taxation 37


Child benefit: out of order comes chaos


Most of us are aware that child benefit is to be withdrawn from families where any member of the household has income in excess of £50,000. Many are not aware, however, of the mechanism that has been devised for achieving this and the pitfalls and penalties that lie in wait for those who are affected and who do not take timely action, writes David Gillies, director, Harwood Hutton


... they hit the statute with most of the major flaws intact


The Government’s reason behind the removal of child benefit is, in itself, understandable. Of course, in the current climate, there is no justification for taxing those on lower incomes in order to fund child benefit paid to those who are better off. The aim is to remove child benefit for the better off without introducing means testing.


As a result, the removal of child benefit takes the form of a tax charge. The rate of the charge increases by reference to the amount of income over £50,000 of the relevant family member. Once the income exceeds £60,000 the rate of the charge is 100%, effectively clawing back all of the benefit.


Failure to meet the filing deadline will result in an immediate penalty


The proposals which are now enshrined in the legislation are hugely ill-conceived. There has already been comment in the press about the fact that a family which has only one breadwinner with income of £60,000 will lose all of its child benefit whereas a family where each spouse has income of £49,000 each will not lose a penny. This is madness.


Despite the accountancy profession lobbying the Government and asking for changes to the proposals, they hit the statute with most of the major flaws intact.


Chaos is predicted as many families will now face the added burden of preparing a self- assessment tax return ...


HM Revenue & Customs is not happy because those who suddenly find themselves liable to the charge are required to self-assess the charge. This means that many who have never had to fill out a tax return before will suddenly find themselves within the self-assessment system. It is estimated that the charge could create around 500,000 new self-assessment cases. HM Revenue & Customs will not be able to cope.


It gets worse. As well as finding themselves in the self-assessment regime, those liable to the charge will also be subject to late filing penalties associated with it. The charge comes into effect on January 7, 2013. So those affected will have to submit 2012/13 tax returns by October 31, 2013 or January 31, 2014 depending on whether they are filing on paper or electronically. Failure to meet the filing deadline will result in an immediate penalty. If the position is not remedied, late filing penalties of up to £1,200 could mount up.


For those who wish to avoid the hassle of self- assessment, there is provision for those affected to elect not to receive child benefit. The election can be revoked at a later stage if an individual’s


THE BUSINESS MAGAZINE – THAMES VALLEY – NOVEMBER 2012 www.businessmag.co.uk


circumstances change. Take note; the only way for those affected to remove themselves from the charge is to make the election not to receive child benefit.


Chaos is predicted as many families will now face the added burden of preparing a self-assessment tax return on top of everything else. Although HM Revenue & Customs will be writing to those they believe to be affected, it is likely that many will end up missing filing deadlines and suffering late filing penalties.


As usual the Treasury say that this will deliver a fairer system but there is nothing fair about this new charge.


Anyone who will be affected by the new charge needs to take action soon. Information is available on the HM Revenue & Customs website, alternatively take advice from an accountant. Needless to say we at Harwood Hutton are ideally placed to help.


Details: David Gillies davidgillies@harwoodhutton.co.uk 01494-739500


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56