Child benefit cheats ‘face fines

Higher rate taxpayers who fail to declare that their partners are claiming child benefit will be fined under planned welfare reforms, it has been disclosed.

Legislation will require those earning more than about £42,000 a year to inform HM Revenue and Customs if anybody in their household is claiming the benefit. The Treasury said that non-disclosure would be breaking the law and result in “penalties”.

There have been claims that the withdrawal of child benefit from households with a higher rate taxpayer is unenforceable.

Claimants – usually mothers – will be expected to stop drawing the money if they or their partners are on 40% tax. The threshold for that will be about £42,000 from next April.

A Treasury spokesman insisted the change would go ahead from 2013 as announced by Chancellor George Osborne.

“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,” he said. “This will include the issuing of penalties.”

A senior Tory MP warned earlier that the proposed shake-up would be “virtually unenforceable”. Ian Liddell-Grainger, chairman of the all-party parliamentary group on taxation, said the move would be impractical until HMRC was able to process real-time information. “One of the big difficulties the Government has got is that the system they have got is not a real-time system and therefore this is going to be virtually unenforceable,” he told BBC Radio 4’s Today programme. “Until we go to real time taxation this is going to be a very difficult position.”

But the Treasury spokesman said: “This is nonsense, the withdrawal of child benefit for higher rate taxpayers will be enforceable and will go ahead in 2013.”

Prime Minister David Cameron later said he did not foresee any problem with compliance. “What we said at the time was that it would be a very simple approach which is to say that if there’s a higher-rate taxpayer in the family you don’t get child benefit,” he said.

“Now I don’t start from the proposition that we are all appalling cheats and liars and tax evaders and the rest of it and I am quite sure this change will secure the very generous revenues that the Office of Budget Responsibility have pencilled in. So I do not predict a problem.”

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