Couples face child benefit quiz under new tax

 
Parents and two children Some couples may not be happy to swap tax and benefit details

New child benefit rules mean that some high earners and their partners will be expected to disclose their finances to each other from next January.

People will also be able to find out from HM Revenue and Customs if their partners receive child benefit, or earn above £50,000 a year.

The changes are part of the forthcoming taxation of child benefit in households where someone earns above £50,000.

Experts say the changes will breach key tax confidentiality principles.

"This is a chip away at independent taxation and taxpayer confidentiality, because there is no other way of going about it," said John Whiting, of the Chartered Institute of Taxation (CIOT).

Chas Roy-Chowdhury of the ACCA accountancy body said: "I think the Treasury have devised a bad tax that HMRC are having to implement.

"It is a bad idea to tax an individual who is not receiving the benefit."

Checking each other

The new tax starts on 7 January 2013 and will affect 1.2 million families.

It is going to be levied on those in a household whose "adjusted net income" is more than £50,000 a year and who claim, or whose partner claims, child benefit.

Child benefit facts

  • Child benefit is a tax-free payment that is aimed at helping parents cope with the cost of bringing up children
  • One parent can claim £20.30 a week for an eldest or only child and £13.40 a week for each of their other children
  • The payments apply to all children aged under 16 and in some cases until they are 20 years old
  • The system is administered by HM Revenue and Customs (HMRC) which pays out to nearly 7.9 million families, with 13.7 million children

HMRC says it will "expect" couples to discuss their tax and benefits with each other, to find out if the higher earner is liable for the tax, despite the policy of separate taxation of married couples being in place since 1991.

HMRC will also let taxpayers ask for rudimentary information from its records to see whether or not their partners receive child benefit, or have an "adjusted net income" above £50,000, and should be paying the new tax.

This runs counter to the general principle of taxpayer confidentiality, which has been a formal part of the income tax system since 1803.

Revealing someone's tax records is currently a criminal offence for HMRC officials.

The relaxation of the two principles is going to happen because otherwise high earners who should pay the tax would be able to claim they were unable to find out if their partner received child benefit, and vice versa.

"In stable relationships you can see this carrying along smoothly," John Whiting said.

"But what about relationships that break up during the year?

"There are so many practical questions [about how the new tax will operate]," he added.

'Best of a bad job'

Responsibility for paying the tax will lie with the high earner in the household.

Start Quote

HMRC would expect couples to discuss their tax or benefit details with each other”

End Quote HMRC

HMRC also administers the child benefit system, which pays out to nearly 7.9 million families, with 13.7 million children.

So the Revenue could cross-check its list of high earners with its list of child benefit recipients, to see where they coincide.

But it hopes that taxpayers who have to pay the tax will save it the trouble and identify themselves when they are sent forms, as part of an enlarged self-assessment tax system next year.

An HMRC spokeswoman explained how the Revenue expected the new arrangements to work.

"HMRC would expect couples to discuss their tax or benefit details with each other," she said.

"However, for taxpayers unable to discuss their financial affairs, we will develop a process with appropriate security checks so HMRC can provide 'yes/no' answers to simple questions about whether child benefit is paid to the taxpayer's partner or about the level of a partner's income," she added.

Despite the implications of the emerging policy, HMRC said: "We are committed to protecting the principle of individual taxation and confidentiality. These principles will be at the centre of our child benefit compliance procedures."

Chas Roy-Chowdhury said: "It is making the best of a bad job.

"The person paying has to comply with the system so there has to be a way they can get the information."

£700m saving

Currently, a parent can claim £20.20 a week in child benefit for their eldest or only child, and £13.40 for each subsequent child.

The money is not taxed and the system is geared towards paying the mother.

The payments apply to all children aged under 16 and in some cases until they are 20 years old.

The policy of withholding child benefit from families where there is a high earner was first suggested by the coalition government in 2010.

In this year's Budget the plan was refined so that it would not apply, as first suggested, to all those who pay 40% income tax on any of their incomes.

Instead, the tax will apply gradually at £50,000 of income, with the child benefit being eroded completely once someone's income is £60,000 or more.

It is expected to save the government nearly £700m a year.

If the high earner is also the person claiming child benefit for their children then they can simply stop claiming it in order to avoid the tax charge.

But if a parent with a high-earning partner claims the benefit, their partner will have no power to tell them to stop claiming it so the new charge can be avoided.

Penalties

The government estimates that 1.2 million families receiving child benefit will have to pay the new tax; 70% will lose all their benefit and the remaining 30% will lose just a portion.

The affected families are expected to lose £1,300 a year on average.

The Revenue said that if it suspected that individuals were not paying the new tax charge when they should, it would be able to cross-check its income tax records with its child benefits records.

"HMRC will apply existing risk assessment techniques to identify where, for example, income has been understated or the liability has not been reported," said the Revenue spokeswoman.

"Existing penalties will apply to non-compliant taxpayers," she pointed out.

That means fines or possible prosecution.

 

Comments

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  • rate this
    +1

    Comment number 206.

    I agree Rebecca.

