Child benefit: Threat of 'penalties'

Higher-rate taxpayers face penalties if they fail to satisfy the Treasury
Higher-rate taxpayers face penalties if they fail to satisfy the Treasury

By staff

Higher-rate taxpayers could find themselves facing fines if their partner receives child benefit and doesn't inform the government.

If the plans are passed through legislation HMRC would reportedly write to all those on the higher rate asking them to declare whether or not the household receives child benefit - with fines for unanswered letters or incorrect responses.

Critics argue that if the details of earnings are not shared amongst household members or if the parents are separated it could lead to unfair issuing of penalties.

The controversial cut in benefit affects individuals earning more than £44,000 and will, according to the Treasury, save two billion pounds annually, part of an overall £18 billion cut from welfare spending overall.

The issue has however generated intense controversy since its announcement at the Conservative conference, where it overshadowed the media agenda and caused David Cameron to hastily tour the television studios to justify the move.

Given that the tax system is focused on individuals rather than families, the change could lead to perverse outcomes which see an arbitrary cut-off point for families receiving child benefit.

Labour has attacked the coalition for the 'unfairness' of the cut, pointing out that two parents with a combined income of £87,998 can still receive the benefit if neither earns over £44,000 - while a single parent earning just over the limit will lose all their child benefit.

The shadow chancellor Alan Johnson has sent a letter to George Osborne today to ask for 'clarity' on the amiguities in the proposals, particularly regarding single parents.

For example, Mr Johnson questioned: "If a single mother meets a new partner who is a higher rate taxpayer - how many nights would they need to spend together for her to be disqualified from child benefit?

"Would she have to keep a record of the number of nights she stayed with him? Would the answer vary if the nights were spent in her property or his?"

He added: "What has been increasingly clear is that the plans simply haven't been thought through. The result is the significant confusion we are now seeing about what this policy means in practice.

"The public are entitled to some straight answers about who will be affected and how the change will be enforced."


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