Revenue Refund for Child

R

rangerscym

Registered User
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My son (5 years old) cashed in a number of his Rabodirect funds last year making a small profit - less than €1k.

I submitted the tax due to the Revenue and have just received a refund cheque with no explanation.

I have searched but cannot find any reference to tax credits for children and don't understand why we received this refund. Does anyone have any ideas before I cash the cheque?
 
This would be a deposit account. If so no profit was made and Dirt would have been deducted at source on the interest earned. As funds were in the name of your son and given the amount of the interest Dirt would have covered the tax liable (AFAIK) and no further tax was payable.
 
Thanks for the reply Brendan - these were investments in Luxembourg based collective investment schemes which don't attract DIRT?
 

Personal tax credits are given to individuals, and AFAIK nowhere are children excluded from this definition...
 
Thanks for this Madelbrot - thinking this through a bit further.

I can gift to my son anything up to but not exceeding €3k in any year without the gift attracting Gift Tax.

In turn he can make up to but not exceed €1650 (current single person tax credit) on "income" producing investments in any year - what am I missing?
 
There is a bigger question here about the meaning of Trust and the different types of Trust which is too complex to go into in this forum. Long story short - if you are controling and accessing money for a minor child then you should probably be returning the income as your income anyway and not the childs.
 
Hi Rangerscym,

What tax did you submit to Revenue? CGT maybe? I know that some of the Rabodirect funds would be subject to CGT. If that is the case here, the gain of 1,000 would have been below the child's small gain exemption for the year of 1,270 and this may have triggered the refund.

Sybil
 
Gains on the majority of Rabodirect funds are taxable as income rather than capital gains as I understand it. As a result I originall completed an income tax return in respect of the gains.

Last night we received a balacing statement from the Revenue Commissioners confirming that a number of my sons tax credits had been used to offset the gains made in the two periods. Cutely however it did't advise on how many tax credits remainined. As a result and in line with the earlier comments I'm going to assume that my son has the same tax credits as any other person.

This is a decent result especially as there are no specific tax free investments in ireland to encourage people to save for their childrens future.
 

Well you can't just read into things what you choose to here - MK Brazil has very rightly pointed out the Trust issues that are possible/likely to arise here. It is possible that this income should properly be assessed on you rather than the child.

And there's nothing "cute" about the balancing statement not advising you of the unused credits; that isn't its purpose. Tax assessments only ever state the amount of credits used.
 
Strange tone to your reply mandelbrot however there is no question of me continuing to access the funds that have been gifted to my son, less than €3k a year each year which I believe is permitted under irish legislation.

If my son has made gains which need to be taxed as income then I would have though it wholy appropriate to offset these against his own tax credits.
 

Apologies if my tone was a bit brusque, but you appeared, and still appear, to be conveniently ignoring the point raised by MK Brazil, regarding Trusts: "if you are controlling and accessing money for a minor child then you should probably be returning the income as your income anyway and not the childs".

You might want to get competent professional advice before you go too far down this particular road, as the consequences could be nasty if it turns out there's a problem in 10 years time...
 
To close this off folks - I paid for advice on this matter and the concerns around the creation of a trust were alleviated on the basis that I am not retaining access and beneficial ownership to the funds.

Thanks for the input.
 
rangerscym said:
To close this off folks - I paid for advice on this matter and the concerns around the creation of a trust were alleviated on the basis that I am not retaining access and beneficial ownership to the funds.

Thanks for the input.
Click to expand...

Better safe than sorry!
 
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