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Child Benefits – the son of Tax Credits

Child Benefits – the son of Tax Credits

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I have often bemoaned the fact that the Government (HMRC) consults on some relatively minor issues and fails to consult on major issues such as the introduction of Tax Credits and its impending replacement Universal Credit. The proposals regarding Child Benefit (CHB) are a classic example.

The TC repayment fiasco caused numerous problems, but at least both members of a claimant couple would have submitted a joint application for the Tax Credits in the first place. This won’t be the case for CHB. Take a typical scenario – mother is the recipient of CHB and her partner is the main earner. The partner (I’m assuming he’s a male, he might not be the father) has no involvement with the CHB claim. The CHB claim would have been made by the mother at the time each child was born. The partner would have had no involvement with the claim – he might not have been on the scene at the time.

So what happens if the mother is reluctant to supply her partner with CHB details? What happens if the mother and partner have split up by the time the partner completes his 2013 Tax Return? He may never have had any involvement with the CHB claim, he never signed the original application, he never received any money, he has no idea whether the mother received any CHB or not because she considered it her business for her children. So how is the partner to obtain the information to complete the 2013 Tax Return? HMRC won’t tell the partner because it was the mother who was the claimant and HMRC aren’t authorised to divulge information to anyone else. And why should the partner be liable to repay CHB that he never claimed and never received?

But it gets worse. TC claimants supply their CHB claim number as part of their TC claim. So the Tax Credit Office could match up partners for each CHB claimant. This was the case until last year when HMRC stopped paying the family element of TCs to couples with combined income in excess of £50k. Then in 2011 and again last month the Tax Credit Office issued letters to all TC claimants who didn’t receive payments telling them their claims will cease if they don’t take any action. So HMRC has actively removed details from their files of many of the couples they will now need to target. So how are HMRC going to gather the data? Most of the effected individuals will be taxed through PAYE and not currently required to complete Tax Returns. Are HMRC going to contact all current CHB claimants and ask for income or NI details of their partners?

The whole thing is a mess. And what for? We’re typically talking of about £1752 for two children. Based on current average earnings only a small proportion of claimants will have to repay some or all of the CHB. HMRC could well spend more in administration trying to identify these couples than they will raise in the claw back.

Has anyone got any clearer idea how this is going to work in practice?

Replies (18)

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By Helen Crowley
28th Mar 2012 15:10

Similarly concerned

Sorry I don't have any answers, it's going to be a bit of a mess I think. Also what happened to "Independent Taxation"? (I'm getting old as I can remember that coming in!)

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By cbp99
28th Mar 2012 16:43

A useful summary

of (at least some of) the problems.

What I keep wondering is why not incorporate Child Benefit into Child Tax Credit by increasing the child element?

I don't pretend to have thought this through, but at first sight it seems to have some logic.

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By listerramjet
30th Mar 2012 17:43

excellent summary

and this muddle from a chap who claims he wants to simplify the tax system.

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By Stephen Dempster
02nd Apr 2012 11:43

Not to mention effective tax rate anomoly

As well as the obvious enforcement problem, I don't imagine the incremental tax rate anomolies have been considered.  Taking the 2 children example in the article, 1% of the child benefit is lost for every £100 over £50k, so adding a further 17.52% deduction to salaries in the range £50k - £60k.


Taking PAYE, NI and lost CHB as a whole, the effective "tax rate" is 59.52%.


There was some "logic" that the higher rate tax threshold was chosen as the original cut-off point, but the argument by George Osbourne that the unfairness in the change was merited for simplicity is clearly even wider of the mark now that this additional complication (and HMRC enforcement requirement) is introduced.


Wouldn't it have been better to roll CHB into the Tax Credit system, thereby having only one process to be policed by HMRC?

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By michaelhudson
02nd Apr 2012 11:47

General query on child benefit

Does anyone know how a child benefit claim works in the scenario where mother and son live with mothers partner who is not the child's father. If his income is over the earnings threshold (50K going forward?) does the mother lose the child benefit for her son?

Or what happens if the mother assumes her partner's income is under £50k and it actually isnt?


Any comments appreciated


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By pauljohnston
02nd Apr 2012 11:53

The CHB cut off was so that everyone could make

a contribution.


As I see a person on £60k is alraedy paying 40% tax and 2% NI above the threshold so has he or she already been making a contribution.


Personally I would leave well alone but stop annual increases and as others have said include the increase in the Child Benefit system.

An easier way would be to slightly reduce the size of the 20% tax band and recoup the cost that way.

However longer term there is a danger that those earning £60k plus will have smaller families, just not what the state needs.

