Commentary Section 13: Relief from income tax and capital gains tax
55.Subsection (1) provides for regulations to be made giving relief from income tax and capital gains tax for income and gains arising on investments held in CTF accounts. Regulations will disapply the income tax settlements legislation for CTF accounts. This legislation prevents parents from gaining a tax advantage by placing money in their children’s accounts. Where gifts from a parent give rise to income of more than £100 in a year, the parent is taxed on all that income at his or her own income tax rate. However, contributions to CTF accounts will not count as such gifts.
56.Subsection (2) makes further provision in relation to capital gains tax. Paragraph (a) permits provision to be made in the regulations for capital losses arising on the disposal of investments held in CTF accounts to be disregarded for capital gains tax purposes. This means that such losses will not be deductible from any capital gains outside the CTF. Paragraph (b) allows the regulations to make provision relating to investments held within a CTF, including provision for them to be treated separately from any investments of the same kind (such as shares of the same class in the same company) held by the child in question outside the CTF. In particular, this will enable the identification rules which determine which shares are disposed of on a part-disposal of a holding of shares, to apply separately to shares held by the child within a CTF and to shares the child holds outside the CTF.
57.Subsection (4) allows the regulations to include provision for appropriate restitution to be made to the Inland Revenue in circumstances prescribed by the regulations. This will include cases where tax relief has to be repaid because it was given where it was not due.
58.Under subsection (5) regulations can be made modifying income tax or capital gains tax legislation in relation to CTF accounts.