Impact of High Income Child Benefit Charge

HMRC has published four documents relating to the High Income Child Benefit Charge (HICBC): the outcome of the HMRC review into HICBC cases where a failure to notify penalty was charged, a Freedom of Information Act release on HICBC, a research report on HICBC awareness, understanding and decision making and a survey of child benefit claimants.

The key points to emerge are:

  • HMRC reviewed 35,000 cases where a failure to notify penalty had been charged and cancelled the penalties of over 6,000 taxpayers who had a reasonable excuse for not notifying their liability for the tax years 2013/, 2014/15 and 2015/16.
    • Penalties were cancelled in cases where child benefit was claimed before the HICBC was introduced and one partner’s income subsequently increased to over £50,000 and in cases where the liability to HICBC arose in the 2013/14, 2014/15, or 2015/16 tax years as a result of the formation of a new relationship.
    • Penalties were not cancelled for those who were liable to the HICBC when it was introduced in 2013 or who have become parents since that date.
  • HMRC has published tables showing the numbers of taxpayers who paid the HICBC and the number who opted out of receiving child benefit.

 

2013/14

2014/15

2015/16

2016/17

2017/18

Number of people paying the HICBC

366,000

319,000

296,000

290,000

293,000

 

 

2013

2014

2015

2016

2017

Families that have opted out of receiving child benefit

at August of each year

397,000

476,000

492,000

504,000

516,000

This illustrates a trend towards opting out of receiving the benefit.

  • HMRC has published a breakdown of the number of compliance checks by the tax year they were opened.

 

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

Taxpayers who failed to register for self assessment

0

22

8,815

1,811

4,090

39,158

Taxpayers who returned an incorrect amount

0

1

12,465

36,394

33,804

25,326

  • HMRC has published a breakdown of the number and value of penalties issued.
    More than 97,000 penalty assessments were issued to more than 37,000 taxpayers with a total value of almost £15m. This table below provides a breakdown.

 

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

Number of penalties

10,982

22,500

32,726

28,480

599

2,188

Value of penalties

£539,822

£3,839,792

£5,470,908

£4,420,376

£76,053

£589,407

 

  • The research reports reveal an unsurprising lack of awareness of the HICBC, contrasting with a generally good level of awareness about claiming child benefit. 

Only half of claimants were aware that if their (or their partner’s) income exceeded a set threshold they may be required to repay some or all of their child benefit and only 14% were aware of the specific income threshold.

There was very limited awareness of the other benefits of claiming beyond receipt of payments ie, a claimant’s eligibility to receive National Insurance credits which count towards the state pension and the automatic notification of the child’s National Insurance number when they reach 16. Some of the more than half a million families who have opted out of receiving child benefit will include a parent who will lose out on state pension in the future.

The most common misconception held by respondents was that individuals are not eligible to claim child benefit if their income is over the £50,000 HICBC threshold. Many respondents were not aware of the possibility of claiming and then opting-out of receiving payment, assuming that this was the same as not claiming. This was even the case amongst those respondents who had opted out; they tended to see themselves as non-claimants.

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