Yes, in the vast majority of cases, an ISA would be taxed as if it were unwrapped upon return to Ireland.While I’m not a tax accountant, would it not be akin to an ISA for an adult? The fact that it’s tax favoured in the UK matters not for an Irish resident, excepting all potential domicile etc stuff that may or may not apply.
This would only work if the underlying investment is subject to general tax principles.A Junior ISA is a tax-free wrapper available in the UK for children under 18 - similar to a standard ISA for adults. There is no CGT or income tax payable on investment gains or dividends.
Junior ISA's
Your child must be both:
Parents or guardians with parental responsibility can open a Junior ISA and manage the account, but the money belongs to the child.
- under 18
- living in the UK
The child can take control of the account when they’re 16, but cannot withdraw the money until they turn 18.
Source: Official UK Government JISA Overview
Key Point: Click for UK Government Source:
If your child moves abroad, you can still add cash to their Junior ISA.
Does anyone have information on how such an account would be taxed upon return to Ireland? I'm aware that, in Ireland, bare trusts are the closest to this, but are still a significantly different structure. If a child turns 16 and decides to take a punt on a company facing a high risk of bankruptcy, there is absolutely nothing a parent can do. The account isn't like bare trust where the account is in a parents name with the child named as a beneficiary - it's in the childs name.
In Ireland, I believe the bare trust structure enables CGT to apply to the child, and them to avail of the annual tax-free allowance, but income tax rolls up to the parent.
Would I be correct in assuming that a JISA belonging to a child, upon return to Ireland, would be different and the income would apply to the child as opposed to the parent? If this were the case, it would reduce the administrative effort significantly because you are only obliged to submit a tax return if your taxable non-PAYE income is more than €5,000 a year. This would be in addition to the fact that there would be no liability to USC or Income tax.
If the above all holds true, it would be highly beneficial to open an account for a child, probably one with no maintenance fees like with X-O, before a child returns to Ireland. That would allow future investments within the structure of up to £9000 per year (based on the current years subscription limits) and the account can be funded by anyone (it just has to be opened by a parent).
The above assumes investment into shares directly as opposed to funds or ETF's (to which an exit tax applies and there are no allowances that I'm aware of).
To add some perspective, I requested my brother to open a JISA for my niece and nephew. They were born in the UK but are returning to Ireland this year.This would only work if the underlying investment is subject to general tax principles.
Most U.K. ISA accounts will hold an OEIC which prior to Brexit was a UCITs so the Irish tax treatment would be exit tax with a notional deemed 41% tax charge on each 8th anniversary from INCEPTION.
So this means that you should at the very least rebase an ISA or JISA before becoming Irish tax resident.
So good idea that is likely to fall down on the execution
Marc Westlake CFP®, TEP, EFP, APFS, QFA
E:marc.westlake@everlake.ie
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The above assumes investment into shares directly as opposed to funds or ETF's (to which an exit tax applies and there are no allowances that I'm aware of).
But my query is related to an assumption that a JISA isn't in any way similar to a bare trust. It's a completely different structure. A JISA is an account in a childs name whilst a bare trust is an account held in a parents name with a child named as a beneficiary.You should be aware that if any of the trustees are Irish resident then the bare trust will need to pay Irish tax and your dividends would be taxed at 40% until the children are 18
Those are the terms set out to the company managing the JISA - in the case of my niece and nephew, X-O.co.uk. The title to the shares are held in the name of the provider. In the case of the above information, 'you' means X-O.co.uk, or whichever other provider you happen to open the JISA with.These terms and conditions must meet the conditions set down in JISA legislation and must specify that:
- The JISA investments shall be in the beneficial ownership of the child.
- The title to the ISA investments will be registered: * in the name of the provider (you) * in the name of your nominee * jointly in one of them and the child or registered contact
- Share certificates or other documents showing the title to a JISA investment will be held by you or as directed by you.
Junior Individual Savings Accounts (JISAs) for managers: terms and conditions
The general terms and conditions ISA managers must provide for all JISAs including transfers.www.gov.uk
It may be one for the lawyers.The question then is would Irish Revenue accept this? In other words does the beneficial ownership imply a bare trust. One for the lawyers I’m afraid.
I thought it had to be in writing and wasn't aware of the idea of an implied trust - but if the Irish Revenue were to argue that an implied trust exists, my argument would be that the bare trust exists between the provider, who holds title to the shares, and the child - not the point of contact.A bare trust is commonly used where assets are held on behalf of minor children, who, because of their minority, may not hold an interest in trust property directly. A bare trust can be in writing or implied
To this point, although I don't believe it would make any difference, I'd probably avoid investing in shares listed on the Irish stock exchange - just to remove the bit of doubt on how dividends paid by Irish companies are dealt with might add to the equation.Im not saying it will be taxable in Ireland I’m saying that in all these things there is always room for some doubt.
The benefit is that it brings the parent ownership out of the equation and, as far as I can see, means that income tax is payable by the child as opposed to the parent.Potential CRBOT registration requirements also.
I don’t really see the benefit of opening an ISA or JISA before moving to Ireland, given that these admittedly great structures have no status here.
Possibly the reason a child must be UK resident when the account is opened. If those registration requirements fall on the entity that holds the title to the assets, I can see why they'd only want to comply with UK legislation.Potential CRBOT registration requirements also.
There is definitely no benefit whatsoever to opening an ISA before moving to Ireland as you cannot add to it whilst resident elsewhere and ownership is your own.Potential CRBOT registration requirements also.
I don’t really see the benefit of opening an ISA or JISA before moving to Ireland, given that these admittedly great structures have no status here.
Isn’t income tax assessed on the parent/settlor in such circumstances?The benefit is that it brings the parent ownership out of the equation and, as far as I can see, means that income tax is payable by the child as opposed to the parent.
In addition to income tax not falling under the parents marginal rate (they are nothing but a point of contact in the whole structure and hold no title to the shares or assets held within the structure), this would remove the need for any submission of tax returns unless dividend income exceeds €5,000. So no tax and no paperwork.
Basically, income tax can only ever be due by one of three parties:
The child? Okay, they have allowances, no liability to USC and no requirement to submit tax returns until dividend income exceeds €5,000.
The parent? Why? They are all but a point of contact.
The UK provider of the structure? Under what circumstances are they liable for Irish tax on dividends paid by, for example, a UK company?
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