The Devil is in the detail as the government's 'simple' approach struggles with the intricacies of the tax and benefits systems

The government's plans to cut Child Benefits for families where one parent/guardian is a Higher Rate Taxpayer are now struggling through the practical complexities. One key announcement is that, if someone is found to have claimed when they shouldn't have, then the excess Benefit will be 'clawed back' through the tax system.

Practically, this means either through the PAYE system for most employed earners, with others such as the self-employed having it taken back through their Self Assessment tax return. One of the chief criticisms of the original proposal was that just one parent earning too much would trigger the clawback, regardless of the other parent's earnings.

It will often be the case that the Benefits recipient will NOT be the 'high earner'; nevertheless, the Benefit will be clawed back from the high earner. How this will work in practice is uncertain: the government is apparently relying on people to volunteer that they are ineligible because the separate tax and benefits computer systems don't 'talk' to each other. (Surprise, surprise). It is expected that penalties will be charged where Child Benefit is deliberately mis-claimed. Presumably they will also be on the high earner.

Bearing in mind that eligibility for Child Benefit is not currently based on a family claim, we may yet see the frankly bizarre scenario where a taxpayer may have to pay personal tax - or even penalties - based on another's incorrect claim. Perhaps independent taxation is just another issue to be dispensed with, in implementing this simple proposal?

Article Added Monday, 01 November 2010 | 1488 Hits

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