Child benefit proposals hit major hurdle

THE government’s plans to scrap child benefit for higher rate tax payers could be almost impossible to enforce, it emerged yesterday, in the latest saga to hit the controversial reforms.

Earlier this month, George Osborne announced plans to axe child benefit for all households that contain at least one higher-rate taxpayer from 2013, saving the exchequer some £2.5bn.
The policy, which caused an uproar among the Tory faithful, has been dogged by controversy ever since.

But under the existing rules there is no method for establishing whether mothers who receive child benefit are living in a household with a partner that pays tax at the higher 40 per cent rate.

Treasury officials are said to believe the policy, which was announced at the Tory conference, will be “unenforceable” as it stands. One civil servant told City A.M. Osborne had failed to consult colleagues at HMRC fully before unveiling the plans.

Yesterday, Treasury sources admitted there were no methods to enforce the policy, but insisted measures would be introduced by the time it comes into effect in 2013.

Initially, the government will rely on higher rate taxpayers being honest enough to disclose whether their partner is receiving child benefit through a system of self-assessment.

HMRC will eventually impose penalties on those higher-rate taxpayers that fail to give up their child benefit. “If you don’t give it up, you’ll be breaking the law, and you’ll be fined,” a Treasury source said yesterday.

A spokesperson for the Treasury said: “In line with the administration of tax, HMRC will take action in cases of non disclosure of information which is relevant to a person’s tax affairs. This will include the issuing of penalties.

“As we said at the time, the government will bring forward legislation to implement this change in due course.”

In a Tweet, chief secretary to the Treasury Danny Alexander said the policy was “completely enforceable” and would be “introduced as planned”.