PART 1Introductory

Citation and commencement1

These Regulations may be cited as the Child Trust Funds Regulations 2004 and shall come into force for the purposes of—

a

issuing vouchers (see regulation 3),

b

completing account-opening formalities (see regulation 5),

c

applications under regulation 13 to open an account with effect from the appointed day,

d

applications under regulation 14 to be approved as an account provider to manage accounts from the appointed day,

e

regulation 17, so far as it relates to applications referred to in paragraph (d), and

f

making a fortnightly claim and financial return (see regulation 30),

on 1st January 2005, and for all other purposes on the appointed day.

Interpretation2

1

In these Regulations—

a

the following expressions have the meanings given in the Child Trust Funds Act 2004 (“the Act”)—

“child”

“child trust fund”

“eligible child”

F16“the income threshold” (see section 9(6) of the Act)

“Inland Revenue”

“Inland Revenue contributions” (see section 11(2) of the Act),

“parental responsibility” (see section 3(9) of the Act);

F16“the relevant income” (see section 9(6) of the Act)

“relevant person” (see section 15(2) of the Act),

F16“relevant social security benefit” (see section 9(6) of the Act)

“responsible person”, in relation to a child under 16 (see section 3(8) of the Act),

F16“tax year” (see section 9(6) of the Act)

“the person entitled to child benefit in respect of the child” (see section 2(1)(a), (4) and (6) of the Act);

b

except where the context otherwise requires—

“account” means a scheme of investment which (except in regulation 22(1)) qualifies as a child trust fund, other than in the cases of—

i

an account with a deposit-taker,

ii

a share or deposit account with a building society, or

iii

a deposit account with a person falling within section 840A(1)(b) of the Taxes Act M1, or a relevant European institution;

  • an “account investment” is an investment under the account which is a qualifying investment for an account within the meaning of regulation 12;

  • an “account provider” is a person who fulfils the conditions of these Regulations and is approved by the Board for the purpose of these Regulations as an account provider;

  • “appointed day” means the day appointed, under section 27 of the Act, for the purposes of sections 8 and 9 of the Act;

  • “assurance undertaking” has the meaning in Article 2 of the Council Directive of 5th November 2002 concerning life assurance (2002/83/EC) M2;

  • F2“Bank of England base rate” means the rate announced from time to time by the Monetary Policy Committee of the Bank of England as the official dealing rate, being the rate at which the Bank is willing to enter into transactions for providing short-term liquidity in the money markets;

  • F7“the Board” means the Commissioners for Her Majesty’s Revenue and Customs;

  • “building society” means a building society within the meaning of the Building Societies Act 1986 M3, or the Irish Building Societies Act 1989 M4;

  • F14“building society bonus”, except in regulation 24(a)(i), excludes any bonus, distribution of funds or the conferring of rights in relation to shares—

    1. a

      in connection with an amalgamation, transfer of engagements or transfer of business of a building society, and

    2. b

      mentioned in section 96 or 100 of the Building Societies Act 1986,

    and “payment under a building society bonus scheme” shall be construed accordingly;

  • “company”, except in regulation 12(4)(a), means any body corporate having a share capital other than—

    1. i

      an open-ended investment company, within the meaning given by section 236 of the Financial Services and Markets Act 2000 M5,

    2. ii

      a UCITS,

    3. iii

      an industrial and provident society, or

    4. iv

      a body corporate which is a 51 per cent. subsidiary of any industrial and provident society;

  • F1“credit union” means a society registered as a credit union under the Industrial and Provident Societies Act 1965 or the Credit Unions (Northern Ireland) Order 1985;

  • “deposit-taker” has the meaning given by section 481(2) of the Taxes Act;

  • “the Director of Savings” has the same meaning as in the National Debt Act 1972 M6;

  • “the Distance Marketing Directive” means Directive 2002/65/EC of the European Parliament and of the Council of 23rd September 2002 M7, and includes any provisions by which an EEA State or the United Kingdom has transposed the Directive or has corresponding obligations in its domestic law, and “distance contract” has the meaning in that Directive;

