HMRC unmoved by child benefit charge complaints

HMRC has dismissed claims that letters sent to child benefit recipients inviting them to consider whether they should pay the high income child benefit charge (HICBC) are “causing trouble”. A spokesman said the letters can be “simply disregarded” where the charge has been paid, but the ICAEW Tax Faculty has claimed that the letters are “aggressive” and poorly targeted.

A note published this week by the Faculty echoes concerns raised by AccountingWEB members.

Last week “evansjez”, writing in the Any Answers forum, said a client “in a state of panic” had received a letter “indicating that she needed to amend her 2012/13 tax return as she had been in receipt of child benefit”. The letter “gave the very strong impression that the client owed extra tax”. But her income was only £40,000, well below the HICBC threshold.

On 22 August “b1lly” said HMRC seemed to have “targeted clients where the profit is greater than £50,000 without taking into account any allowable deductions such as pension contributions”. The letters suggested that the tax return “needs to be amended”.

Responding to that post, “tazmaniandevil” wrote: “Just received a call from upset client. Has received the same letter stating ‘You need to act now!’ HMRC confirmed they do not check partner's income – which is a shame as, in this instance, the HICBC is on the partner's return!”

‘Unacceptable’

The Tax Faculty said the “poorly targeted, aggressive letters” were “causing trouble”. It had received “several emails and calls” from members whose clients had received letters asking them to check their tax return.

“The letters appeared to have been written to people who said they had received child benefit and earned over £50,000 in 2012/13 but who did not themselves actually pay the HICBC,” the Faculty said. “This was correct because in the cases we have seen, the individual’s spouse or partner earned the greater amount and had actually paid the HICBC which seems to be being chased now.”

The Faculty said the words “You need to act now!” were stamped in red.

It added: “The letter states: ‘We have checked your tax return for 2012 to 2013 against child benefit records. This shows that you or your partner continued to get child benefit after 7 January 2013.’ It goes on to say that if the statements in the letter are correct, the recipient of the letter will have to pay the HICBC for 2012/13. The taxpayer is invited to amend their 2012/13 tax return if they believe they should have paid the charge, but haven’t.

“In all the cases we have seen, the agent had correctly completed the tax returns of both taxpayers comprising the couple and is now faced with placating a concerned client, while also having to decide whether to respond to the letter on the client’s behalf. Almost as an afterthought, the letter says that no action is needed if the HICBC doesn’t apply.”

The Faculty said it was “unacceptable” that HMRC “has been able to cross-check a tax return with child benefit records, but has not apparently cross-checked with the taxpayer’s husband's or wife’s records”.

‘No errors’

AccountingWEB invited HMRC to respond to these concerns. A spokesman said that they were “groundless”, because the letter can be “simply disregarded” if the charge has been paid.

He added: “We cannot disclose details of either parent's income to the other, but we would encourage couples to discuss between themselves which partner might be eligible for the charge. If that is not possible we can provide guidance to allay any concerns about who is to pay the charge.”

Asked to confirm that errors had been made and to indicate the extent of the problem, the spokesman said “no errors” had been made.

AccountingWEB asked: “In some cases it appears that the recipient's spouse or partner has paid the charge but HMRC has not cross-checked the records. Is that right?”

HMRC replied: “We have, but the point of the letters is to help taxpayers get their returns right by raising awareness of the high income child benefit charge, and to remind taxpayers who file under self-assessment of the importance of including HICBC on their return.”

Comments

Sounds like poor data analysis to me

the_Poacher | | Permalink

Sounds like someone got their database analysis wrong here. Makes for poor fishing

Just shakin the tree.

moneymanager | | Permalink

It appears that HMRC is quite prepared to use alarmist communications in the mere hope of making a few more apples drop.  This has a striking similarity to those "your return may be in need of ammendment"letters of a few years ago.

The problem is the wording

garethgreen | | Permalink

The letter seems to be designed to panic the recipient into paying up immediately. It says, categorically, that "you should have included" the benefits in the tax return and "have to pay the charge".

Why did it not add the words "if you had income higher than your partner"? Or at least mention that HMRC has not cross-checked to see if the partner has paid the charge?

Seems to have worked though.

