Categorized | matt's blog

Children don’t get taxed, they get charged instead.

There is obviously sentiment at HMRC for children. That’s nice.

Somebody in Whitehall really could not add the word tax and children together, when it came to clawing back some of the money they give you for child benefit. So what we have now is a new system, call the High Income Child Benefit Charge. Or HICBC for short. If you want it even shorter, you can call it CT (Children Tax)

As from 7th January 2013, if any one of two parents earns more than £50,000 in a year, one of them will pay a “charge” and give the child benefit back to HMRC. To me – this is a tax, it isn’t a charge. A charge is a price for a service rendered or goods supplied – THAT YOU HAVE REQUESTED. A Tax is a compulsory contribution to the revenue of a country.

Semantics aside, this is also a lazy and cheap method of getting the money back to HMRC. It would be politically very difficult for HMRC to write to every family/guardian and ask them if they feel claiming child benefit is still the right thing to do. Not only is it a political issue, the cost for the exercise would be huge. Instead, they came up with the idea of requiring you to inform them you don’t want the child benefit in the first place. This is quite smart, as you are making the request for them to stop paying your child benefit – so it is your decision and not theirs.

How are they going to Police this? Let’s say Mr and Mrs Smith have two children and one of the parents earns £60,000 per annum. They will lose £1752.40 per annum in child benefit, which is a pretty hefty loss. Fair enough – but how will HMRC possibly know if Mister Smith claims the child benefit and Mrs Smith earns the £60k. The obvious answer is the address, but HMRC don’t have the address of every employee, only their national insurance number.

The truth is more compelling. In order for you to pay the High Income Child Benefit Charge, you must register for self-assessment and complete an annual tax return. And that is where the whole system falls down. If you want to avoid paying the charge, you can simply feign ignorance and not register to file a personal tax return. Can you be charged with tax evasion as HICBC is apparently not a tax?

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