  • “electronic communications” includes any communications by means of a telecommunication system (within the meaning in the Telecommunications Act 1984 M8);

  • “EEA Agreement” means the Agreement on the European Economic Area signed at Oporto on 2nd May 1992, as adjusted by the Protocol signed at Brussels on 17th March 1993 M9;

  • “EEA State” means a State, other than the United Kingdom, which is a Contracting Party to the EEA Agreement;

  • “European institution” means an EEA firm of the kind mentioned in paragraph 5(a), (b) or (c) of Schedule 3 to the Financial Services and Markets Act 2000 which is an authorised person for the purposes of that Act as a result of qualifying for authorisation under paragraph 12 of that Schedule;

  • “51 per cent. subsidiary” and “75 per cent. subsidiary” have the meanings given by section 838 of the Taxes Act;

  • “gains”, except in regulations 22(1) to (3), 24(a)(ii), (iii) and (v), 37(5) and 38, means “chargeable gains” within the meaning in the 1992 Act;

  • “gilt-edged securities” has the meaning given by paragraphs 1 and 1A of Schedule 9 to the 1992 Act M10;

  • “incorporated friendly society” means a society incorporated under the Friendly Societies Act 1992 M11;

  • “industrial and provident society” means a society registered or deemed to be registered under the Industrial and Provident Societies Act 1965 or under the Industrial and Provident Societies (Northern Ireland) Act 1969 M12;

  • “investments under the account” has the same meaning as investments under a child trust fund in the Act;

  • “investment trust” has the meaning given by section 842 of the Taxes Act, and references to the “eligible rental income” of an investment trust have the same meaning as in that section;

  • “the Management Act” means the Taxes Management Act 1970 M13;

  • “market value” shall be construed in accordance with section 272 of the 1992 Act;

  • “the 1992 Act” means the Taxation of Chargeable Gains Act 1992;

  • F8“the New Collective Investment Schemes Sourcebook” means the Sourcebook of that name made by the Financial Services Authority under the Financial Services and Markets Act 2000;

  • “non-UCITS retail scheme”—

    1. a

      has the meaning in the New Collective Investment Schemes Sourcebook (that is, a scheme to which, or to whose authorised fund manager and depositary, Sections 5.1, 5.4 and 5.6 of that Sourcebook apply),

    2. b

      includes a “recognised scheme” by virtue of section 270 or 272 of the Financial Services and Markets Act 2000, which would fall within paragraph (a) of this definition if it were an authorised fund, and

    3. c

      includes a sub-fund of an umbrella which the terms of the scheme identify as a sub-fund which would fall within paragraph (a) or (b) of this definition if it were itself an authorised fund or a recognised scheme.

    In this definition, expressions defined in the Glossary forming part of the Financial Services Authority Handbook have those defined meanings;

  • “notice”, except in regulations 12(12) and 37(6)(a), means notice in writing;

  • F8“qualifying units in or shares of a non-UCITS retail scheme” means that—

    1. a

      the instrument constituting the scheme secures that redemption of the units or shares in question shall take place no less frequently than bi-monthly (see Rule 6.2.16(6) of the New Collective Investment Schemes Sourcebook omitting the words “Except where (7) applies, and”, read with Rule 6.3.4(1), whether or not those Rules apply to the scheme), and

    2. b

      a provision for suspension of dealings in exceptional conditions in accordance with Rule 7.2 of that Sourcebook (or any foreign procedure which is a direct foreign equivalent of that Rule) shall not be treated as a provision contrary to paragraph (a) of this definition;

  • “recognised stock exchange” has the same meaning as in section 841 of the Taxes Act;

  • “registered friendly society” has the meaning given by the Friendly Societies Act 1992 and includes any society that by virtue of section 96(2) of that Act is to be treated as a registered friendly society;

