Separated parents warned about child benefit tax trap

Separated parents have been warned to check whose name their child benefit is registered in or face being clobbered with a hefty tax bill.

The warning from the Low Incomes Tax Reform Group (LITRG) comes following a recent tribunal where a parent was found liable to pay high income child benefit charges (HICBC) even though they didn’t receive the benefit and it was paid directly to their ex-partner.

The problem occurs because child benefit is claimed by an individual and not a couple. Therefore, the person who completes and signs the form to make the claim – even if they choose for their partner to receive the benefit – is deemed as the claimant.

If a couple goes on to separate and the income of the person listed on the application grows to more than £50,000, they will automatically be liable to pay the higher charges. It’s even possible that any new partners might also become liable for HICBC too even though they had nothing to do with the original claim.

According to LITRG it’s not as simple as just changing names to avoid paying the charges. If you’ve separated and find you’re affected by this, you’ll have to end your claim for child benefit and ask your ex-partner to make a new claim.

Tom Henderson, LITRG Technical Officer, said: “When making a child benefit claim, it might feel like it doesn’t matter which person fills in the form – but it does. The claimant is the person responsible for keeping the claim up to date and is the person liable to repay the benefit if it is overpaid.

“We would encourage everyone with children for whom child benefit is being paid – especially separated couples – to check they are aware of who the claimant is and what the consequences of that claim are.”

Anyone who’s found to be liable for HICB but haven’t told HRMC could also be charged penalties.