CIOT: Steep penalties loom for parents receiving child benefit

The Chartered Institute of Taxation (CIOT) is reminding parents with income over £50,000 a year in 2012/13 that many of them have less than one month (deadline 5 October) to register for Self Assessment with HM Revenue & Customs (HMRC) in order to avoid paying a penalty. This applies to single parents, or the parent with the higher income, where they or a partner received Child Benefit between 7 January and 5 April 2013.1

The ‘High income child benefit charge’ (HICBC), implemented on 7 January 2013 2, is a tax charge generally payable if a taxpayer has income of more than £50,000 for the tax year, has a higher income than their partner and one of them is entitled to receive Child Benefit. Parents who submitted a notice to stop receiving Child Benefit payments before 7 January 2013 are not required to take any action for the 2012/13 tax year.

However, higher income parents must register for Self Assessment for that year if they or their partner stopped receiving payments at a date after 7 January or they are continuing to receive Child Benefit.

Tina Riches, Director, Technical, of the CIOT explained:

“What may seem like onerous form-filling is ultimately about helping people to pay the right amount of tax. Those already enrolled in Self Assessment need not worry about the 5 October deadline, but those for whom it does apply should act quickly.

“HMRC are sending letters to around two million eligible taxpayers including those affected by the recent changes introducing the tax charge on Child Benefit.  They will be reminded that they must register now with HMRC for Self Assessment, in order to pay the HICBC, if they have not already done so. Once in Self Assessment they will also need to declare all their income such as investment income and may be liable to pay further higher rate tax on that, if the income has not already been coded out and the tax paid through PAYE.

“Around 400,000 individuals on higher incomes have already opted out of receiving Child Benefit payments. If a taxpayer opts out and his circumstances change he can opt back in for some earlier years so as not to lose out. 3

“Taxpayers who are required to register but fail to do so could be liable to face a penalty of up to 100 per cent of the tax due, depending on the circumstances. 4 They might be able to come out of Self Assessment in future years if they (or their partner if they are the Child Benefit recipient) choose to opt out of receiving Child Benefit and avoid incurring the tax charge.

“A taxpayer with income of more than £50,000 a year, where they or a partner is entitled to receive Child Benefit, will need to talk to their partner to find out who has the higher income. If the taxpayer is unable to obtain  this information from their partner, for example  where the partners have split up, they or their agent can get in touch with HMRC, who will try to help them ascertain the position.”

Notes for editors

1.       Being in Self Assessment will enable a taxpayer to declare the Child Benefit received, pay the tax charge on time and avoid penalties for failure to notify HMRC on time. You can register for Self Assessment by clicking here.  

2.       You can find out if you have been affected or not by visiting HMRC’s website here.

3.       CIOT’s press release on opting out of the HICBC can be found here.

4.       HMRC may levy a penalty for late notification of the need to go into Self Assessment of up to 100% of the potential lost tax payable depending on whether the failure was deliberate, prompted by HMRC and the extent of the delay in notification. Further information can be found here.

5.       The HICBC legislation can catch other family arrangements, such as where a grandparent has custody of a child. Those who think they might be affected should read the HMRC guidance carefully or seek advice from a Chartered Tax Adviser.

6.       The Chartered Institute of Taxation

The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries.  The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 16,800 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

James Knell
External Relations Officer

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Chartered Institute of Taxation
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