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 666.

    If working was made illegal (but then no-one would be arround to enforce it!) & we all lived on benefits, would that make things better (all equals)?

    Bye all, have fun

  • rate this
    +4

    Comment number 665.

    Do you know, I reckon it would be more efficient to give every adult citizen £15000 pa, then tax ALL income, and abolish benefits and allowances completely.

  • rate this
    +4

    Comment number 664.

    656.working Stiff
    4 Minutes ago
    Lets just simplify it.
    Socialists are forever screaming

    Really? Most of the Socialists that I've met weren't screamers. Tut, I love a screamer, too. Where are your Socialists from?

  • rate this
    +7

    Comment number 663.

    641.Tsunami of Logic
    If you can't afford a child then don't have one! But don't expect my hard earned cash to keep you supplied with nappies!

    I wonder, do you have children? have you claimed child benefit? Did your parents claim child benefit for you? If the answer is yes to any of these questions then perhaps you should thank those who paid their taxes and contributed towards your nappies.

  • rate this
    +3

    Comment number 662.

    @619 Whistling Neil
    Actually I did pay upper rate tax, and while I didn't mind subsidising those on lower rate tax, generally, I did object to subsidising those who earn substantially more than me for the fact they have kids. I'd rather that money went to those who actually needed it. Hope that clarifies. Cheers

  • rate this
    0

    Comment number 661.

    @657 Astridd01

    Well Said I agree 99% but why make the free school meals compulsory. I enjoy seeing my grandson at dinner times..

  • rate this
    0

    Comment number 660.

    627. And then that's where we differ. Change, is sometimes a necessary thing.

  • rate this
    -3

    Comment number 659.

    657.Astridd02
    How dare anybody decide who is "allowed" to have children&who isn't.

    Only those than can afford to have children should have children. There is no right to a detached house or a ferrari in this world unless you can pay for them - children should be the same.

  • rate this
    -4

    Comment number 658.

    650 JPublic

    Well they wouldn't be in this mess if they had voted tory instead of for that blaggard Blair. So it is difficult to feel much sympathy for 'em!

  • rate this
    +8

    Comment number 657.

    Some of the comments are simply shocking. How dare anybody decide who is "allowed" to have children&who isn't.

    With regards to child benefit - I'd be more than willing to give up child benefit&would agree with it's abolition if the money would be used to pay for free (compulsory) school meals for all children instead of being swallowed by admin costs or paying for MP's expenses.

  • rate this
    -4

    Comment number 656.

    Lets just simplify it.
    Socialists are forever screaming about what they should have or want more..
    Lets just have a Scrounger Allocation Department.. Every working tax payer is allocated a Scrounger, Chav, Benefit Guzzler
    A Govt Inspector would turn up on payday with you and your allocated Scrounger in attendance.
    and just rob the cash of you, and give it to said Scrounger, more personal

  • rate this
    +5

    Comment number 655.

    619.Whistling Neil
    Unless you are paying upper rate tax generally you are being subsidised by someone who is. Those paying std rate tax are subsidising no one.
    The envy and false sense of contribution and entitlement you display is what makes those who actually do pay most taxes resent it, when those in receipt of them see it as OK to abuse them.

    My god...a voice of reason on HYS...

  • rate this
    +5

    Comment number 654.

    641.Tsunami of Logic
    9 Minutes ago
    If you can't afford a child then don't have one! But don't expect my hard earned cash to keep you supplied with nappies

    Have no fear, no-one here expects anything from you. Anticipates, perhaps, but not expects.

  • rate this
    -3

    Comment number 653.

    645.Billythefirst
    "the tax loophole industry is as healthy as it's always been"

    Could you give a few examples of these loopholes and how you'd close them? Or do the two words "tax" and "loophole" represent the sum of your knowledge on the topic?

  • rate this
    +4

    Comment number 652.

    554.Paul
    Why pay people just for having kids? Why not pay them for having a dog? Or a motorbike? Or whatever? Why kids especially? It's illogical.

    When you are grown up and have children of your own then you will understand.

  • rate this
    -4

    Comment number 651.

    Our population is forecast to increase by another 7m in the next 10 years. What possible justification is there for burdening the hard pressed taxpayer with a subsidy for someone else's child ? We are overpopulated as it is. In my opinion it is high time child benefit was scrapped in the UK for all, thereby placing the charge for childbirth on those responsible for it.

  • rate this
    +1

    Comment number 650.

    641.Tsunami of Logic
    "If you can't afford a child then don't have one! But don't expect my hard earned cash to keep you supplied with nappies!"

    I agree but ever thought that perhaps they could have afforded a child if they where not forced to pay so much in taxation due to what the Banks and Politicians have done to us?

  • rate this
    +1

    Comment number 649.

    643.paulmerhaba

    don't expect a debate on the purpose of CB, most posters are too busy fighting over why they should have their right to it removed while others say it should be scrapped regardless of any reason for it. So no intent to find common ground and work for the best solution for all.

  • rate this
    +1

    Comment number 648.

    611. Markus
    Well instead of jumping to conclusion about where I live. I think you'll find I live in one of the poorest towns that I know. A large proportion of the people in this town have been failed by "the working system"! think before you type my friend you might become a little more intelligent that way!

  • rate this
    +1

    Comment number 647.

    637 I hope you parents are no longer alive to read how badly you think of them.

 

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