HMRC refunds parents’ penalties

HMRC has refunded £1.8 million in penalties charged to taxpayers who had failed to notify their liability for the High Income Child Benefit Tax Charge.

The charge applies where a family claims child benefit but one partner earns more than £50,000, effectively clawing back all or part of the benefit. The higher earner has to register to pay the charge, but many assumed HMRC would automatically make payment adjustments and did not register when the charge was introduced in 2013.

HMRC has now refunded penalties charged to families that claimed child benefit before 2013 where one partner’s income subsequently increased to over £50,000, as well as to some families where liability resulted from the formation of a new partnership.

Opting out

The rules, nevertheless, remain complicated and awareness is low. You can avoid paying the charge by electing not to receive benefit payments. But continuing to claim child benefit (and paying the tax charge) means that state pension entitlement will be preserved.