this is £325,000, or up to £650,000 if a late spouse's or civil partner's unused threshold can be transferred) but as a 'PET' they are taxed on a sliding scale.
It may be possible to obtain exemption from Inheritance Tax if regular gifts, ie monthly investments, are made to the bare trust and it can be shown that these gifts are 'normal expenditure out of income' and that they do not reduce the donor's normal standard of living.
Gifts to the bare trust up to a total value of £3,000 each tax year, plus any part of the previous tax year's £3,000 that has not been used, may also be exempt (provided no other gifts have been made by the donor which uses the exemption).
Designated plan
The above is also the case for a designated plan if, and with effect from, the time that the fund is gifted to the child in the future.
Q Can I use STOCKPLAN: A Flying Start for a Child Trust Fund (CTF)?
A STOCKPLAN: A Flying Start is not a CTF product. However, you can open a STOCKPLAN: A Flying Start on behalf of a child even if you have invested your CTF elsewhere.
How to apply