Parents face fines if they wrongly claim child benefit

HIGHER rate taxpayers could be fined if they fail to declare whether they or their partner receive child benefit when the universal payment is axed in 2013, the Treasury said yesterday.
It said letters will be sent to all parents who are higher earners asking them to disclose their salaries and whether they receive the perk.
Recipients who fail to respond or give false information could then face fines. The step follows the government’s announcement that child benefit is to be withdrawn from parents if one or the other pays income tax of 40 per cent.
The measure will affect people earning more than £44,000.
The curb, deeply unpopular among middle income earners, will raise about a billion pounds a year and hit more than a million families.
The policy has been attacked as unfair because payments will still be made if both parents earn less than the higher tax threshold, even if they jointly earn almost £88,000 a year.
A senior Conservative MP who specialises on tax said the change would be “virtually unenforceable” and Labour politicians slated it as a rushed, ill thought-out and contrary to its stated family-friendly philosophy.
Earlier the Treasury scotched media reports citing unnamed Treasury officials saying the new system would prove impossible to implement.
“This is nonsense, the withdrawal of child benefit for higher rate taxpayers will be enforceable and will go ahead in 2013,” the spokesman said.
But Conservative MP Ian Liddell-Grainger, chairman of the all-party parliamentary group on taxation, said the move would be impractical until tax office computers were modernised.
“One of the big difficulties the government has got is that the system they have got is not a real-time system and therefore this is going to be virtually unenforceable,” he told BBC Radio.
“If your circumstances change they will not be able to enact it in real time. The ramifications for getting it wrong are enormous for the taxpayers and the citizens of the UK,” he said.
Shadow Chancellor Alan Johnson said the government had added “incompetence to unfairness” in their eagerness to shake up the system.
The Treasury said bringing the measure into law would involve usual HMRC policy.
“So if someone is breaking the law by not saying that they are a higher rate tax payer and in receipt of child benefit then in line with usual HMRC tax administration there will be the relevant penalties put in place.”
It said the Office for Budget Responsibility has scrutinised all the assumptions underlying the savings from the measure, including compliance.

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