    I also agree with others who question the bureaucratic cost of this - the onus is on individuals to comply and HMRC to validate/ensure compliance.. Otherwise audit, penalties etc will ensue. You have been warned, which is what I suspect this article is really trying to say.

  • rate this
    +10

    Comment number 205.

    If partners are afraid off disclosing their incomes to each other, then why are they still partners? I don't know why I am getting a culture shock reading this news item....

  • rate this
    0

    Comment number 204.

    The coalition is doing what Labour normally does, massively over complicate something so the average person struggles to understand the implications.

    This benefit should be scrapped in any case, it is out of date and they already have mechanisms (albeit over complicated) in place for tax credits/benefits, why not use those and save a huge amount of administration?

  • rate this
    +6

    Comment number 203.

    Oh ... some poor rich people might lose some state funds - and a few unscrupulous individuals who keep secrets and squirrel funds away might have to reveal to their partners just how little they think of them. What a disaster! :-/

  • rate this
    +10

    Comment number 202.

    Good God! Are these high earner posh couples so fractured that they do not know each others salaries or whether one or other receives child benefit? Amazing!

    One wonders how they carry on or why they ever got married in first place. For trivial reasons most likely & because she wants an extravagent showy wedding. But when it comes to nitty gritty marriage part they don't like that bit at all.

  • rate this
    +2

    Comment number 201.

    I wonder if the advocates of abolishing child benefits would like to be the ones to bury the children that starve to death as a result?

    Panorama showed an interview with a small girl in the US a few months back whose Mum had to catch a rat to feed her. You want that here?

    Food tokens as an alternative maybe, but don't punish children for their parent's mistakes.

  • rate this
    +2

    Comment number 200.

    It would be far easier to just scrap child benefit. It's had it's day and is simply an unneccessary luxury now.

    Might even prevent most of the less salubrious elements of society from continuing to breed uncontrollably.

  • rate this
    -2

    Comment number 199.

    174. kevin

    It is fact that low income families are more likely to breed low income children. Why prop them up and encourage this. Stop child benefits and they may stop breeding therefore breaking the cycle of poorly educated, support dependent families.

  • rate this
    +6

    Comment number 198.

    164.Ben Essada
    ...The answer is mandatory birth control. With the right to have kids going first to the workers.

    So, it is ok for workers to have children, but what happens when the breadwinner is made redundant and can't find another job (especially in the current climate), I suppose you would then class him/her as a benefit scrounger.

  • rate this
    +5

    Comment number 197.

    If you're not willing to share financial details with your chosen partner then why should the government be willing to hand out cash to you? I love the idea that this is somehow unfair. If don't want to disclose don't ask for the benefit, it's not a right. The easier solution, just cap child payments at 3 children. The government shouldn't be paying people to have children.

  • rate this
    0

    Comment number 196.

    So hold on a minute:

    So this will affect me because i earn just over the threshold but my partner does not.

    Although my mate has a growing electrician business with profit over 200k, drives a 4litere car, 3 holidays a year, 2 kids in private school & owns 4 rental properties although because he on the books earns minimum wage & takes divedends will contrinue to receive...sound really fair!

  • rate this
    +2

    Comment number 195.

    Apparently expecting these two poor darlings earning £49,000 each to ask the other if they are claiming child benefit is too much. I am also still entirely in the dark as to Labour's faked outrage / hypocrisy over higher rate taxpayers having to be honest about their income.

  • rate this
    +4

    Comment number 194.

    The epitaph of this government will be:

    'Oh dear, we didn't really think this through'

  • rate this
    +9

    Comment number 193.

    Surely if you're having a kid with someone you trust them enough to divulge your earnings?!? Even your relationship doesn't survive, you're tied together for life by that kid you're supposed to be raising together.

  • rate this
    +12

    Comment number 192.

    There are couples who don't know what each other earns? Jesus, what sort of couples are they? Sounds more like a badly run business partnership.

  • rate this
    +1

    Comment number 191.

    44. Lewis Fitzroy

    Child benifit should be increased the cost of bringing up children has increased 100% since 1945 every child born in the U.K.should have a government given fund/ grant for university at birth, and all new parents should have a year off work on full pay."
    -

    But of course, it goes without question that you want other people to pay for this, rather than yourself, right?

  • rate this
    +5

    Comment number 190.

    This government only ever seem to dither over cuts that will affect people who are ok for money. There was no thoughts to cutting tax credits for low/middle income. No cliff edge was considered there. This government (and previous government) is unashamedly pro rich people and not business as Cameron claims.People need to run this country not politicians as per the original democracy.

  • rate this
    +11

    Comment number 189.

    So it's okay to have kids with someone but not discuss your finances? No wonder there are so many single parents around.

  • rate this
    +16

    Comment number 188.

    178.UKStinks
    Obvisouly dont have children if you think £80 a month you can provide clothes, pay for school meals, take out at weekends to places of interest and eduction etc.
    ---
    Obviously don't understand the concept of responsible parenting if you expect the sate to pay for these things and didn't take them into consideration before having children. Your kids - your responsibility.

  • rate this
    +1

    Comment number 187.

    I keep getting marked down, so I'd conclude there are either couples too 'embarrassed' to have their tax codes linked, or there are high earners that think I should subsidise them. I guess that's democracy

 

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