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Off your backsides

22nd Oct 2013
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Hundreds of thousands of families losing child benefit payments this year need to "get off their backsides" and fill in extra forms to avoid being fined by the taxman, the head of HMRC has said.

Lin Homer, chief executive of HMRC, said more than 200,000 families still needed to register for the self assessment tax forms as part of the government's plans to take away child benefit for higher earners.

This apparently worked to the extent that some 29,000 registered over the weekend following Homer’s remarks, which was of course the last weekend to register in time.

This is said to leave 165,000 not registered and 160,000 who have, plus a large number who have opted not to receive child benefit.

Just a simple question: How does the continuing cost of issuing some 325,000 additional tax returns, and doing the work to identify who should have them, save money? It has been a continuing policy to attempt to reduce the number of self assessment tax returns issued, and while this may have created problems as a creaking PAYE system attempts to deal with the consequences of multiple jobs, HMRC had on the whole succeeded in this aim.

But this particularly witless approach to fiscal lawmaking has the consequence of a substantial increase in SA returns for exactly those who were assumed not to need them.

It is an added complication: Where taxing child benefit would have had some logic to it, taxing child benefit where one partner earns more than £50,000-a-year makes little sense, because the records to police it properly do not exist. One would have thought that child tax credits had shown up the difficulty of trying to base something on couples when the tax system has long since been based on the independent taxation of individuals. Child benefit is paid to the mother as a matter of principle, and so she has to know whether her partner earns more than £50,000-a-year, and he has to know that she is in receipt of child benefit – both of which breach the principle of independent taxation.

Because relationships are not permanent, it can only be taxed after the end of a tax year: And then the child benefit is reduced by 1% for every £100 of “adjusted net income” over £50,000. Now tax law is sometimes complicated for good reasons, but in this case it will apply, as we have seen, to a substantial number of people who have not needed to make a tax return.

Enforcing it will not only be expensive: It will also take a fair number of HMRC staff away from rather more important work.

Politicians bang on enough about simplifying the tax system but mostly can see no further than reducing the rate of corporation tax or relieving the burdens on the rich. Leaving the 45% rate at 50% would have been a great deal simpler than this and raised more money. It is the politics of gesture taken to the limit.

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Replies (11)

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By Wiganer Elaine
22nd Oct 2013 16:11

Although I disagree with a 50% tax rate, I do agree with the rest of Simon's article - the collection of "overpaid" child benefit is diabolically not fit for purpose.

This is a knee-jerk scheme that adds needless complexity to the self-assessment system.

Personally, I think it's time that the state stopped paying people to have children. On the grounds that the world is heavily over-populated to say the least, someone should have the b****s to announce that Britain is making a stand on our over-populated world. (A bit like saying Britain will go it alone to reduce carbon emissions but better!!) As from say 9 months from now there will be no further payments made to anyone who has a child. Child benefit would continue to be paid to those already in receipt of it - this way no-one would lose out and gradually this would disappear as children reached the appropriate age.

I also think that the personal allowance should become a transferable allowance between couples.

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Replying to BexHawker:
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By John MacDonald
25th Oct 2013 11:28

The only problem with stopping paying people to have children is that the birthrate will decline even further and in twenty years time the government will have great difficulty paying pensions and employers will be short of workers. The Hobson's Choice will be to increase the pension age even further and/or increase taxes and/or import even more workers.

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By User deleted
23rd Oct 2013 17:17

Well said, Simon

.

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By User deleted
25th Oct 2013 15:59

But ...

... if the children are going straight to benefits and not in to employment ...

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Replying to Cheshire:
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By John MacDonald
25th Oct 2013 16:31

I understand your point, but it still doesn't solve the conundrum I have described which is facing the government 20 years down the track anyway, and would only be worse if we do as the original post advised. The government would have to increase the retirement age even farther and faster, and - not or - increase taxes even more, and - not or - import even more workers.

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By User deleted
25th Oct 2013 16:43

I quite like ...

... the idea of Carousel - beats auto-enrolment as a solution!

I would favour 70 rather than 30 though!

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By Wiganer Elaine
29th Oct 2013 10:35

Think about the long term

When all is said and done, in the scheme of things 20 years is not "the long term"; if you don't make a stand at some point what is the world going to be like in 50 or 100 years time?

I would say hugely overpopulated with finite natural resources leading to a man-made (or procreated if you like?) disaster for the planet. Too many people will ultimately lead to the destruction of this planet. 

But, maybe that is the natural way of things and in a 100 years time or so, technology will be so advanced that we can travel in search of a new planet to call home so the selected few will set off on their journey to colonise another planet and the whole sorry story of mankind's history will begin again!

Maybe the guy (whose name escapes me for the moment - impending old age strikes again!) who wrote in the seventies that we are in fact descended from aliens was right??

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Replying to paulgrca.net:
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By John MacDonald
29th Oct 2013 10:58

Let me be clear Elaine - when I say 20 years that is only the start of a potentially catastrophic situation for this country, as I have described and you didn't directly challenge, which will be felt for at least 50 years after that.

Respectfully Elaine I am thinking in the long term - and also the short and medium term. Unfortunately all politicians in this country and abroad subscribe to the week is a long time in politics doctrine of a former Prime Minister - the little man in a gannex coat who smoked a pipe in public and big expensive cigars in private.

A little country like Great Britain cannot make much difference to the undoubted overpopulation in other parts of the world.

There is no doubt that your proposal would save money in the short to medium term, and possibly the long term as well. However, my case still stands.

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By User deleted
30th Oct 2013 14:25

Taking a global view, population will always rise ...

... the only two solutions will be a man made one or a natural one.

Man made will be war, the inevitable outcome with more and more people fighting for fewer and fewer resources, and ethnic cleansing will be high on the agenda.

That is unless nature beats us to it and areas of extreme poverty wil have populations decimated by famine and disease.

Taking a scientific view, the international relief agencies are actually impeding nature and natural selection as they try to cull out the weak, old and infirm to leave a young healthy viable population!

If we actually co-operated and shared resources properly this could be many decades in the future - the waste food from the UK alone would go a long way to aleiviating third world food shortages.

 

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By hockleyaccountant
11th Nov 2013 16:37

Another string takes on a life of its own!

I find it amusing that an article essentially about taxation moves swiftly on to saving the human race!

On that subject, there is a very interesting project called "The Venus Project" (google it) which advocates a Resource based economy. There are some great ideas there, and perhaps it is possible (the world was proved to be round, the Wright Brothers did fly) in the long run, if we entertained at least 50 years of transition from a monetary economy as the monetary economy is clearly not working for the majority of the population of the world. I am hoping to have retired by then.

 

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By User deleted
11th Nov 2013 19:25

Disagree ...

... generally, this one included, Simon's posts are essentially political, loosely shrouded with a veneer of taxation!

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