High Income Child Benefit Charge – HMRC’s “lazy response”

The so-called High Income Child Benefit Charge was introduced with effect from 7th January 2013, i.e. the 2012-13 tax year. The charge applies to the receipt of child benefit where the income of either the claimant or their partner exceeds £50,000.  Where the charge applies, a certain percentage (up to 100%) of the child benefit has to be repaid via Self Assessment.  In the case of a couple, the charge is applied to the partner with the highest income, regardless of which member of the couple actually received the child benefit.

Such a charge was always going to be difficult to implement – collecting tax from one person in respect of a benefit paid to another – and it appears that HMRC are now realising this.

It seems that letters are being sent by HMRC to individuals with income in excess of £50,000 who continue to receive child benefit and who did not include the High Income Child Benefit Charge on their 2012-13 tax return.

The letter suggests that the individual should have included the charge on their tax return, invites them to amend it and reminds them to include the charge on future tax returns. It does not explain that the charge only applies if the individual’s income is more than £50,000 and is higher than their partner’s.   In most cases, the High Income Child Benefit Charge will have been correctly included on the higher earner’s tax return.

HMRC seem willing to cross-check a taxpayer’s tax return with the child benefit records but not with their spouse’s tax return.

While the letter goes on to say that no action is required if the High Income Child Benefit Charge does not apply, it is clearly written in such a way as to prompt a response.

If you or your spouse receive such a letter from HMRC, your Barnes Roffe tax manager will be able to tell you quickly what has been included on your tax returns and confirm whether any further action is needed.

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