New Child Benefit rules “seriously flawed”

Posted on May 16th, 2012 | Categories - News

The new rules for Child Benefit announced in the Budget are “seriously flawed” according to The Institute of Chartered Accountants in England & Wales (ICAEW).

New Child Benefit rules

At present Child Benefit is available to all and is not means tested.

One parent can claim £20.30 per week for the eldest child and £13.40 per week for each additional child. The benefit is available for all children under the age of 16, and in some cases can be paid until they are 20.

The government wants to change the system and remove Child Benefit from “higher earners”.

George Osborne announced in the Budget that Child Benefit would start to be removed from families where one parent was earning over £50,000 per year and be completely removed when the mother or father starts earning over £60,000 in a single year.

Experts say that this move will reduce the level of Child Benefit paid to more than one million families.

Concerns

However, having studied the proposals the ICAEW have raised a number of concerns about the changes due to be introduced in January next year.

Exactly how the rules will work is still to be clarified although one option for parents earning above £60,000 is to stop claiming Child Benefit altogether.

However, parents earning between £50,000 and £60,000 will, it seems, have to claim the full amount of Child Benefit and then have some of the payment clawed back via the self assessment system. The ICAEW says that this process undermines the principle of individual taxation as the benefit paid to one person may be clawed back from someone else.

The new system could also lead to issues of confidentiality couples will have to declare to each other whether they earn above £50,000 or whether they claim Child Benefit.

Self Assessment forms

The ICAEW are also concerned that the new system will require an additional half a million people to complete a tax return at a time when HMRC already seem stretched.

Speaking to the Daily Telegraph the ICAEW said: “Families in similar financial situations could be treated quite differently, undermining the policy’s fairness objective and creating very high marginal rates of tax for some.

“Taxpayers could find their tax confidentiality breached and experience lower service standards while grappling with an even more complicated system. Their confidence in HMRC and the tax system will be undermined and there will be behaviour changes and planning to avoid the charge.”