Once again some taxpayers have received letters from HMRC asking them to “check their tax return”. HMRC appears to have sent the letters to those individuals who said they had received Child Benefit and earned over £50,000 in 2012/13. However they have not paid the High Income Child Benefit Charge (HICBC). In all the cases our professional body, the ICAEW, has seen, the taxpayers did not have to pay HICBC because their spouse or partner earned more than them and had actually paid it.
The letters are written to attract attention, with the words “You need to act now!” stamped in red across the front. They have not been copied to the taxpayers’ agents (i.e. their appointed accountants or advisers).
The letter states:
“We have checked your tax return for 2012 to 2013 against Child Benefit records. This shows that you or your partner continued to get Child Benefit after 7 January 2013.”
It goes on to say that if the statements in the letter are correct, the recipient of the letter will have to pay the HICBC for 2012/13. The taxpayer is invited to amend their 2012/13 tax return if they believe they should have paid the charge, but haven’t.
In all the cases the ICAEW have seen, the agent had correctly completed the tax returns of both taxpayers comprising the couple and is now faced with placating a concerned client, while also having to decide whether to respond to the letter on the client’s behalf. Almost as an afterthought, the letter says that no action is needed if the HICBC doesn’t apply, but clearly, many agents would prefer not to risk silence in case it prompts a further letter. This merely adds to the administrative cost of the HICBC.
Luckily we have not yet been notified by any of our clients that they have received such a letter.
We think it is unacceptable that HMRC has been able to cross-check a tax return with child benefit records, but apparently been unable to cross-check it with the taxpayer’s spouse/partner’s records.
We have always thought that attempting to implement this policy in this way would not work. Independent taxation should mean just that; collecting tax from one person on account of a benefit paid to their partner is just inviting problems – both in adminstration and in implementation.
This kind of situation does highlight the benefit of taking out Fee Protection insurance. You can see from the above that there is a fair chance that HMRC will pick your tax return for an enquiry because of some ill thought out, poorly targeted tax recovery campaign.
We have our own Fee Protection Scheme which we know brings peace of mind for our clients. If you would like to learn more about our Scheme – please do drop me a comment below, call me on 01788 577 613, email me or ask me question on Twitter.