SFIA Educational Plans Limited

  


Tax Implications

 
As far as we are aware, the termly benefits do not form part of the income of the Pupil, Parent or Donor and therefore, there is no liability to Income Tax.

If a Plan has to be cancelled and the policy surrendered, the gain is not subject to any tax.

With regard to Inheritance Tax and the capital sum paid, as we are not Financial Advisers, we do suggest that you contact your tax adviser. However, for your information, we have attached an extract from the Fact Sheet produced by School Fees Insurance Agency Limited in 1993.

Inheritance Tax
The following is an extract of a Fact Sheet produced by School Fees Insurance Agency Limited in 1993.

We have reproduced the following for your information only. We cannot take any responsibility for the content and we cannot make any comments.
UNDER OPTION A UNDER OPTION B
Parent Donor Individual Donor who is not Parent Parent Donor Individual Donor who is not Parent
Before Termly Payments Commence No liability to Lifetime Inheritance Tax

On Death of Donor the market value of the plan forms part of the Estate

 No liability to Lifetime Inheritance Tax

On Death of Donor the market value of the plan forms part of the Estate (see note iv)

 No liability to Inheritance Tax (see note iii) Potential liability to Inheritance Tax (see notes i & iv)
When Termly Payments Commence No liability to Inheritance Tax (see note iii) Potential liability Inheritance Tax (see note i, ii & iv)

Notes:

i)  The rules for calculating Lifetime Inheritance Tax are complex. The value of the Plan will be aggregated with all other chargeable lifetime transfers over a 7 year period. Inheritance Tax may be payable on the excess of the total over the tax-free threshold.

ii)  Under the 'Option A' Deed the transfer is accepted as being made at the date the termly payments commence. It is from this date the seven years are counted for the Lifetime Inheritance Tax calculation.

iii)  The transfer is exempt by virtue of section 11 of the Inheritance Tax Act (1984)

iv)  See 'Exempt Transfers' below.

Under present legislation transfers between individuals may be made free of tax up to certain limits. These limits usually change with each year's Budget but when they are exceeded then an Inheritance Tax liability may arise. SFIA can advise on the Inheritance Tax implications of its plans but cannot provide a full tax advisory service.

Exempt Transfers

Where the Donor is someone other than a parent or legal guardian, the Inland Revenue Capital Taxes Office have clearly indicated that a payment into an SFIA Educational Trust Plan is not a Potentially Exempt Transfer.

Those clients for whom Inheritance Tax is a concern may wish to consider gifting monies to the parent of the child; such a gift is a Potentially Exempt Transfer, and the parent will then become the Donor. The Parent, as Donor, should then refer to the table and determine which option best suits his/her circumstances.

Changes in the Law

The statements made above are based on our understanding of current legislation and practice and although we believe them to be correct, they cannot be guaranteed.

 
 
 
 

Disclaimer

Please note that the information available may be incomplete, out of date, or incorrect.

It is a condition of us allowing you free access to the material on this website that you accept that we will not be liable for any action you take in reliance on it.

We do not give financial advice for which you must contact a Financial Adviser.

  
 
 
  2006 SFIA Educational Plans Limited