  • “relevant authorised person” has the same meaning as in section 333A(12) of the Taxes Act;

  • “relevant European institution” has the meaning given by section 326A(10) of the Taxes Act;

  • “security” means any loan stock or similar security of a company whether secured or unsecured;

  • “subscriptions” has the meaning in section 12(1) of the Act (but excluding Inland Revenue contributions and income or gains arising from investments under the account);

  • “tax” where neither income tax nor capital gains tax is specified means either of those taxes;

  • “the Taxes Act” means the Income and Corporation Taxes Act 1988;

  • “year” except in the expression “subscription year” in regulations 9, 21(5)(b) and 32(2)(b)(iv), means a year of assessment (within the meaning in section 832(1) of the Taxes Act, or section 288(1) of the 1992 Act, as the case may be);

    1. c

      “authorised fund” means—

      1. i

        an authorised unit trust, or

      2. ii

        an open-ended investment company with variable capital incorporated in the United Kingdom in the case of which an authorisation order made by the Financial Services Authority under regulation 14 of the Open-Ended Investment Companies Regulations 2001 M14 is in force;

  • “authorised unit trust” means a unit trust scheme in the case of which an authorisation order made by the Financial Services Authority under section 243 of the Financial Services and Markets Act 2000 is in force;

  • “the Collective Investment Schemes Sourcebook” means the sourcebook of that name made by the Financial Services Authority under the Financial Services and Markets Act 2000;

  • “depositary interest” means the rights of the person mentioned in paragraph (ii), under a certificate or other record (whether or not in the form of a document) acknowledging—

    1. i

      that a person holds relevant investments or evidence of the right to them, and

    2. ii

      that another person is entitled to rights in or in relation to those or identical relevant investments, including the right to receive such investments, or evidence of the right to them or the proceeds from such investments, from the person mentioned in paragraph (i),

    where “relevant investments” means investments which are exclusively qualifying investments for an account falling within regulation 12(2)(a) to (i), and the rights mentioned in paragraph (ii) are exclusively rights in or in relation to relevant investments;

  • “fund of funds scheme” means—

    1. i

      an authorised fund which according to the terms of the scheme is a fund of funds scheme belonging to the category under that name established by the Financial Services Authority, and

    2. ii

      a part of an umbrella scheme which the terms of the scheme identify as a part that would belong to that category if it were itself an authorised fund;

  • “money market scheme” means—

    1. i

      an authorised fund which according to terms of the scheme is a money market scheme belonging to the category under that name established by the Financial Services Authority, and

    2. ii

      a part of an umbrella scheme which the terms of the scheme identify as a part that would belong to that category if it were itself an authorised fund;

  • “open-ended investment company”, except in sub-paragraph (a), has the meaning given by subsection (10) of section 468 of the Taxes Act as that subsection is added in relation to open-ended investment companies by regulation 10(4) of the 1997 Regulations, and “shares” in relation to an open-ended investment company, includes shares of any class and of any denomination of a given class and, in relation to a part of an umbrella company, means shares in the company which confer for the time being rights in that part;

  • “securities scheme” means—

    1. i

      an authorised fund which according to the terms of the scheme is a securities scheme belonging to the category under that name established by the Financial Services Authority, and

    2. ii

      a part of an umbrella scheme which the terms of the scheme identify as a part which would belong to that category if it were itself an authorised fund;

  • “the 1997 Regulations” means the Open-ended Investment Companies (Tax) Regulations 1997 M15;

  • “UCITS” means undertakings for collective investment in transferable securities within the meaning of Article 1 of Council Directive 85/611 M16;

  • “umbrella scheme” means an authorised fund which according to the terms of the scheme is an umbrella scheme belonging to the category under that name established by the Financial Services Authority, and

    1. i

      in the case of an authorised fund which is an authorised unit trust, references to a part of an umbrella scheme shall be construed in accordance with subsection (8) of section 468 of the Taxes Act, and, in relation to a part of an umbrella scheme, references to investments subject to the trusts of an authorised unit trust and to a unit holder shall be construed in accordance with subsection (9) of that section, and

