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May 2, 2018

Ignorance is Bliss? - Child Benefit & Failure to Notify

Child Benefit is a tax-free payment that all parents can claim, regardless of their income or savings.

At the time of writing, the Child Benefit amounts are:

  • £20.70 per week for the eldest (or only) child; and
  • £13.70 per week for each of the other children.

Parents may claim Child Benefit if they are responsible for one or more children under the age of 16 (or under 20 if they stay in approved education or training).

High Income Child Benefit Charge (HICBC)

The HICBC was introduced for the 2012/13 tax year onward to claw back Child Benefit received where one or both parents' "adjusted net income" exceeds £50,000. "Adjusted net income" for these purposes is your total income, less Gift Aid donations and contributions made to a personal pension.

The HICBC is calculated as 1% of the Child Benefit received for every £100 of the adjusted net income exceeding £50,000. Therefore, the charge will be equal to the full Child Benefit received once the adjusted net income reached £60,000.

Where a HICBC arises, the highest earning partner will be required to notify HM Revenue & Customs of their income and submit a self-assessment tax return. This is the case even if the highest earner is not the one who received the payment.

Reasonable Excuse?

In the recent case of David Lau v HMRC [2018], the First-Tier Tribunal held that ignorance of the law was not a reasonable excuse for failing to notify HMRC of a liability to the HICBC.

In this case, the taxpayer's income exceeded the £50,000 threshold but he failed to notify HMRC or register for a self-assessment tax return.

When HMRC issued a penalty in relation to this failure, he appealed on the basis that he did not keep up to date with the news and was not aware of the requirement to tell HMRC that his income had exceeded the threshold.

However, the Tribunal dismissed his appeal and held that this was not a reasonable excuse.

Contact us today to discuss your tax requirements.
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