The ‘high income child benefit charge’ included in the current Finance Bill is ‘seriously flawed in principle and in practice’, the ICAEW Tax Faculty has warned.
A briefing published on the Faculty’s website last week said: ‘Unless the government withdraws this clause and schedule with a view to tabling a more workable alternative in time for the Bill’s third reading, we believe the new tax charge could be an operational and reputational disaster for the government and HMRC.’
The new income tax charge, set to be introduced in January 2013, will withdraw child benefit from families where one spouse or partner has income in excess of £50,000. ‘The Government’s plans will means test child benefit, taking it away from taxpayers earning over £60,000 and tapering it where income lies between £50,000 and £60,000,’ the Faculty said.
But the Faculty warned that since the tax system is based on individuals, while the benefits system is based on households, the proposals would undermine the principle of individual taxation and could lead to breaches of taxpayer confidentiality.
‘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,’ it added.
Changed family circumstances could make it ‘difficult or impossible’ to calculate the clawback, or who should pay it, and taxpayers could be penalised for failing to submit information that they have no access to, ‘particularly if the relationship breaks down’.
The ‘high income child benefit charge’ included in the current Finance Bill is ‘seriously flawed in principle and in practice’, the ICAEW Tax Faculty has warned.
A briefing published on the Faculty’s website last week said: ‘Unless the government withdraws this clause and schedule with a view to tabling a more workable alternative in time for the Bill’s third reading, we believe the new tax charge could be an operational and reputational disaster for the government and HMRC.’
The new income tax charge, set to be introduced in January 2013, will withdraw child benefit from families where one spouse or partner has income in excess of £50,000. ‘The Government’s plans will means test child benefit, taking it away from taxpayers earning over £60,000 and tapering it where income lies between £50,000 and £60,000,’ the Faculty said.
But the Faculty warned that since the tax system is based on individuals, while the benefits system is based on households, the proposals would undermine the principle of individual taxation and could lead to breaches of taxpayer confidentiality.
‘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,’ it added.
Changed family circumstances could make it ‘difficult or impossible’ to calculate the clawback, or who should pay it, and taxpayers could be penalised for failing to submit information that they have no access to, ‘particularly if the relationship breaks down’.
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