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
    +3

    Comment number 686.

    659. Son of Maggie and Norman
    '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.'

    Actually no. There is a right to children as set out in the UN Charter of Human Rights.

    Unfortunately your stance is one which was spouted in various European dictatorships of the 1930s. CB helps with that right.

  • rate this
    +5

    Comment number 685.

    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
    ----
    Because over 30% of the UK population will be over 70 by then the size of the working age population will actually have increased scarcely at all. Without children this is a demographic disaster

  • rate this
    +2

    Comment number 684.

    644.Trina
    "We really, really should be disincentivising fertility on this crowded island."

    So you'd prefer a steadily aging and declining population? Who's going to pay for your health care when you're old and decrepit?

  • rate this
    0

    Comment number 683.

    Crispy_king : I think the mother sometimes is not forced to work. she would like to work, perhaps to keep in the working force for the future, to build up a career etc. if she is allowed to work, she will provide for her family better when kids grow up, and also she will continuously pay tax on her earning and provide further employment of nannies, childminders, nurseries etc.

  • rate this
    +6

    Comment number 682.

    "only have children if you can afford it" - the simple life:get good job,get married, have children, happy ever after.... nobody gets divorced,loses a job,gets ill..... unfortunately that's not real life.

    "why pay people to have children?" - because maybe one day when you're old these children will be looking after you, feeding you, washing you & helping you go to the toilet

  • rate this
    +2

    Comment number 681.

    In my view, if you don't share details like financial income with your Partner/Spouse, what are you doing with them?! Shouldn't these relationships be about trust? I'm flabergasted. What are we as a society coming to?!

  • rate this
    +3

    Comment number 680.

    Unfortuantely the UK is in such a mess the Governement is grasping at straws. I'm amazed they have'nt starting looking at taxing oxygen intake.

    The consultancy and implementation will far outway the saving at least for the first few years.

    When they let vodaphone off over £1billion in tax makes you wonder if we really are all in this together!

  • rate this
    +3

    Comment number 679.

    @ 667.AndyC555 - I agree with most of what you say but people were screaming about fat-cats - many saw the warning signs about 4 years before the Banking crisis but those in charge ignored them.

    The rich-poor chasm has for a number of years been getting wider and wider and only the rich have remained silent about that.

  • rate this
    +2

    Comment number 678.

    @598.Gaz
    You're right I oversimplified it. Basically if someone earns just over a tax threshold then things like loss tax of tax credits means they can end up earning less than someone just below but won't just on income tax rate.

  • rate this
    +1

    Comment number 677.

    What an odd relationship it must be for one spouse to conceal financial details from the other spouse. The same argument applies to couples who aren't married to each other.

    They get enough state handouts as it is. It's therefore only fair that the state should be in a position to determine entitlement.

  • rate this
    0

    Comment number 676.

    652.
    yes, because you can clearly budget on your income and live by the means of what you earn.

    What's that? Oh, no you can't because you 'somehow can't survive' without a handout from the state.

    (Comment only applies if you earn the minimum wage or more).

  • rate this
    +2

    Comment number 675.

    Is baffles me the attitude of some childless people who really believe there decision not to have children means they are somehow distanced from the fundamental reason we are all here on this planet. Just because you don't have children doesn't mean you were not once a child, who's parents probably benefited from child benefit.

  • rate this
    +2

    Comment number 674.

    #637 Ppuj
    Low quality families have low quality children. Stop the cycle. Some are 3rd generation unemployed. It needs to stop.

    ------------
    Aldous Huxley was a true visionary - if we only allow alphas and betas whose gonna clean the bogs.

  • rate this
    +7

    Comment number 673.

    641. Tsunami of Logic
    ' 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!'

    Hard earned cash? You seem to spend most of the day on here so its hardly hard earned cash. Unless you are paid by your employers to be on here to spout right wing dribble.

    Another thing - did your parents get CB for your nappies? Pray tell.

  • rate this
    +1

    Comment number 672.

    Why are the government cutting housing benefit for jobless from £80 per week to £53 per week yet people on £50 thousand a year are getting state benefits,just totally stupidand morally wrong.Might not be popular cutting child benefit but anybody on £20.000 a year does not need it never mind £50 thousand a year.

  • rate this
    -4

    Comment number 671.

    How do they propose to make the families disclose the information to each other for this online quiz? What happens if one person does'nt want to tell the other and tells them a lie? Are they going to send the police around?
    Surely as part of your civil liberties you are allowed to keep some things private - even though most people here think talking about salaries should done freely.

  • rate this
    0

    Comment number 670.

    Scrap child benefit after the child attains school age and invest the money saved into the state education system instead. You could then give all children free school meals and uniforms, subsidise higher education etc.

    In that way we will know that the money is being spent for the benefit of the children and not on their parents.

  • rate this
    +2

    Comment number 669.

    658.Tsunami of Logic
    "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!"

    Speak for yourself, I have had enough of all of these 3 rotten self-serving arrogant main parties and no longer vote for any of them. We'll be back here once Labour get back in.

  • rate this
    +3

    Comment number 668.

    Wow! I'm impressed at how the great British public can pour such bile and vitiol over each other. Nastiness makes you feel powerful does it?
    I'd love to join the debate, but there doesn't seem to be one going on here.....

  • rate this
    -2

    Comment number 667.

    Labour under Blair and Brown effectively ran the economy as a giant Ponzi scheme. So long as the combination of borrowing and taxes from the financial sector paid for the ever larger public sector and endless benefits, no-one complained, no-one screamed about fat-cats. Now the house of cards has collapsed and the money's run out and everyone's looking for someone else to blame.

 

Page 9 of 43

 

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