Child benefit can be claimed by people who are not the main carer – see http://www.hmrc.gov.uk/students/who_can_claim_cb_4_1.htm. Let us suppose the claimant would have to pay the Child Benefit Tax Charge and the grandparent’s income is below £50,000. My understanding is the grandparent could claim Child Benefit provided they pay the whole lot over for the upkeep of the child. The claimant wouldn’t have to be a grandparent – could be anyone provided they pay the whole of the money over. Would this work?
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You'd have thought that they'd have thought of this one!
And they did! The new S.681D of ITEPA will still levy the High Income Child Benefit charge on the high earner in these circumstances.