Member Article

Child benefit or hassle?

Since 7 January this year, for parents where one partner has more than £50,000 of income, child benefit is withdrawn on a sliding amount so that for a home where one parent has more than £60,000 of income, no child benefit is payable at all.

Where child benefit is no longer payable, it is possible to ask for the payments to be stopped. Alternatively, if payments continue, the high earner will need to pay the child benefit back through the tax system.

As a result, HMRC is urging those who continued to receive child benefit but are no longer eligible, to register for Self Assessment before 6 October, if they don’t already complete a tax return.

Failure to do so could potentially result in a penalty being charged.

Is this really what HMRC want? Assuming someone has two children and earns more than £60,000 – the most that will be in tax is the amount of child benefit received in the period 7 January to 5 April 2013, which would amount to £438. Does HMRC really want more individuals in the Self Assessment system just to assess a relatively small amount of tax?

The amounts could even be much less than that. If a parent was earning £51,000, just over the threshold, the tax charge would amount to £43. Hardly worth the time and effort from HMRC to deal with a Self-Assessment tax form.

Of course, the tax due should be recovered, but not necessarily through a tax return. There is already a system in place which allows HMRC to recover up to £3,000 in unpaid tax through the monthly tax on salaries by adjusting the PAYE tax code.

Oddly, HMRC’s guidance specifically excludes adjusting the tax code for the child benefit payments in the period 7 January to 5 April 2013.

It’s unclear why HMRC are excluding this period from a coding adjustment and instead they are making it clear that those who fail to register for Self-Assessment by 6 October could find themselves heavily penalised for a relatively small amount of tax which could be dealt with in a much simpler way.

This was posted in Bdaily's Members' News section by Baker Tilly .