    2. ii

      in the case of an authorised fund which is an open-ended investment company, references to a part of an umbrella scheme shall be construed in accordance with subsection (18) of section 468 of the Taxes Act as that subsection is added in relation to open-ended investment companies by regulation 10(4) of the 1997 Regulations, and, in relation to a part of an umbrella scheme, references to investments of the company shall be construed in accordance with subsection (12) of that section as so added;

  • “unit holder”, except in relation to a part of an umbrella scheme, has the meaning given by subsection (6) of section 468 of the Taxes Act;

  • “unit trust scheme” has the meaning given by subsection (6) of section 468 of the Taxes Act;

  • “units”, in relation to an authorised unit trust, means the rights or interests (however described) of the unit holders in that unit trust and, in relation to a part of an umbrella scheme, means the rights or interests for the time being of the unit holders in that part;

  • “warrant scheme” means—

    1. i

      an authorised fund which according to the terms of the scheme is a warrant scheme belonging to the category under that name established by the Financial Services Authority, and

    2. ii

      a part of an umbrella scheme which the terms of the scheme identify as a part that would belong to that category if it were itself an authorised fund.

2

The table below indexes other definitions in these Regulations—

Term defined

Regulation

“the applicant”

5

“the commencement date”

7(8)

“description” of an account

4

“the disqualifying circumstances”

16

“first return period”

30(1)

“fortnightly period”

30(1)

“initial contribution”

7(1)

“interim tax claim”

26(2)

“local authority”

33(1)

“looked after child”

33(1)

“management agreement”

5

“the named child”

5 and 8(1)

“qualifying circumstances”

14

“qualifying investments for an account”

12

“registered contact”

8(1)(d)

“second return period”

30(1)

“special contribution”

7(1)

“subscription year”

9(2)

“supplementary contribution”

7(5)

“the termination event”

12(12)

“the transfer instructions”

8(2)(h)

“the internal transfer instructions”

8(2)(i)

Vouchers3

1

The voucher to be issued under section 5(1) of the Act shall contain the following particulars—

a

the full name of the child,

b

his date of birth,

c

his unique reference number,

d

the expiry date of the voucher, and

e

the amount of the initial contribution (see regulation 7(1)),

and a statement that the voucher cannot be exchanged for money.

2

The voucher shall be sent to the person who is entitled to child benefit in respect of the child (or, in the case of a child who is an eligible child because of section 2(3) of the Act, to a responsible person in relation to the child) by post.

3

The expiry date F10... shall be whichever is the earlier of—

a

the date 12 months from the date of issue of the voucher, or

b

where the child is over 17 years of age, the date on which he will attain the age of 18 years.

Descriptions of accounts4

1

An account may be of either of the following descriptions—

Stakeholder account

Where the account meets the characteristics and conditions in the Schedule to these Regulations.

Non-stakeholder account

Where any of those characteristics or conditions is not met.

2

Accounts opened by the Inland Revenue (see regulation 6) must be stakeholder accounts.

Opening of account by responsible person or the child5

1

For the purposes of these Regulations, subject to F12paragraphs (1A) and (2), an account is opened for a child (“the named child”) with an account provider on the date the last of the following conditions is satisfied (in any order) where “the applicant” means—

a

if the named child is 16 or over, the child; and

b

in any other case, a responsible person in relation to the named child:

Condition 1

The applicant gives the voucher relating to the named child to the account provider F13not later than 7 days after its expiry dateF17or, where the account provider has chosen to open accounts without sight of the relevant voucher, the applicant gives the following information to the account provider:

a

the expiry date of the voucher,

b

the amount of the initial contribution as specified on the voucher, and

c

where the date of birth shown on the voucher differs from the actual date of birth of the child (see regulation 13(5)(c)), the date of birth shown on the voucher.

