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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4208
Experience:  FCCA FCMA CGMA ACIS
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Tony. We have a granddaughter at last and would like to

Customer Question

Hi Tony. We have a granddaughter at last and would like to make provision for her in some way. I do not like the complication of trusts as they always seem vulnerable to 'political' decisions. I therefore wondered if I could use the simple device of my family investment company as a means whereby it could issue, say, a 20 year cumulative loan stock of some sort in her name with an appropriate coupon. This would give her taxable income (within her tax free allowance) and a tax deduction in the company and preserve the capital until she is 'mature'. The value of the loan note would, of course, be subject to the 7 year IHT rule but otherwise, can you see any problems with this idea?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. The only problem that I see is who is going to manage the company. If you pass on before the maturity of the loan note who is going to ensure that your grand daughter is paid? She will have, as a mere holder of a loan note, no say in the operation of the company even allowing for the limited position that share holders find themselves viz a viz a company. Why not give her the money and place it in some interest earning safe investment eg a gilt and leave it at that. We did this with my daughter long ago and a thousand quid gift grew to some 6K by the time she was 21 with reinvested interest in other loan stocks. She was at uni with substantial stock market interests and the envy of her fellow students. I do hope that I have given you some food for thought. Don't try this with you daughter as opposed to your grand daughter. In that case the income would remain on your tax slop chit!
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.