JonathanD | | Permalink

I've had 3 clients who have rung up to 'declare all', so it has been a handy exercise for both sides.

Without this reminder, 2014 returns would have been filed, and there would be more errors!

Also, no contact details

garethgreen | | Permalink

Also bad that they gave no way to contact them to discuss this. Which seemed to reinforce the impression that you had bloody-well better pay up and no discussion will be entered into.

Dont worry    5 thanks

jholmes | | Permalink

Soon they wont need to bother sending out these aggressive letters.

They will simply take the money out of your bank account. Then when you contact them to say it was paid via your spouse's tax return, got your spouse to confirm they can talk to you, got them to check the records again, and waited the standard 4-12 weeks time for them to process something, you money will be returned.

The system works!

cfield's picture

Poor planning, poor systems, poor communication    5 thanks

cfield | | Permalink

One of my my clients told me his wife got one of these letters. His description of it was "slightly aggressive" but he knew the tax had been paid so to him it was more puzzling than worrying.

His wife earns £50k+ but he earns even more so we ignored the Child Benefit Higher Income Charge on her tax return. That seems to have been the trigger for the letter.

The root problem here (which is typical of HMRC's poor planning and organisation) is that there is no box you can tick to say "Yes, I do earn over £50k but my partner/spouse has paid the tax". You either tick it or you ignore it. So now, they cannot distinguish between those who left it blank correctly and those who should have completed it but didn't. Brilliant! 

Being HMRC, they think it's OK to send these letters willy-nilly to everyone just to catch the few who owe tax on Child Benefit. A typical expedient, scatter-gun approach.

Being HMRC, they think it's OK to scare the living daylights out of people who owe nothing and then excuse themselves by saying it is to "raise awareness" and that they did say "disregard" the letter if it doesn't apply, notwithstanding its aggressive tone.

And being HMRC, they don't even bother to mention why the letter might be wrong, because that would be as good as admitting it was poorly targetted and show them up as the incompetent twits they really are.

Instead of binning these letters, people should just send them back with letters of complaint, so HMRC have to spend time dealing with the consequences of their own incompetence.

The real idiocy of course is using the tax system to claw back state benefits that should never have been given away in the first place, but that's another argument.

No trouble...

Ian McTernan CTA | | Permalink

I agree, the letters are causing HMRC 'no trouble', so their statement is totally correct.

The problem they like stoking at every opportunity is to fire off these alarmist letters and then ignore the flak agents then get from their clients about it.

It surely can't be beyond the scope of the HMRC and old DSS systems to read income details and then calculate who owes the charge then send out a bill, with a big return box for you to state 'my partner/wife/whatever has paid the charge under reference xxxxx' which they then check and amend the record to check that partner's return for the charge in future years.

The real problem is the jerry built over budget inefficient systems and the constant tinkering of the tax system that causes all the problems.  I actually feel sorry for HMRC employees who have to put up with all this piled on them from on high.

It's the wording of the

cyrynpen | | Permalink

It's the wording of the letters and the big red "you need to act now" statement that's the problem! And of course it's not a problem for HMRC because they'll get extra income from it.

 

Remember

Paulsoper | | Permalink

With the exception of this idiotic politically inspired charge which I'm sure HMRC would rather never happened, independant taxation means that for more than 20 years HMRC have no way of actually knowing who is married to whom - so here they are being given a responsibility that they don't want - could it be that they are hoping to anger sufficient taxpayers that politicians realise at last just how crazy this is?

Child Benefit 20132-13

Jim Dixon | | Permalink

I received this letter, too.

The letter has no contact details for HMRC, telephone number, or e-mail address.

 

The only option was to spend time re-opening the return and posting a comment in the "Other Information" box explaining why this charge did not apply. A complete waste of time, and some 3 weeks later still none the wiser if my note has been read, let alone accepted. Still awaiting a refund. 

