The high income child benefit charge (HICBC) was introduced on 7 January 2013 to claw back child benefit paid to families where the highest earner has total net income of £50,000 or more. The professional bodies warned that this would drag people into self-assessment who would otherwise would have their tax affairs adequately dealt with under PAYE.
And so it came to pass. Since 2013 thousands of higher earners have been obliged to tell HMRC that they need a tax return in order to self-assess the HICBC. There are several problems with this:
- The parent who receives child benefit may not be the highest earner in the family.
- Many parents weren’t aware of the HICBC.
- Where the taxpayer’s income increases above £50,000 they aren’t prompted to think about their liability to pay the HICBC.
- HMRC knows who receives child benefit but didn’t tell all these claimants about the HICBC.
Some parents have received penalties for failing to notify HMRC of the need to pay HICBC. One such taxpayer was James Robertson (see our newsletter on 12 April 2018).
Robertson won his case as the child benefit he failed to tell HMRC about was not his income (his wife received it). In fact, child benefit is not taxable income at all. That’s why the HICBC is described as a charge and not a tax. As Robertson did not fail to declare any of his taxable income, there was no potential lost revenue to assess, and the penalty for failure to notify had to be nil as well.
Following the Robertson case, and other unreported cases, HMRC has now decided to refund some of the penalties charged to parents for failing to notify their liability to pay the HICBC for the years 2013/14 to 2015/16. However, not all parents will get a refund of the penalties. The parent must have made a claim for child benefit before 7 January 2013, and not received any communications from HMRC about the HICBC.
Parents who need to pay the HICBC for 2016/17 or a later year still need to tell HMRC about their liability. Also, any parents who claimed child benefit since 7 January 2013 are deemed to know all about the HICBC, which is really not the case.
Written by the Tax Advice Network