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Fine threats over child benefit Fine threats over child benefit
(about 3 hours later)
Higher rate taxpayers could be fined if they fail to declare their partner receives child benefit. Higher rate taxpayers could be fined if they fail to declare they have a partner receiving child benefit, when cuts are introduced in 2013.
The Treasury has confirmed that "penalties" would be issued in cases of non-disclosure of earnings.The Treasury has confirmed that "penalties" would be issued in cases of non-disclosure of earnings.
The benefit is to be stopped from 2013 if at least one parent earns over £44,000, but some experts have questioned whether this is workable. It follows reports that Treasury sources have said a plan to stop child benefit payments to couples with one higher rate taxpayer is unenforceable.
They say the tax system traditionally looks at individuals rather than couples, making administration harder. Chief Secretary to the Treasury Danny Alexander said that was "nonsense".
In many cases, the father is the higher rate tax payer, but the mother receives the benefit. Chancellor George Osborne announced plans to withdraw child benefit - currently paid to all mothers until their child reaches 19 - from couples with at least one higher rate taxpayer from 2013, with the aim of saving £2.5bn by 2014-15.
'Complex and intrusive' 'Completely enforceable'
That makes it much harder to administer - because couples do not always know about each other's finances, and if they split up things become even more complicated. But there have been questions over how it will be enforced, as mothers, to whom child benefit is paid, are currently under no obligation to declare it.
The government plans to write to all four million higher rate taxpayers asking them whether their household gets child benefit. The Wall Street Journal reported that a Treasury source had said it was unenforceable and elsewhere in government it was felt the policy, due to come into force in 2013, would eventually be dropped.
Those who fail to answer or do not tell the truth could be fined. Asked about the story in the Commons on Thursday, Mr Alexander said: "This is a nonsense story, it is completely enforceable, it will be introduced as planned."
The Treasury says legislation will be brought forward to implement the change, but critics say this could create a much more complex and intrusive tax and benefit system. It has emerged that the government plans to write to all four million higher rate tax payers asking them whether they or their partner get child benefit. Those who do not respond, or do not tell the truth, could be fined.
Chancellor George Osborne announced the changes earlier this month in a move designed to save £2bn a year. The Treasury says legislation will be brought forward to implement the change but there are suggestions it could result in a much more complex and intrusive tax and benefit system.
But critics, including Labour, seized on the "unfairness" of the reforms for stay-at-home mothers. John Whiting, of the Chartered Institute of Taxation, told the BBC: "You have to compare it to the tax credits system where there are lots of forms to fill in, there's lots of checking up - you have really to put a lot of effort in to get it and make sure you are getting the right amount. You are really grafting that onto a system which, until now, has been beautiful in its simplicity."
A couple who are both working can earn more than £80,000 between them and still claim benefit, while those relying on a single income just above the higher tax rate will miss out. And Conservative MP, Iain Liddell Grainger, who chairs the All Party Parliamentary Group on taxation, said he had concerns the current taxation system would struggle to cope with the change.
Shadow foreign secretary - and former Work and Pensions Secretary - Yvette Cooper said the government's policy was "unravelling" - a claim Treasury sources have dismissed as "nonsense". "We can bring it in, there's no doubt. But, will we put the confidence into the citizen that what information is held by the Revenue is right ... can be used and, finally and most importantly, is it going to leave people in a financially worse position if they get it wrong, and lose confidence in the whole system? I think the answer could well be yes."
A report in the Wall Street Journal on Thursday claimed the Treasury was struggling to find ways to make the plan work. The policy has proved controversial. It means a couple with one higher rate taxpayer - currently paid a salary of more than about £44,000 but due to fall closer to £42,000 by 2013 - would lose the benefit but a couple with two basic rate taxpayers collectively earning about £80,000 a year would keep it. Some Conservative MPs have raised concerns it will particularly hit couples where one parent stays at home to look after the children.
Shadow Chancellor Alan Johnson said: "The government has added incompetence to unfairness in their eagerness to cut child benefit. We already knew their plan to hit middle earners was unfair, now we're told it is also unenforceable. If they know how they are going to make it work they should tell us what it is, or drop a policy which hits a family on £45,000 but continues to reward a family that earns £85,000."
Note: higher rate tax begins after earning £43,875 (£37,400 + personal allowance of £6,475)Note: higher rate tax begins after earning £43,875 (£37,400 + personal allowance of £6,475)
Source: HMRCSource: HMRC
Do you think the government's plan is workable? Are you a higher rate taxpayer? What do you think of the plan to fine those over non-disclosure? You can send us your views using the form below.Do you think the government's plan is workable? Are you a higher rate taxpayer? What do you think of the plan to fine those over non-disclosure? You can send us your views using the form below.
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