...The duty to invest wisely and tell the tax man!
Historically, money belonging to a person who lacked the capacity to look after those funds was frequently held in the Court Funds Office (CFO). This offered a safe government- backed account paying a good rate of interest. What’s more, when high street interest rates began to fall, the CFO rates fell at a slower pace which meant that CFO account holders benefited from higher rates of return for longer.
However, times have changed and funds held in the CFO now earn interest of no more than half of one percent and, sometimes, less.
If the funds held in the CFO are there to compensate someone for an injury, their original award will have been reduced to take account of it being invested and achieving a reasonable rate of return over their lifetime. It is, therefore, vitally important to ensure that their award is invested wisely. In the vast majority of cases, leaving funds in the CFO is not a wise investment.
If you are a Court of Protection Deputy, the Court will expect you to take investment advice from a suitably qualified person and invest the money in a way which is prudent and in the best interests of the person that you care for. The order appointing you may specify this but, even if it doesn’t, you will still have this general duty of care. If you are still holding funds in the CFO, you should be taking investment advice.
You my also need to file a tax return for the person you represent so that HMRC can collect any tax which is due or refund any which has been deducted at source if the income is within the individuals personal allowance. Interest paid by the CFO is paid without deduction of tax, but it is taxable income so if, when added to a persons other taxable income (which can include benefits), their tax free allowance is exceeded, tax will be payable. This applies to children as well as adults.
These are just some of the issues that, as a Court of Protection Deputy, you need to be aware of.