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Where Taxpayers and Advisers Meet
Editorial: Child Benefits, the Tax Clawback and Independent Taxation - a Nice Idea While it Lasted...
14/01/2013, by Lee Sharpe, Tax Articles - General
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TW Ed forecasts a year full of acronyms for taxpayers and practitioners as the High Income Child Benefit Charge (HICBC) slowly, ominously, shudders to hideous life...

A belated Happy New Year to all TW readers.

We at TW have had an interesting year, to be sure. Succinctly, silence is not always golden. Or even remotely desirable.

But we cannot dwell overlong on the past, since there is much to do in the present, and much more to come. To add to Mark’s forecast of interesting things ahead for 2013 (Statutory Residence Test or SRT, and the General Anti-Abuse Rule or GAAR) a couple more acronyms:

  • HICBC - The High Income Child Benefit Charge, and
  • RTI - Real Time Information PAYE reporting for employers

As regards the broad present, many readers will be fully aware of my antipathy towards the changes to the Child Benefit regime. It may not have been fair but at least it was universal. Now it achieves neither principle but it has arrived at divisive instead – via complex. I wonder at the intent that motivated these revisions, and fear that I may simply have baulked at the obvious answer. It may not be wholly safe blithely to assume that “only a fool” would try to wed benefits with taxation – and drive a cart and horses through independent taxation as well.

No doubt we shall return to Child Benefit and the High Income Child Benefit tax charge for those whose incomes – adjusted net incomes, of course – exceed £50,000, in the months to come.

But for now:

  • Child Benefit will continue to be paid as normal
  • But a tax charge will be raised if personal "adjusted net income" exceeds £50,000, clawing back the entire annual Benefit if income is £60,000 or more (but only Benefit paid from 7 January is affected)
  • The tax charge is not necessarily on the claimant: if a couple, it will be on whoever is the higher earner – who may be obliged to submit a tax return and pay tax on a benefit he or she did not even receive. Lament the passing of independent taxation and the farce which follows: Was it higher than a five, a five you say...? Play your cards with Bruce – I mean, HMRC and its new online form to find out if you earn more than your partner. Ask HMRC for High Income Child Benefit Information
  • It is possible to opt out of the Child Benefit regime altogether. But only the claimant can opt out – not necessarily the person with the tax bill! The BBC reported on Monday that 270,000 had already done so.
  • The new tax charge comes into effect for Child Benefit paid on or after 7 January 2013. To be sure of avoiding a clawback tax charge completely, people should have opted out by 7 January – perhaps later, depending on the timing of the actual payment.
  • For now, it is possible to re-instate a claim for benefit if family incomes fall – retrospectively to revoke the opt-out for up to two tax years afterwards. This will be some reassurance for those with incomes which fluctuate around the clawback level. I say “for now” because let’s not forget this is the same government that restricted the backdating of Tax Credits claims to just one month. Remember, we're all in this together.
  • Lots more information (if you can stand it) at High Income Child Benefit Charge

More on RTI to come.

On to some good news: I see that John Andews, founder and former chairman of the Low Incomes Tax Reform Group (LITRG) has been given the prestigious Council Award by the Chartered Institute of Taxation. Congratulations to John and our best wishes to his colleagues at LITRG, in recognition of their hard work - such as trying to ensure our home heating bills don't go up by 14% in the next few years!

Finally, our thanks as always to those who have supported TW through 2012 and continue to do so, through the TW fora. You know who you are and you are all ace.

vivat TW.

Regards all,

TW Ed

About The Author

Lee is TaxationWeb's Articles & News Editor and writes for TaxationWeb. He is a Chartered Tax Adviser with experience of advising individuals and owner-managed businesses over a broad spectrum of tax matters.
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