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!”
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”.
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.”