Back dated tax bill for child health benefit

festivalabbie

Hi all, the tax man says we owe approx. £15k for unpaid tax of child benefit going back to 2013, so I'm optimistically trying to find a way of reducing it!

We have 3 kids. Partner has a taxable income of approx. £60k. I've had an income of approx £12k for the last 6 years, and only about £3k max on and off over the previous 8 years as I was at home with the kids. We didn't pay tax on the child health benefit as partner wasn't doing self assessments and we didn't know anything about this tax until recently. 

Can the tax man go back ten years to claim back this unpaid tax? Can we do anything to reduce this huge tax bill?

May thanks!

festivalabbie

* many thanks *

calcotti

festivalabbie said:

Can the tax man go back ten years to claim back this unpaid tax? Can we do anything to reduce this huge tax bill?

See
https://www.gov.uk/child-benefit-tax-charge
The charge was introduced in January 2013.
Your husband can reduce future liability by reducing his net adjusted income.
https://www.litrg.org.uk/tax-guides/tax-credits-and-benefits/child-benefit/high-income-child-benefit-charge

There was some legal action about applying the charge retrospectively which HMRC lost in certain circumstances but, as I understand it, a HMRC have since changed the rules retrospectively. Hopefully there will be other posters that can fill that bit in more fully.

https://www.gov.uk/government/publications/high-income-child-benefit-charge-data/high-income-child-benefit-charge
https://revenuebenefits.org.uk/child-benefit/guidance/how-do-child-benefit-and-guardians-allowance-work/high-income-child-benefit-charge/#hmrc%20review

Jeremy535897

You might try to argue that your partner had a reasonable excuse. See:
https://www.litrg.org.uk/latest-news/news/200714-hmrc-told-high-income-child-benefit-charge-assessments-not-valid

However, this article does not deal with changes in Finance Act 2022. You should also read:
https://www.gov.uk/government/publications/high-income-child-benefit-charge-data/high-income-child-benefit-charge

See also:
https://revenuebenefits.org.uk/child-benefit/guidance/how-do-child-benefit-and-guardians-allowance-work/high-income-child-benefit-charge/
https://www.rossmartin.co.uk/sme-tax-news/6674-hmrc-wrong-to-back-date-high-income-child-benefit-charge-assessments

Dazed_and_C0nfused

festivalabbie said:

Hi all, the tax man says we owe approx. £15k for unpaid tax of child benefit going back to 2013, so I'm optimistically trying to find a way of reducing it!

We have 3 kids. Partner has a taxable income of approx. £60k. I've had an income of approx £12k for the last 6 years, and only about £3k max on and off over the previous 8 years as I was at home with the kids. We didn't pay tax on the child health benefit as partner wasn't doing self assessments and we didn't know anything about this tax until recently. 

Can the tax man go back ten years to claim back this unpaid tax? Can we do anything to reduce this huge tax bill?

May thanks!

I think legislation has been changed to allow them to do this.

One thing which may help reduce the amount owed would be if your partner has made any relief at source (RAS) pension contributions in any of the years involved and he hasn't previously notified HMRC about them.

RAS contributions are where he pays a net amount to the pension, say £1,000, and the pension company adds basic rate tax relief of £250, making a gross contribution of £1,250.

In addition to the tax relief added to the pension fund these contributions have two other benefits,

1.  They reduce adjusted net income, which is used to calculate any HICBC.

2.  They increase the basic rate band meaning more tax is paid at basic rate and less at higher rate.

Note it is only RAS contributions that will help in this scenario.  If he has made net pay contributions or sacrificed some salary in return for employer contributions then they won't reduce the HICBC as they are already factored in before you get to this stage.

If he contributed to a pension then the key thing is to find out which method was used to get the money into the pension.

calcotti

Dazed_and_C0nfused said:

I think legislation has been changed to allow them to do this.

I think that was done in the Finance Act 2022.
https://www.legislation.gov.uk/ukpga/2022/3/section/97

Jeremy535897

calcotti said:

Dazed_and_C0nfused said:

I think legislation has been changed to allow them to do this.

I think that was done in the Finance Act 2022.
https://www.legislation.gov.uk/ukpga/2022/3/section/97

Yes, I mentioned that earlier.

calcotti

Jeremy535897 said:

calcotti said:

Dazed_and_C0nfused said:

I think legislation has been changed to allow them to do this.

I think that was done in the Finance Act 2022.
https://www.legislation.gov.uk/ukpga/2022/3/section/97

Yes, I mentioned that earlier.

Sorry, Jeremy - when I saw Dazed comment I'd forgotten that you'd already mentioned it.

festivalabbie

Thanks so much for the info! Sorry I've not had chance to thank you sooner. I'll look through it all as soon as I can.

I was really hoping someone would say "no, they can't make you pay that huge bill going back all those years - the tax man with never be that unfair" but sadly not!! Looks like I was being very naive / too optimistic!

Thanks!

MattMattMattUK

festivalabbie said:

Thanks so much for the info! Sorry I've not had chance to thank you sooner. I'll look through it all as soon as I can.

I was really hoping someone would say "no, they can't make you pay that huge bill going back all those years - the tax man with never be that unfair" but sadly not!! Looks like I was being very naive / too optimistic!

Thanks!

Why would it be unfair to allow you to claim money to which you were not entitled, then keep it? 

TheAble

MattMattMattUK said:

festivalabbie said:

Thanks so much for the info! Sorry I've not had chance to thank you sooner. I'll look through it all as soon as I can.

I was really hoping someone would say "no, they can't make you pay that huge bill going back all those years - the tax man with never be that unfair" but sadly not!! Looks like I was being very naive / too optimistic!

Thanks!

Why would it be unfair to allow you to claim money to which you were not entitled, then keep it? 

Yes - hardly fair on all the other parents who have paid it. It's not exactly new legislation.