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Child Trust Funds Act 2004

Type Public General Act

Publication 2004-05-13

State In force

Department Statute Law Database

Source legislation.gov.uk

Reform history JSON API

Introductory

Northern Ireland

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(1) This Act makes provision about child trust funds and related matters.

(2) In this Act “child trust fund” means an account which—

(a) is held by a child who is or has been an eligible child (see section 2),

(b) satisfies the requirements imposed by and by virtue of this Act (see section 3), and

(3) The matters dealt with by and under this Act are to be under the care and management of the Inland Revenue.

Eligible children

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(1) For the purposes of this Act a child is an “eligible child” if the child was born after 31st August 2002and before 3rd January 2011 and either—

(a) a person is entitled to child benefit in respect of the child, or

(b) entitlement to child benefit in respect of the child is excluded by the provisions specified in subsection (2)(a) or (b) (children in care of authority),

but subject as follows.

(2) The provisions referred to in subsection (1)(b) are—

(a) paragraph 1(c) of Schedule 9 to the Social Security Contributions and Benefits Act 1992 (c. 4) and regulations made under it, and

(b) paragraph 1(1)(f) of Schedule 9 to the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7) and regulations made under it.

(3) Where entitlement to child benefit in respect of a child is excluded because of a directly applicable EU provision or an international agreement, subsection (1) applies as if that exclusion did not apply.

(4) Where a person is entitled to child benefit in respect of a child only because of a directly applicable EU provision or an international agreement, subsection (1) applies as if the person were not so entitled.

(5) A child who—

(a) does not have the right of abode in the United Kingdom within the meaning given by section 2 of the Immigration Act 1971 (c. 77),

(b) is not entitled to enter or remain in the United Kingdom by virtue of an enforceable Community right or any provision made under section 2(2) of the European Communities Act 1972, and

is not an eligible child.

(5A) A child born before 3rd January 2011 who would otherwise have become an eligible child on or after that date is not an eligible child unless subsection (5B) or (5C) applies to the child.

(5B) This subsection applies to a child (who accordingly is an eligible child by virtue of subsection (1)(a)) if—

(a) a person is entitled to child benefit in respect of the child,

(b) the first day for which child benefit is paid falls on or before 3rd January 2011, and

(c) either subsection (5) does not apply to the child at the beginning of 3rd January 2011, or that subsection applies to the child at that time but ceases to apply to the child before 3rd April 2011.

(5C) This subsection applies to a child (who accordingly is an eligible child by virtue of subsection (1)(b)) if—

(a) the child is in the United Kingdom at the beginning of 3rd January 2011,

(b) the provisions specified in subsection (2)(a) or (b) apply in relation to the child before 3rd April 2011, and

(c) either subsection (5) does not apply to the child at the beginning of 3rd January 2011, or that subsection applies to the child at that time but ceases to apply to the child before 3rd April 2011.

(6) A person is not to be regarded for the purposes of subsection (1)(a)or (5B)(a) as entitled to child benefit in respect of a child (otherwise than by virtue of subsection (3)) unless it has been decided in accordance with—

(a) Chapter 2 of Part 1 of the Social Security Act 1998 (c. 14), or

(b) Chapter 2 of Part 2 of the Social Security (Northern Ireland) Order 1998 (S.I. 1998/1506 (N.I. 10)),

that the person is so entitled (and that decision has not been overturned).

(7) Regulations may amend subsection (1) by substituting for the reference to 31st August 2002 a reference to an earlier date.

Requirements to be satisfied

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(1) A child trust fund may be held only with a person (referred to in this Act as an “account provider”) who has been approved by the Inland Revenue in accordance with regulations.

(2) An account is not a child trust fund unless it is an account of one of the descriptions prescribed by regulations.

(3) The provision which may be made by regulations under subsection (1) includes making approval of an account provider dependent on the person undertaking to provide accounts of such of the descriptions for which provision is made by regulations under subsection (2) as is prescribed by the regulations.

(4) The terms of a child trust fund must—

(a) secure that it is held in the name of a child,

(b) secure that the child is beneficially entitled to the investments under it,

(d) prevent withdrawals from it except as permitted by regulations under this section or any other provision of this Act, and

(e) provide that instructions may be given to the account provider with respect to its management only by the person who has the authority to manage it.

(5) Regulations may impose other requirements which must be satisfied in relation to child trust funds.

(6) The person who has the authority to manage a child trust fund held by a child—

(a) if the child is 16 or over and has elected to manage the child trust fund, is the child;

(b) in any other case, is the person who has that authority by virtue of subsection (7) (but subject to subsection (10)).

