Section 14: Insurance companies and friendly societies

59.     This section is required to allow the income and gains made on investments held in CTF accounts provided in the form of life insurance policies by insurance companies and friendly societies to be exempt from corporation tax. But this does not prevent the profits made by the companies on such business from being taxed. Subsection (1) does this by applying the relevant subsections of section 333B of the Income and Corporation Taxes Act 1988 as it relates to the Individual Savings Account (ISA) business of insurance companies and friendly societies to their business in providing CTF accounts. ISA and CTF business will be treated for tax purposes as a single category of business with ISA losses being offset against CTF profits and vice versa.

Section 15: Information from account providers etc

60.     This section gives the Treasury power to make regulations under which information can be required from account providers and others. Under subsection (1) the regulations may require or authorise officers of the Inland Revenue to require account providers and other relevant persons to provide documents for inspection or to provide information about CTF accounts.

61.     Subsection (2) defines relevant persons as the current or previous provider of the CTF account; the person who owns, or owned, the CTF account; the person to whom a CTF voucher was issued; the person who applied to open the CTF account; anyone who gave instructions about the management of the account; and anyone entitled to child benefit in respect of the child.

62.     Subsection (3) provides that regulations may specify how, where and when information should be provided.

Section 16: Information about children in care of authority

63.     The child benefit legislation does not allow child benefit to be claimed for children in care (see paragraph 13) but the Government wants to ensure that these children do not miss out on the CTF. Subsection (1) gives the Treasury power to make regulations requiring authorities to provide both the information necessary to arrange for CTF accounts to be opened for children looked after by a local authority and any other information required for the administration of accounts, for example, for further Government contributions to be made.

64.     Subsection (2) sets out the legislation under which child benefit cannot be claimed for children in care. Subsection (3) provides that regulations may specify how, where and when information should be provided.

Section 17: Use of information

65.     This section allows information to be shared within Government and between Government departments and contractors such as the Inland Revenue's IT provider. In the section such contractors are described as " persons providing services to the Inland Revenue". Under subsection (1) information held for CTF purposes can be used in connection with the CTF. Under subsection (2) information held for CTF purposes can be used for other functions carried out by the Inland Revenue. This would allow the Inland Revenue to use information about the CTF for statistical purposes in assessing the success of savings policies. Under subsection (3) information held for functions not connected with the CTF can be used in connection with the CTF. This would allow the Revenue to use information about households' claims for child tax credit to assess a child's eligibility for the supplementary contribution.

66.     Subsection (4) allows other government departments to provide information to the Inland Revenue or one of its contractors for purposes connected with the CTF. The Inland Revenue will need to use information provided by the Department for Work and Pensions (DWP) or the Northern Irish equivalent to assess the eligibility for supplementary contribution of children born after 31 August 2002 but before the launch of CTF accounts. This group will include children in households unable to claim child tax credit as this was not introduced until April 2003 and children whose parents are receiving other benefits and will only transfer to child tax credit in the tax year 2004-05. For households in these circumstances, DWP will provide the Inland Revenue with information about other benefits that were claimed at the relevant time (see paragraphs 45 and 46).

Section 18: Disclosure of information

67.     This section deals with the disclosure of information relating to a CTF account held by an identifiable person by Government officials to people outside Government. It brings the CTF within the existing statutory provisions providing for Revenue confidentiality, and the exceptions to those rules on confidentiality.

Section 19: Payments after death of child

68.     Under subsections (1) and (2) the Inland Revenue will have the power to make payments to the personal representatives of a child born after 31 August 2002 who has died before payments to which the child was entitled have been credited to a CTF account.

69.     Subsection (3) sets out the conditions that will have to be met for a payment to be made. These are that no initial contribution was paid under section 8, or if one was paid, it had not been credited to the child's CTF account; that the child was entitled to a supplementary contribution under section 9 but this had not been credited to the child's CTF account; or that a further contribution under section 10 was payable but had not been credited to the child's CTF account.

Section 20: Penalties

70.     Under subsection (1) the Inland Revenue has power to impose a penalty of £300 on anyone who fraudulently applies to open, makes a withdrawal from or secures the opening by the Inland Revenue of a child trust fund.

71.     Subsection (2) allows the Inland Revenue to impose a penalty not greater than £3,000 on an account provider who makes a fraudulent or negligent claim under sections 8 or 9 or in connection with regulations under sections 10 or 13 and on any person who fraudulently or negligently provides incorrect information under section 15.

