Cash Q&A: Setting up a bank account

I decided to open a savings account for him to pay in some cash on these occasions but am finding this impossible without his birth certificate. He already has an account set up with money we gave him when he was born, but that is in his mother’s name and my son would prefer that she did not have access to this new account. Unfortunately, however, she holds his birth certificate.

There are great grandparents and aunts who also give him money from time to time that would be deposited for him, but we cannot find an account that does not need his birth certificate or one that can take deposits as and when given as gifts. Do you know of anywhere that would open such an account for us? I am sure there must be other grandparents in similar circumstances nowadays.

HF Linlithgow

AUnfortunately the regulations mean evidence of an individual’s identity as well as proof of address must be supplied when opening a bank account. This includes setting up accounts on behalf of minors. Generally, you need either a birth certificate, passport or child benefit book, though each banking institution will have its own requirements.

There is the possibility that your son can apply for a copy of the birth certificate from his local authority. Administration charges may well be incurred for obtaining a copy, but this may well solve the problem.

A copy of the birth certificate would also be required even if the account was to be opened in trust for your grandson, given his age. As your grandson is under seven, an adult must open and run the account on their behalf, which you could do as his grandparent.

An account held in trust would have you noted as the “trustee”, ie, look after the funds on his behalf. Upon reaching either age 16 or 18, the account can then move into your grandson’s name.

When money is given to your grandson by his parents, if the interest paid on these funds exceeds £100 a year (£200 a year for a couple), the interest would be taxed on the parents. For money given by grandparents (or any other adult), this cap doesn’t apply as long as it’s a genuine gift. Therefore, the interest paid on these funds could be paid without deduction of tax if your grandson’s income does not exceed £9,440 for the current tax year.

An alternative is to simply set up an account in your name, make deposits as necessary and then withdraw when required. But the funds will be treated as yours for tax purposes and the interest may be subject to tax.

You could consider alternative options such as children’s bonds from National Savings (www.nsandi.com). These are deposit-backed savings and only require proof of identity from you and at least one parent (your son), who then control the money until the child is 16. As a grandparent, you will need to apply by post but you shouldn’t need your grandson’s birth certificate.Anyone can invest for a child whether you are a parent, grandparent, family member or friend. However, you need the parent’s permission in order for the bond to be set up.

You can also save a small amount tax-free using a friendly society savings bond. You can save up to £25 a month or £270 a year a child and take all returns free of tax, but you have to save for a minimum of ten years and the return will be based on stock market performance, so there is an element of risk. Anyone can invest for a child they care about – whether you’re a parent, grandparent, family member or friend – but they need the parents’ permission to set a bond up.

• Neil Mitchell is a tax partner at Mazars Scotland

If you have a question you need answered, write to Jeff Salway c/o The Scotsman, 108 Holyrood Road, Edinburgh EH8 8AS or email: [email protected]