 

JD

No proper targetting

wyoming | | Permalink

I can understand the fact that HMRC don't know when it is the taxpayer's partner who is liable to HICBC and so send out a letter (although it doesn't excuse the tone of the letter). How can they know, seeing as we have had independent taxation for well over 20 years now? Wasn't this one of the fundamental weaknesses in the system that we were all pointing out from the start? However, they really should be able to target the letter more effectively in terms of a) not sending it to people who clearly earn less than £50K and b) not sending it to people who opted not to receive CB after 07.01.2013. On the positive side, I've had a couple of cases where this letter has unearthed people who didn't pay the 2012/13 HICBC when they should have (i.e. they failed to read our letters telling them they needed to tell us if they were still claiming CB) and rectifying the situation now is relatively painless as we're only talking about paying back 13 weeks' worth of benefit - as opposed to potentially having to pay back 52 weeks' worth of benefit re 2013/14.

What about those under PAYE

fndeloh | | Permalink

What about those under PAYE who do not complete a self asessement tax return and may well be due HICBC ? Is HMRC also targetting them or is there no mechanism to do that yet ?

Well, they should be in SA!    1 thanks

wyoming | | Permalink

fndeloh wrote:

What about those under PAYE who do not complete a self asessement tax return and may well be due HICBC ? Is HMRC also targetting them or is there no mechanism to do that yet ?

This shouldn't happen as anyone who was liable to HICBC for 2012/13 (i.e. earnings over £50K and they didn't opt to stop receiving the benefit after 7 January 2013) was obliged to register for Self Assessment. Any who failed to do so should contact HMRC as soon as possible in order to mitigate the penalties that they will inevitably face.

Its over the top

AndrewV12 | | Permalink

Another form that needs completing, HMRC probably have this information to hand anyway, maybe they wanted to check all information they hold on certain people. 

Taking a wider view, why is

St Bruno | | Permalink

Taking a wider view, why is it that cfield's clients are in receipt of child benefit anyway, given that family income as stated is over £100,000? If their joint income is that high, why do they need support from other taxpayers?

Am I right in thinking that G Brown Esq invented this lunacy?

cfield's picture

My clients    1 thanks

cfield | | Permalink

St Bruno wrote:

Taking a wider view, why is it that cfield's clients are in receipt of child benefit anyway, given that family income as stated is over £100,000? If their joint income is that high, why do they need support from other taxpayers?

Am I right in thinking that G Brown Esq invented this lunacy?

I'm afraid you don't understand St Bruno. As I said in my post, the tax on the child benefit was paid by the husband so they didn't get anything in the end anyway. In their case, the system worked just as it was supposed to, except that the wife got one of those stupid letters due to HMRC incompetence.

As for rich people getting Child Benefit, that particular idiocy existed long before Gordon Brown's time, so we can't blame him for that, although he was obviously in favour of it given how he dished out Child Tax Credits (out of our hard-earned taxes) to people earning up to £60,000.

It was the Coalition who tried to address universal Child Benefit by restricting who gets it, but their original idea of banning it altogether for higher rate taxpayers was scrapped as a vote-loser (very unfair anyway on people living in the South East given the higher costs of living) and they brought in this daft idea of using the tax system to claw it back, which meant that total household income was ignored. Maybe this was a covert policy by them to reward marriage (or at least parents who actually live with each other). More likely though, it was an inadvertent side-effect which, by good fortune, just happened to achieve their policy objectives on tax and marriage).

What they should have done of course was treat Child Benefit just like any other state benefit, linked to household income rather than individual income. This is how Tax Credits already work, so whilst they were at it, they could have merged it with them and started treating them as state benefits too, given that this is what they really are.

All state benefits (and Minimum Wage too) should have regional variations to take account of local wages and living costs, so the unemployed and low earners do not get too much (or too little) in comparison with other people living in the same part of the country.  I would stop short of doing that for the State Pension though, as after all, people contributed at the same rate towards that, even though their money went to current pensioners rather than into a properly funded system.

A similar idiocy which we can blame Gordon Brown for is Winter Fuel Allowance being paid to rich pensioners. I think a lot of them would be relieved to see an end to it, as it is quite frankly embarrasing to most of them.

Free public transport should be left unchanged, however, as a) it would cause an uproar if they messed with it, b) wealthier pensioners probably don't use it as much anyway (so little loss of revenue) and c) perhaps most importantly, it has become a "badge of seniority", a mark of respect for reaching 60 years old which does not us cost much and which I think we should keep.