(7) If there is one person who is a responsible person in relation to the child, that person has that authority; and if there is more than one person who is such a person, which of them has that authority is to be determined in accordance with regulations.

(8) For the purposes of this Act a person is a responsible person in relation to a child ... if the person has parental responsibility in relation to the child and is not—

(a) a local authority or, in Northern Ireland, an authority within the meaning of the Children (Northern Ireland) Order 1995 (S.I. 1995/755 (N.I. 2)), or

(b) a person under 16.

(9) “Parental responsibility” means—

(a) parental responsibility within the meaning of the Children Act 1989 (c. 41) or the Children (Northern Ireland) Order 1995, or

(b) parental responsibilities within the meaning of the Children (Scotland) Act 1995 (c. 36).

(10) Regulations may provide that, in circumstances prescribed by the regulations, the person who has the authority to manage a child trust fund held by a child ... is to be a person appointed by the Treasury or by the Secretary of State.

(11) A person who has the authority to manage a child trust fund by virtue of subsection (10) is entitled to give any instructions to the account provider with respect to its management which appear to the person who has that authority to be for the benefit of the child.

(11A) Regulations under subsection (10) may provide that, where the terms on which a person is appointed by the Treasury or by the Secretary of State include provision for payment to the person, the payment must be made by a government department specified in the regulations (instead of by the person making the appointment).

(11B) Regulations may provide that, where a person authorised to manage a child trust fund by virtue of subsection (10) ceases to be so authorised, the person must provide any information held by that person in connection with the management of the fund to the person (if any) who becomes authorised by virtue of that subsection to manage the trust fund instead.

(12) Where a contract is entered into by or on behalf of a child who is 16 or over in connection with a child trust fund—

(a) held by the child, or

(b) held by another child in relation to whom the child has parental responsibility,

the contract has effect as if the child had been 18 or over when it was entered into.

Inalienability

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(1) Any assignment of, or agreement to assign, investments under a child trust fund, and any charge on or agreement to charge any such investments, is void.

(2) On the bankruptcy of a child by whom a child trust fund is held, the entitlement to investments under it does not pass to any trustee or other person acting on behalf of the child’s creditors.

(3) “Assignment” includes assignation; and “assign” is to be construed accordingly.

(4) “Charge on or agreement to charge” includes a right in security over or an agreement to create a right in security over.

(5) “Bankruptcy”, in relation to a child, includes the sequestration of the child’s estate.

Opening and transfers

Opening by responsible person or child

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(1) In the case of each child who is first an eligible child by virtue of section 2(1)(a) the Inland Revenue must issue, in a manner prescribed by regulations, a voucher in such form as is so prescribed.

(2) The voucher must be issued to the person who is entitled to child benefit in respect of the child (or, in the case of a child who is such an eligible child because of section 2(3), to a responsible person).

(3) An application may be made—

(a) if the child is 16 or over, by the child, or

(b) otherwise, by a responsible person,

to open for the child with an account provider a child trust fund of any description provided by the account provider.

(4) The application is to be made—

(a) within such period beginning with the day on which the voucher is issued as is prescribed by regulations, and

(b) in accordance with regulations.

(5) When the application has been made the account provider must—

(a) open, in accordance with regulations, a child trust fund of that description for the child, and

(b) inform the Inland Revenue in accordance with regulations.

Opening by Inland Revenue

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(1) In the case of each child to whom this section applies, the Inland Revenue must apply to open for the child with an account provider selected in accordance with regulations a child trust fund of a description so selected.

(2) The application is to be made in accordance with regulations.

(3) The account provider must—

(a) open, in accordance with regulations, a child trust fund of that description for the child, and

(b) inform the Inland Revenue in accordance with regulations.

(4) This section applies—

(a) to a child in respect of whom a voucher is issued under section 5(1) but in whose case subsection (5) is satisfied, and

(b) to a child who is first an eligible child by virtue of section 2(1)(b).

(5) This subsection is satisfied in the case of a child if—

(a) the period prescribed under section 5(4) expires without a child trust fund having been opened for the child, or

(b) the child is under 16 and it appears to the Inland Revenue that there is no-one who is a responsible person in relation to the child.

(6) No liability is to arise in respect of the selection of an account provider, or a description of child trust fund, in accordance with regulations under this section.