Condition 2

The applicant enters into an agreement with the account provider (the “management agreement”) for the management of the account (see regulation 8(1) and (2)), which includes the application and declaration required by regulation 13.

Condition 3

Where that application is not in writing the applicant has agreed, or is treated as having agreed, the contents of the copy of the declaration required by regulation 13(3).

Condition 4

a

In any case where the management agreement is a distance contract, the agreement must be an initial service agreement for the purposes of the Distance Marketing Directive M17, and contain the instructions required by regulation 8(1)(f), and

b

in every case where there is any right to cancel (or automatic cancellation of) the management agreement, the period during which it may be exercised or occur has expired without that right being exercised or cancellation occurring.

F111A

The application to open the account must be made, and Condition 2 satisfied, not later than the expiry date of the voucher.

2

An account must satisfy the requirements that—

a

no subscription to the account is accepted by the account provider until the account has been opened in accordance with paragraph (1); and

b

where the account is so opened before the appointed day, it shall not be treated as open for the purpose of accepting subscriptions until the appointed day.

Opening of account by Inland Revenue—(Revenue allocated accounts)6

1

The Board shall apply to open an account for a child to whom section 6 of the Act applies, by forwarding to an account provider the particulars which would be required for a voucher (see regulation 3), but omitting paragraph (1)(d) of that regulation.

2

The account provider shall immediately open a stakeholder account in the name of the child, which shall have the same effect as if a responsible person for the child (or the child if aged 16 or over) had entered into the account provider’s standard management agreement for the stakeholder account in question, including the terms mentioned in Condition 2 of regulation 5(1) (but treating the reference to the application and declaration required by regulation 13 as a reference to the authorisation required by regulation 13(4)) and regulation 8(1)(f).

3

The Inland Revenue shall maintain (and update from time to time) a list of account providers who have agreed to accept Revenue allocated accounts under this regulation, in the order of the date of their agreement, and the account provider shall be selected in rotation from the current list.

4

Where the account provider offers two or more types of stakeholder account

F9a

the account provider shall select the type or types to be used for the purposes of this regulation (subject to sub-paragraph (b)),

b

any type selected must be offered to the general public at the time of opening a Revenue allocated account of that type, and

c

if more than one type has been selected, the account to be opened shall be chosen by the account provider in rotation between the selected types of accounts.

F35

The Inland Revenue shall write to the person who is entitled to child benefit in respect of the child (or, in the case of a child who is an eligible child because of section 2(3) of the Act, to a responsible person in relation to the child) to inform them of the opening of the account and particulars of it.

Government contributions7

1

The amounts of the contribution for the purposes of section 8(1) of the Act are set out in paragraphs (2) to (4), (the amounts set out in paragraphs (2) and (4)(a) to be known as the “initial contribution”, and the amounts set out in paragraphs (3) and (4)(b) as the “special contribution”).

2

Where the child is an eligible child on the appointed day by virtue of section 2(1)(a) of the Act (by reason of a child benefit award), and—

i

was born after 31st August 2002 but before 6th April 2003, the amount is £277,

ii

was born between 6th April 2003 and 5th April 2004, the amount is £268, and

iii

was born between 6th April 2004 and the day preceding the appointed day, the amount is £256.

3

Where the child is an eligible child on the appointed day by virtue of section 2(1)(b) of the Act (by reason of being a child in the care of a local authority at that date) and—

i

was born after 31st August 2002 but before 6th April 2003, the amount is £554,

ii

was born between 6th April 2003 and 5th April 2004, the amount is £536, and

iii

was born between 6th April 2004 and the day preceding the appointed day, the amount is £512.

4

Where the child F6becomes an eligible child on or after the appointed day and—

a

is first an eligible child by virtue of section 2(1)(a) of the Act, the amount is £250, and

b

is first an eligible child by virtue of section 2(1)(b) of the Act, the amount is £500.

5

The amounts of the supplementary contribution for the purposes of section 9(2) of the Act (to be known as the “supplementary contribution”) are set out in paragraphs (6) and (7).

