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Where Taxpayers and Advisers Meet

Averaging and High Income Child Benefit charge

Brightonian
Posts:130
Joined:Wed Aug 06, 2008 3:31 pm
Averaging and High Income Child Benefit charge

Postby Brightonian » Tue Jun 29, 2021 2:52 pm

My client is an author and generally liable to higher rate tax and the child benefit charge. For 2020/21, his income was much lower than usual. Averaging could apply and would reduce his overall tax and NIC for 2019/20 and 2020/21. Using the averaged profit for 2019/20 would also reduce the Child Benefit charge. But can you reduce the CB charge in the same way that you can reduce tax and NIC? I can't find anything on this topic.

There is another difficulty. As business was so bad in 20/21, he applied for a fellowship that pays him for helping students with their writing. This forms almost 35% of his turnover. I note that averaging only applies to creative income. Should I take the element relating to the fellowship out and show it as a second self-employment? This would reduce the creative profits for 2020/21 and the averaged profit.

Brightonian
Posts:130
Joined:Wed Aug 06, 2008 3:31 pm

Re: Averaging and High Income Child Benefit charge

Postby Brightonian » Tue Jun 29, 2021 4:04 pm

I have just seen something in the BIM manual that I missed before - the averaged profits become the profits for all purposes of the Income taxes Acts. Therefore it appears it does reduce Child Benefit, which is logical.

That's one question solved. I am still interested and would be very grateful to hear views on how to deal with the fellowship receipt.

Jholm
Posts:261
Joined:Mon Mar 11, 2019 4:22 pm

Re: Averaging and High Income Child Benefit charge

Postby Jholm » Thu Jul 01, 2021 2:05 pm

Without researching, I would be inclined to agree about separating the trades out for averaging purposes.

It sounds like there is enough difference between the two activities.

Brightonian
Posts:130
Joined:Wed Aug 06, 2008 3:31 pm

Re: Averaging and High Income Child Benefit charge

Postby Brightonian » Fri Jul 02, 2021 10:05 am

Thank you for taking the time to respond. I had been coming round to that point of view - thank you for reinforcing it.


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