72.     Under subsection (3) penalties can be imposed on account providers who do not make a claim under section 8, 9 or 10 within the time set out in regulations and on any person who does not provide a document or information within the time set out in regulations under section 15. Subsection (4) sets this penalty at no more than £300 and no more than £60 for each day that the failure continues after the first penalty is imposed. Subsection (5) ensures that no penalty will be charged under subsection (3) once the failure has been remedied. Subsection (6) ensures that a person will not be considered to have failed to make a timely claim or failed to provide or make information available on time if they have made the claim etc. within any additional time offered by the Inland Revenue, if they had a reasonable excuse for the delay, and if they made the claim etc. without delay once the excuse no longer applied.

73.     Under subsection (7) penalties can be imposed on account providers in respect of:

a)     the provision of an account with does not comply with the requirements of this Act or regulations made under it as set out in subsection (8) ;

b)     the failure to comply with sections 8(2) and 9(3) on crediting accounts with the initial and supplementary Government contributions or with regulations under 5(5) on the opening of accounts by providers, under section 6(3) on providers opening accounts at the request of the Inland Revenue, under section 7 on transfers and under section 10(3) on crediting accounts with further Government contributions; or

c)     a breach of section 12(1) allowing only monetary contributions to CTF accounts or regulations on subscription limits under section 12(2).

74.     Subsection (9) sets the penalty under subsection (7) as the greater of £300 or £1 in respect of each child trust fund for which a penalty is incurred.

Section 21: Decisions, appeals, mitigation and recovery

75.     This section sets out various procedural matters related to decisions, appeals and the mitigation and recovery of penalties. Under subsection (7) the Inland Revenue is given the power to mitigate penalties imposed under section 20.

Section 22: Rights of appeal

76.This section sets out the grounds under which account providers or responsible persons may appeal against decisions taken by the Inland Revenue. Subsection (1) states that account providers can appeal against the withholding or withdrawal of approval as a CTF account provider. Subsection (2) states that a relevant person can appeal against the Inland Revenue deciding not to issue a voucher or open an account or deciding not to make any of the Government contributions required under this Act. Subsection (3) defines relevant person as the person entitled to child benefit, the person who applied to open a CTF account and anyone who has given instructions on the management of the CTF account. Subsection (4) entitles a person required to repay tax relief or a contribution to the Inland Revenue to appeal against that requirement. Subsection (5) allows a child's personal representatives to appeal against a decision not to make a payment in accordance with section 19. Subsection (6) allows someone who is charged a penalty under section 20 to appeal against the decision to impose that penalty.

Section 23: Exercise of rights of appeal

77.     This section specifies the procedures for appeal, either to the General Commissioners or, if the appellant so chooses under the Taxes Management Act 1970, to the Special Commissioners. It should be read in conjunction with section 24. Until a day appointed by the Treasury by order, the appeals procedures are modified by section 24, so that appeals will be heard by an appeals tribunal and Northern Irish equivalent and any appeal against any decision made by this service will be to the Social Security Commissioner.

Section 24: Temporary modifications

78.     In line with the current arrangements for appeals against decisions on tax credits, these appeals will be heard by an appeals tribunal. See section 23.

Section 25: Northern Ireland

79.     This Act will have effect throughout the United Kingdom. Under this section the Northern Ireland Act 1998 is amended to place the Child Trust Fund in the Schedule of excepted matters. This will ensure that the Child Trust Fund will always be dealt with by way of a UK-wide Act.

Section 26: Money

80.     Subsection (1) provides that the expenditure made by the Inland Revenue under this Act, including the Government contributions, will be met out of money provided by Parliament. Subsection (2) provides that any sums received by the Inland Revenue, such as recoveries of Government contributions incorrectly made, will be paid into the Consolidated Fund.

Section 27: Commencement

81.     This section provides for the main provisions of the Act to come into force in accordance with provision made by order.

Section 28: Regulations and orders

82.     This section sets out the powers of the Treasury to make regulations under this Act by statutory instrument.

COMMENCEMENT

83.     A Treasury order (or orders) will be made setting out when this Act will come into force.

HANSARD REFERENCES

     The following table sets out the dates and Hansard references for each stage of this Act's passage through Parliament.

     Royal Assent - 13 May 2004          House of Lords Hansard Vol 660 Col 506

                              House of Commons Hansard Vol 421 Col 536