6

Where the child is an eligible child on the appointed day (and is a child to whom section 9 of the Act applies), the amount—

a

if the commencement date was after 31st August 2002 but before 6th April 2003, is £266,

b

if the commencement date was between 6th April 2003 and 5th April 2004, is £258,

c

if the commencement date was between 6th April 2004 and the appointed day, is £250.

7

Where the child becomes an eligible child after the appointed day (and is a child to whom section 9 of the Act applies), the amount is £250.

8

The “commencement date”, in relation to a child, means the first day for which child benefit was paid (under a decision mentioned in section 2(6) of the Act) in respect of the child, except that—

a

where entitlement to child benefit is wholly excluded by a directly applicable Community provision, it means the date on which that exclusion took effect, and

b

where the child was prevented from being an eligible child by virtue of section 2(5) of the Act, it means the date on which the child became an eligible child.

F59

The Inland Revenue shall, following final determination of entitlement to child tax credit, write to the person who is entitled to child benefit in respect of the child (or, in the case of a child who is an eligible child because of section 2(3) of the Act, to a responsible person in relation to the child) to inform them that the supplementary contribution is being paid into the child’s account.

F410

A further contribution under section 10 of the Act of £250 is due for any child where—

a

the commencement date (for child benefit: see paragraph (8)) in relation to that child is after 5th April 2005, and

b

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

F1810A

A further contribution under section 10 of the Act of £250 is due for any child if—

a

an account is held by the child,

b

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

c

section 9 of the Act does not apply to the child,

d

a contribution is not, and has not been, due for the child under paragraph (10),

e

the child is an eligible child on the day identified under the provisions of paragraph (10B) or (10C) as the case may be, and

f

the condition in paragraph (10B) or (10C) is satisfied in relation to the child.

10B

The condition in this paragraph 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—

a

that a person was, or persons were, entitled to child tax credit in respect of the child for any day falling—

i

after the commencement date, but

ii

not later than three months immediately preceding the expiry date of the voucher for the child (see regulation 3), and

b

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

and that determination has not been overturned.

10C

The condition in this paragraph is that income support, or income-based jobseeker’s allowance, was paid for any day falling—

a

after the commencement date, but

b

not later than one month immediately preceding the expiry date of the voucher for the child (see regulation 3),

to a person whose applicable amount included an amount in respect of the child.

11

On receipt of the further contribution F19mentioned in paragraph (10) or (10A) from the Inland Revenue the account provider must credit the account held by the child with the amount of the payment.

F15Age 7 payments7A

1

A further contribution under section 10 of the Act is due for any child who is an eligible child on his or her seventh birthday, in accordance with paragraphs (2) to (5).

2

Where the child is an eligible child on his or her seventh birthday by virtue of—

a

section 2(1)(b) of the Act (child benefit entitlement excluded by reason of being a child in care on that date), or

b

section 2(1)(a) of the Act (child benefit entitlement), but is also a looked after child or looked after and accommodated child within the meanings of those expressions in regulation 33, on that date,

the amount is £500.

3

Where the child is an eligible child on his or her seventh birthday by virtue of section 2(1)(a) of the Act (by reason of a person being entitled to child benefit in respect of the child on that date) and does not fall within the terms of paragraph (2), the amount is £250 and, if the condition in paragraph (4) or (5) is satisfied in relation to the child, the further amount of £250.

4

The condition in this paragraph 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—

a

that a person was, or persons were, entitled to child tax credit in respect of the child for any date (“the CTC date”) falling within the same tax year as the child’s seventh birthday, and

b

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

and that determination has not been overturned.

5

) The condition in this paragraph is that income support, or income-based jobseeker’s allowance, was paid for any date falling within the same tax year as the child’s seventh birthday to a person whose applicable amount included an amount in respect of the child.

6

On receipt of the further contribution from Her Majesty’s Revenue and Customs the account provider must credit the account held by the child with the amount of the payment.