HMRC defends child benefit information policy
Revealing information about taxpayers and child benefit recipients to their partners is legal, HM Revenue & Customs says.
The tax authority is preparing to do this when the new tax on child benefit payments comes into force next January.
Critics say this appears to breach HMRC's legal obligation to keep individuals' tax affairs confidential.
But HMRC says a 2005 Act of Parliament in fact gives it the necessary authority to take this action.
From next January, the highest paid member of a family will pay an extra tax if he or she earns more than £50,000 a year or more and the partner claims child benefit.
If couples are unwilling to share information with each other about their incomes or child benefits, HMRC will be willing to give them basic information, such as whether their partner's income is over the relevant threshold, or they receive child benefit for their children.
HMRC has now explained that all this is legal, under a clause of the 2005 Commissioners for Revenue and Customs Act (CRCA).
This was the Act that established HMRC when it was created from the merger of the old Inland Revenue and Customs & Excise.
Specifically, subsection (2) (a) of paragraph 18, on confidentiality, says the general rule against disclosing taxpayers' information does not apply if it "is made for the purposes of a function of the Revenue and Customs".
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 that collecting the new child benefit tax, from 7 January 2013, is just such a purpose.
"In this instance the policy change to child benefit for those with income over £50,000 necessitates disclosure of one claimant's information to the other," a spokeswoman explained.
"If this disclosure were not made, HMRC would not be able to administer child benefit in accordance with the policy.
"Consequently s18(2)(a) CRCA 2005 is a sound legal basis for HMRC to disclose," she added.
The legal changes necessary to bring in the new tax charge on child benefit - a policy announced by the coalition in 2010 and confirmed in this year's Budget - are contained in the current Finance Bill which is currently being considered by Parliament.
Chas Roy-Chowdhury, of the ACCA tax body, said: "From what I can see, the legislation does give them the right, but only in very narrow circumstances, where other avenues have been exhausted - and I don't think that has happened."
"The individuals should voluntarily exchange information as the first option, and only then refer to the Revenue as a last resort."
Earlier this week the Institute of Chartered Accountants warned that the new tax would be an "operational disaster", partly because it will involve clawing back from one person a benefit which has been paid to another.
About 1.2 million people earning more than £50,000 a year are expected to find they have to pay more tax as a result of a partner claiming child benefit.
HMRC will send letters to all the potentially affected taxpayers this autumn to alert them to the impending tax charge, which will be collected via the income tax self-assessment system.