The Chancellor's recent announcement about cutting child benefit for those on higher incomes, on the face of it may seem simple enough wrt how it will be administered.
However, when it comes to politicians' announcements, nothing is ever as simple as it first appears.
Accountancy Age reports that instead of child benefit payments to higher rate earners simply being stopped, the payments will in fact be "clawed back" through the PAYE and self assessment systems.
This absurd "Heath Robinson" claw back will increase the complexity of individuals' tax affairs, and add to the burden on the already overstretched HMRC.
Come on George, sharpen up!
Tax does have to be taxing.
Professional Cover Against the Threat of Costly TAX and VAT Investigations
What is TAXWISE?
TAXWISE is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.
To find out more, please use this link Taxwise
Tax Investigation for Dummies, by Nick Morgan, provides a good and easy to read guide for anyone caught up in an HMRC tax investigation. A must read for any Self Assessment taxpayer.
Click the link to read about: Tax Investigation for Dummies
HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"
So that means that those of us without kids and not in the higher earning bracket will get stuffed as well because HMRC needs to tinker with it's systems again.
ReplyDeleteThe practicalities of such a daft arrangement do not appear to have been thought through very well.
ReplyDeleteSo the gov has to spend money to make payments to people and then spend more money to get the same money back from them?
ReplyDeleteAnd I thought the condems were all about cutting waste. lol.
There seems to be a great anomaly where 1 person earning over the threshold, whilst the other stays at home, lose the benefit against where two high earners together, both 'just' under the threshold, don't. Then they seems to be a lot of admin and tinkering required too.
ReplyDeleteThe child tax credits still exist (and are assessed on total household income) - why didn't they just scrap child benefit altogether and increase child tax credits for families under "X" total income instead ?
Im higher rate.....my missus doesnt work.....she gets the CB.....not sure how they intend to clawback against me....any ideas?
ReplyDeleteMark
Also, after 13 years of middle england getting stuffed by Blown, how can tories continue to attack the same people.
ReplyDeleteMark
6 October 2010 11:46
ReplyDeleteIt will happen and Hartnett will not see a need to apologise either.
Re Smithy 06.10.09 I totally agree. I've emailed my MP to suggest this. (I also suggested that Winter Fuel Payments should just be targeted at people who receive Pension Tax Credits.I am ex PAYE and can see the admininstrative nightmare ahead. Don't these politians ever talk to people who understand the PAYE system before they make their announcements. I still can't believe that Brown didn't realise the problems that would surface from abolishing the 20% band.
ReplyDeleteAny one working in Tax Credits who can see problems wih Smithy's suggestion?
6 October 2010 15:21, Don't the politicians get advised by people like hartnett and strathie?
ReplyDelete@15:21 Who the hell would want their advice? Staff in HMRC dont.
ReplyDeleteLook forward to a lot more of this kind of simplistic policy. Why has it been done like this? Simple. Any other way would need intervention by actual people.And they will, in the main, be cut (sacked)over the next 5-6 months. Don't expect anyone to cry for me when I'm chopped. Tried my best for the last 25 years. Had enough now. Sold down the river by Senior managers, despised by the public I have tried to serve. Had enough ,basically.
ReplyDeleteNext week I am 44 and have given 22 years loyal service to my employers - YOU THE GENERAL PUBLIC, and my reward since the merger between IR & CE is to be treated like a mushroom.
ReplyDeleteI am not quitting as I like my job @ the present but am forced to give crap customer service to my paymasters - YOU THE GENERAL PUBLIC.
I apologise to you all
"Look forward to a lot more of this kind of simplistic policy. Why has it been done like this? Simple. Any other way would need intervention by actual people.And they will, in the main, be cut (sacked)over the next 5-6 months. Don't expect anyone to cry for me when I'm chopped. Tried my best for the last 25 years. Had enough now. Sold down the river by Senior managers, despised by the public I have tried to serve. Had enough ,basically."
ReplyDeleteI WILL be taking voluntary redundancy if its offered to me, as I believe a lot of my HMRC colleagues will.
Would merging Child benefit & Tax Credits be a fairer system?
ReplyDeleteDo any HMRC staff take any heart from the fact that bankers are probably hated more than HMRC now?
ReplyDelete"Do any HMRC staff take any heart from the fact that bankers are probably hated more than HMRC now?"
ReplyDeleteNo because thanks to the media the public feel that they have every right to phone and verbally abuse and threaten us on a daily basis. Would they do this to their bank. No.
I WILL be taking voluntary redundancy if its offered to me, as I believe a lot of my HMRC colleagues will.
ReplyDeleteYou may not have to volunteer.
With respect, Ken, I'm not sure if you've thought through the 'daftness' of this arrangement very well.
ReplyDeleteFirst, a clarification of how it works: people are asked not to claim child benefit if there's a higher rate taxpayer in the household. If they claim anyway the benefit gets clawed back when it emerges that they've been higher rate payers. There's going to be a box on the SA form for people to indicate that there's a higher rate payer in the household; I presume the link will be made automatically by the IT for PAYE taxpayers.
It doesn't seem all that unreasonable for people to know that they shouldn't be claiming child benefit if there's a higher rate payer in the family, given the media storm at the moment and the fact that there will presumably be guidance on it in the benefit claim form.
It's difficult to see how else it could work. HMRC doesn't know what individuals' income is until after the year end, when it receives either a Self Assessment return or an employer's return (yet another advantage that would emerge from real-time PAYE!). Off the top of my head, problems with child benefit payments to higher rate earners "simply being stopped" include:
- People would have to go through an appeals process if their income fell during the year, or if it had fallen since HMRC's information was last updated.
- They'd also have to appeal in the case of a family split (i.e. where a lower-earning parent split from a high-rate payer taking the children).
- HMRC would have to do lots more work overall. Under the system being put in place, HMRC won't have to do anything with the majority of people involved, as they will simply stop claiming. If HMRC had to stop the payments then they'd have to process every single one of them; as it is only the smaller number of people who keep claiming when they shouldn't have will require attention.
- HMRC would have to do all this work up-front, including modifying IT systems, possibly delaying implementation. As it is, they've given themselves extra time to prepare.
The "Heath Robinson" claw back, as you call it, simply involves one extra figure being brought into the computation which HMRC does at the year end, based on information that will mostly have been collected in any case (i.e. who's claimed child benefit). It's hard to see how this significantly increases the complexity of individuals' tax affairs (and, in the vast majority of cases, it will have been pretty clear that they shouldn't have claimed in the first place!). Yes, it adds to the burden on HMRC (and yes, HMRC is overstretched), but it's inevitable that any significant change in policy will do this, and for reasons including those set out in the above bullets, I think this increases the burden less than the alternative you suggest.
Having said all that, I do entirely agree with Smithy's point. While I believe the decision that HMRC has made on delivery of the policy is probably the least worst realistically practical option, the policy itself is flawed. In addition to what Smithy has pointed out, this goes against what the government has been putting forward in recent consultation on benefits: namely that cutting benefits too quickly as people's income rises is a disincentive to working harder/longer and that therefore it should be simplified and tapered. In this case, if a family's highest earner is earning, say, £100 below the high rate threshold, an increase in salary of £1,000 will actually result in a significant effective pay cut. Not a great policy outcome.