Child benefit tax penalties refunded by HMRC
Almost 5,000 UK taxpayers who claim child benefit have received refunds totalling £1.8m after HM Revenue and Customs (HMRC) opted to cancel ‘failure to notify’ penalties among those within the higher rate income tax threshold.
Since 2013, small business owners and employed individuals earning more than £50,000 a year have been given the choice to opt out of receiving child benefit or risk facing a tax charge known as the High Income Child Benefit Charge (HICBC).
In 2018, HMRC was tasked with assessing thousands of cases where the tax authority had issued ‘failure to notify’ penalties to parents for the 2013/14, 2014/15 and 2015/16 tax years as they had not registered for the HICBC.
Because of these reassessments, HMRC sought to review what it deemed a ‘reasonable excuse’ for taxpayers failing to register for the HICBC.
Following a review of some 35,000 cases, HMRC has confirmed it has annulled more than 6,000 HICBC penalties issued to taxpayers, with 4,885 of these parents receiving a refund of £370 on average.
Families who claimed child benefit prior to the introduction of HICBC have been refunded. Meanwhile families where one parent’s income rose above the £50,000 threshold and families where the HICBC liability arose due to new relationships between 2013-2016 have also been refunded.
Although HMRC states there is no need for taxpayers to contact them regarding these refunds, which have already been issued, the lack of clarity and awareness of HICBC remains a serious issue for the UK tax authority.
Samantha Skyring, Senior Training & Communications Manager, TaxAssist Accountants, said: “Due to the lack of information available when the charge was introduced and over the subsequent years, it’s no wonder parents may not have been aware of this charge or how it works.
“It is an unprecedented move by HMRC to acknowledge this and issue these bulk refunds.”
Even if you choose not to claim child benefit payments, it is still important to submit the child benefit claim form to HMRC for your child.
This will ensure that you receive the National Insurance credits you are owed towards your own state pension. Meanwhile those who do claim child benefit will ensure their child automatically receives a National Insurance number shortly after they turn 16.
If you want to calculate whether your personal income is over the £50,000 threshold for child benefit, you need to work out your ‘adjusted net income’.
This is your overall taxable income, before any personal allowances and the payment of things such as Gift Aid.
GOV.UK has created a useful child benefit tax calculator to help parents with calculating their adjusted net income.
Last updated: 13th June 2019