Transfers

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Regulations may make provision about the circumstances in which—

(a) a child trust fund which is an account of one of the descriptions prescribed by regulations may become an account of another of those descriptions, and

(b) a child trust fund held with one account provider may be transferred to another.

Contributions and subscriptions

Initial contribution by Inland Revenue

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(1) The Inland Revenue must pay to an account provider such amount as is prescribed by regulations if the account provider has—

(a) informed the Inland Revenue under section 5(5) or 6(3) that a child trust fund has been opened, and

(b) made a claim to the Inland Revenue in accordance with regulations.

(2) On receipt of the payment the account provider must credit the child trust fund with the amount of the payment.

Supplementary contribution by Inland Revenue

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(1) If this section applies to a child the Inland Revenue must inform the account provider with whom a child trust fund is held by the child that this section applies to the child.

(2) If the account provider makes a claim to the Inland Revenue in accordance with regulations, the Inland Revenue must pay to the account provider such amount as is prescribed by regulations.

(3) On receipt of the payment the account provider must credit the child trust fund with the amount of the payment.

(4) This section applies to a child if—

(a) a child trust fund is held by the child,

(b) the child was first an eligible child by virtue of section 2(1)(a), and

(5) That condition is that it has been determined in accordance with the provision made by and by virtue of sections 18 to 21 of the Tax Credits Act 2002 (c. 21)—

(a) that a person was, or persons were, entitled to child tax credit in respect of the child for the child benefit commencement date, and

(b) that either the relevant income of the person or persons for the tax year in which that date fell does not exceed the income threshold or the person, or either of the persons, was entitled to a relevant social security benefit for that date,

and that determination has not been overturned.

(6) In subsection (5)(b)—

“the income threshold” has the meaning given by section 7(1)(a) of the Tax Credits Act 2002,

“the relevant income”, in relation to a person or persons and a tax year, has the meaning given by section 7(3) of that Act in relation to a claim by the person or persons for a tax credit for the tax year,

“relevant social security benefit” means any social security benefit prescribed for the purposes of section 7(2) of that Act, and

“tax year” means a period beginning with 6th April in one year and ending with 5th April in the next.

(7) If the child benefit commencement date is earlier than 6th April 2005, this section applies in relation to the child even if the condition in subsection (5) is not satisfied in relation to the child provided that the condition in subsection (8) is so satisfied.

(8) That condition is that—

(a) income support, or income-based jobseeker’s allowance, was paid for the child benefit commencement date to a person whose applicable amount included an amount in respect of the child, or

(b) working families' tax credit, or disabled person’s tax credit, was paid for that date to a person whose appropriate maximum working families' tax credit, or appropriate maximum disabled person’s tax credit, included a credit in respect of the child.

(9) If the child benefit commencement date is earlier than 6th April 2003, subsection (5) has effect as if—

(a) the reference in paragraph (a) to the child benefit commencement date were to any date in the tax year beginning with 6th April 2003,

(b) the reference in paragraph (b) to the tax year in which the child benefit commencement date fell were to the tax year beginning with 6th April 2003, and

(c) the reference in paragraph (b) to being entitled to a relevant social security benefit for the child benefit commencement date were to being so entitled for any date in that tax year for which the person was, or the persons were, entitled to child tax credit in respect of the child.

(10) “Child benefit commencement date”, in relation to a child, means—

(a) the first day for which child benefit was paid in respect of the child (otherwise than because of a directly applicable EU provision or an international agreement), or

(b) in the case of a child to whom section 2(3) applies or section 2(5) has applied, such day as is prescribed by regulations.

Further contributions by Inland Revenue

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(1) Regulations may make provision for the making by the Inland Revenue in the circumstances mentioned in subsection (2) of payments to account providers of child trust funds held by—

(a) eligible children, or

(b) any description of eligible children,

of amounts prescribed by, or determined in accordance with, regulations.

(2) The circumstances referred to in subsection (1) are—

(a) the children attaining such age as may be prescribed by the regulations, or

(b) such other circumstances as may be so prescribed.

(3) The regulations must include provision—

(a) for making account providers aware that such amounts are payable,

(b) about the claiming of such payments by account providers, and

(4) For the purposes of this section, a child is to be treated as being an eligible child if entitlement to child benefit in respect of the child is excluded by—

(a) paragraph 1(a) of Schedule 9 to the Social Security Contributions and Benefits Act 1992 (c. 4) (children in custody), or

(b) paragraph 1(1)(a) to (d) of Schedule 9 to the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7) (corresponding provision for Northern Ireland).

Recouping Inland Revenue contributions

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