Child benefit farce: 100,000 families face tax demands

SOME 100,000 middle- class families face unexpected demands from the taxman for thousands of pounds this year following an administrative fiasco. HM Revenue & Customs has been accused of ‘ bullying’ middle- class families who have fallen foul of complex new child benefit rules.

The taxman said it had written to 60,000 people earning more than £50,000 who claimed child benefit during 2017/18.

As well as the 60,000 contacted about a ‘ high-income child benefit charge’ for 2017/18, HMRC said a further 41,000 have been sent letters asking them to repay child benefit from previous years.

Their arrangements are different from those who owe the benefit charge from last year and must be discussed individually with HMRC.

Some families have been allowed to wrongly claim child benefit for years and are now finding they owe thousands of pounds.

Those affected must complete a tax return and pay any debt by the end of January next year.

The debacle stems from a clampdown on child benefit in 2013. Under the new rules, households where one parent earns more than £60,000 are not eligible for the weekly payment to help cover the cost of raising children. Those earning between £50,000 and £60,000 are entitled to only part of it.

But instead of HMRC just paying parents what they are owed, families must work out if they are entitled to the benefit and repay it if not.

In many cases high-earning families are advised to continue claiming the benefit because it counts towards state pension entitlement when one parent is a stay-athome mother or father.

They must then repay the money via what is known as a ‘ high-income child benefit charge’ (HICBC) by registering for self-assessment and completing a tax return.

However, because of the system’s complexity, thousands have failed to understand the new rules – and many are not even aware they have changed.

HMRC has admitted that it has not done enough to inform families of the rules.

It said that although it sent letters to 800,000 parents when the rules changed in 2013, some may not have been aware of their responsibility to repay the benefit before more recent letters.

As a result, it has agreed to waive late payment charges in cases where parents were unaware of the policy. However, they will still have to repay the child benefit.

Last night MPs accused HMRC of making ‘completely unfair’ demands on families.

Tory MP Nicky Morgan, chairman of the Treasury select committee, said: ‘ It was wholly foreseeable that without prompt and careful communication from HMRC, many people would not be aware that they owe money under the charge.

‘Unsurprisingly, people are now facing charges or demands to repay money. HMRC must improve its communication with recipients of child benefit to help resolve this debacle.’

Labour MP Wes Streeting, who also sits on the Treasury select committee, added: ‘It is completely unreasonable to sting families with an unexpected bill and then expect them to cough up thousands of pounds by January.’

Elaine Clark, of accountancy firm Cheap Accounting, said: ‘These families are lowhanging fruit, easy targets, and HMRC are being bullies.’

An HMRC spokesman said: ‘Following feedback received from customers, MPs and our own evaluation, we’re improving how our customers are made aware of HICBC.’