CIOT welcomes child benefit rule change

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The Chartered Institute of Taxation (CIOT) has welcomed a government decision not to penalise parents who opt of out receiving child benefit in order to avoid a tax charge when new rules come into force in January.

The government said that parents will be able to claim the benefit if their income subsequently falls.

From January, any household where at least one person earns more than £50,000 will have the benefit reduced or stopped.

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About Nick Huber

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I’m a specialist business journalist and have a particular interest in tax and technology. 


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05th Nov 2012 11:38

Come Fly with HMRCAir

The child benefit changes resemble an aircraft rolling down the runway for take-off, with the ground crew running alongside slapping gaffer tape on the bits that are about to fall off.

As I've been saying for ages, if they'd just combined child benefit with child tax credit all this could have been avoided.

Ah, but less complexity means fewer HMRC jobs I guess...

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to steve 12321
05th Nov 2012 12:11

to be fair
I don't think HMRC's view is much different and it is ministers who wouldn't budge. Their view is that the tax system burden is less bad than moving these bods into tax credits. I personally don't agree but poor HMRC is picking up the pieces in any event. I suspect that they have a pretty clear idea of the issues etc but no power to say so. The rep bodies are working hard to make it slightly less bad - I guess you could say we have quite a few rolls of gaffer tape to hand!

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to Dick Stastey
05th Nov 2012 12:19

Cynical me

'tis a fair point, I might reign back my cynicism a tad!

It's could be another example of a policy wonk coming up with a bright idea, yet when the real practical difficulties are brought up, the suspicion is that it's just Sir Humphrey being intransigent again (because perhaps too many times before that's been exactly what's happened).


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05th Nov 2012 21:53

Imagine the alternative

You're spending too much on child benefit, and you need to cut the bill without losing too many votes and without creating too much extra work.  You take it away from those who can most easily afford it, in a way that you can most easily legislate and manage.

If you simply means test it, you need many millions of claims, renewed every year, and somebody has to check them.  If you take it back via the tax system, you ask a couple of extra questions on the SA tax return, and potentially get an extra ½million SA returns.  You already have an army of people and a computer checking tax returns.  You also create an opt-out so that couples who will clearly face full clawback don't even bother taking the money in the first place, so your cost of running CB falls and the ½m extra returns total shrinks too.

Rolling it into TC won't be as good, because it's a universal benefit and you lose millions of votes when millions who don't qualify for TC lose their CB, or you complicate the TC system even further by introducing a new threshold that increases the number of TC claims.

The clawback through SA is actually a clever solution to an increase in tax for higher earners.  The problem is that the mixing of tax and social security concepts will mean that there will be some impossible requirements.  If your relationship has broken up, acrimoniously, what price on getting all the information you need for declaring the HICBC, in time or even at all?  Even in stable relationships, stereotypically he will need her private information, and she has no obligation to give it. 

The official PR is too blasé: HMRC admits that it won't be able to give one party the earnings information or actual CB payment values of the other, but glosses over it as if it was not a problem.  In practice, most taxpayers are honest and will share financial information, but the government should not be passing laws with which people cannot comply through no fault of their own.

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By Jimess
06th Nov 2012 09:36

'Tis a sad thing

It is a sad thing when some "Sir Humphrey" types in the Government want to keep their department looking good for the votes whilst using the ever creaking tax system as the whipping boy.  The whole benefit system needs a really good shake up, never mind tweaking round the edges with a benefit that should never have been allowed to escalate in the first place.  The Treasury needs to start looking at the major source of Revenue leaks - large scale benefit fraud, the banking system, large corporations abusing the tax rules, lack of industry base in the uk, crumbling infrastructure and too much red tape diverting business outside of the uk etc etc.  It is so easy to go for soft targets instead of tackling the real issues. 

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06th Nov 2012 11:03

Income v Earnings

Clarification is between those people who 'earn' "more than £50,000 (and) will have the(ir) benefit reduced or stopped" and those whose income is above £50,000.  We all know that income does not equate to earnings and I can only imagine the look of horror on my client's face when I suggest that, even though they are only 'earning' a £5,000 loss, they may have to lose their child benefit because their income (turnover) is £60,000 for this year!

I agree with Jimess, the HMRC and Government are going "for soft targets instead of tackling the real issues". 

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By cne333
06th Nov 2012 11:29

Surely wrong!?!

penpusher wrote:

... even though they are only 'earning' a £5,000 loss, they may have to lose their child benefit because their income (turnover) is £60,000 for this year!

What??? Are you sure???

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06th Nov 2012 12:57


Total income per the tax computation before personal allowances

Deduct Trading losses offset against total income (current year)

Deduct gross amount of gift aid contributions

Deduct gross amount of pension contributions paid by the taxpayer

Equals net adjusted income

That's the figure to use for income - which is currently used in the abatement of personal allowances - chosen therefore as it is a concept in current use, rather than inventing a new one.

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By MJShone
06th Nov 2012 17:09

Pension contributions, salary sacrifice and HITC

The more I tihink about this, the more complicated it seems to be!

People can obviously bring their net adjusted income down by making pension contributions.

Employees could also bring it down by entering into a salary sacrifice arrangement with their employer. (It all adds to the unfairness for those who don't have any opportunity to do this.)

However, what if someone is in a salary sacrifice scheme already, where they are now entitled to (say) £60,500 and their employer makes (say) £10,000 of pension contributions for them? I don't think that the introduction of the high income charge is a lifestyle change, so I don't think the employee would be able to reduce their pay to (say) £58,000 and increase the employer pension contributions, without potentially screwing[***] up the salary sacrifice scheme. However, I think the employee could decide to start making pension contributions themselves, without affecting the integrity of the salary sacrifice scheme. Anyone disagree?

The numbers no doubt have to be carefully checked so that individuals don't find themselves in a worse net position.

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