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By Tom 7000
02nd Apr 2012 12:06

simple answer

Just use more explosives

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By Swedish Chef
02nd Apr 2012 12:18


Just abolish child benefit altogether (and I too will be affected by this)

All it has done is reward people for having children - whereas I concur with the moral stance that people should only be rewarded for having children where it is a benefit to society.  That obviously cannot be policed - so just get rid.

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By The Black Knight
02nd Apr 2012 12:57

HMRC learn from mistakes ?

Yeah right !

1, That would assume the intelligence to learn.

2, They never make mistakes !

3, That's not really the point a vast number of the otherwise unemployable are are engaged being awkward in the security checks alone.

4, If you don't subsidise the delinquent baby factory then many government departments will have nothing to do in years to come e.g. policing , child tax credits, ASBO's, UB40, etc etc


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By jfrowe
02nd Apr 2012 16:13

January 2013

The changes are to be brought in on 7 January 2013 - how is the entitlement for the period 7 January 2013 to 5 April 2013 to be determined?  Will it based on income in this period or on income in the whole of the tax year 2012/13  ie from 6 April 2012 - this week!  Can they base a benefit entitlement on income received in a preceding period before the changes were brought in? If it is to be based on income in the 13 week period beginning 7 January 2013 how is this information to be obtained and checked?  I can only see an administrative mess and collection nightmare for HMRC

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By kevinringer
03rd Apr 2012 13:41


HMRC have some FAQs at In answer, mother will continue to receive CHB regardless of whether partner has income >£50k - electing not to receive CHB is voluntary. Partner will be liable for the income tax charge if his (or her) income is >£50k. This is the point of my article - partner will be liable for tax on a benefit that he never signed up for and never received. And if they've separated by the time he completes his Tax Return will he even consider the CHB? And if he does and tries to declare it, where does he get his figures from? Mother may refuse to disclose them as will HMRC. He can assume she claimed for the full year and use the standard rates - but she may have closed down her claim. Very messy.

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By kevinringer
03rd Apr 2012 13:46

Choose not to claim and still complete claims at the same time !

Whilst on the subject of FAQs take a look at - you choose not to claim but still need to complete claims to preserve your NIC record. So how do you choose not to claim and still complete claims at the same time? The cost of administering this new system will surely exceed the tax raised.

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Replying to Glennzy:
By The Black Knight
03rd Apr 2012 14:04

first directive

kevinringer wrote:

 The cost of administering this new system will surely exceed the tax raised.


Passes the test for a government idea then ?

That has to be where they start with these things ?

More work for civil servants being the primary purpose ?

They can always borrow or raise taxes you should hear their attitude (tax office employees) when paying your employees came before your own tax bill !!!

The best thing would be to abolish it altogether !!

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By The Black Knight
03rd Apr 2012 13:53


I had to make her cancel the bank account to stop them paying tax credits that I then had to repay.....caused some massive family arguments over money she said she never had.

You are best off not claiming !

Bring back the rule of thumb....when the Mrs causes this much trouble you should be allowed to beat her with a stick (before 10 pm of course).

Makes a complete farce of independent taxation. Why should I tell her how much I earn ? It is supposed to be confidential.

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By tonimatthews1
17th Apr 2012 15:36


My first ever comment to a post because I'm so worked up about this, it's a complete farce.

Why not only pay child benefit for the mother's first two children?  I don't see why society should pay for people that want to have large families.  If you want more than two children, great, you pay for them!

Or you could ask for details of household income when the intial CB claim is made.. over £50K = no child benefit and then ask again 5 years later, now more than £50 = child benefit removed (with availability to opt in if income drops below £50K).

There must be a hundred better and more easily managed options than this.

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By pauljohnston
17th Apr 2012 15:49

I agree for the future only pay child benefit for the first two new rules start 1 April 2013.  If you have any more no extra Child Benefit. 

For those who had more than 2 before 1 April 2013 keep paying.  The reduction in total paid will reduce each year as the next eldest child gets taken off the benefit on attaiining 18 or starts work..

My mother pointed out that when I was born 55 years ago that no child benefit was paid for the first.  How matters have changed

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By Jane S-D
17th Apr 2012 15:58

All very well saying only pay CB for the first two - but my second pregnancy was twins. Totally unexpected - no twins anywhere in the family, not IVF etc - so it wasn't as if we were planning to have 3 children. Although it did put paid to any "shall we go for another baby" discussions thereafter!


The whole scheme as thought up and tweaked by the Government is rapidly bacoming farcical.


And how many women (mostly but possibly some men) are going to miss out on NI contributions because they stop claiming child benefit and don't realise they still need it for NI.

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By pauljohnston
18th Apr 2012 17:20

Good point jane

so perhaps pay CB for first 2 prenancies excluding still births or deaths before 5 years.

I think you point about NIC is very relevant.  Typical just no thinking by Govt or maybe not qualified.  Why dont they ask the accounting profession before implementation....

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