Law Centre NI has been granted permission by the High Court in Northern Ireland to challenge HM Revenue and Customs (HMRC) on how it applies the rules on which a parent is awarded child benefit.
What is the case about?
Law Centre NI is bringing judicial review proceedings on behalf of a mother whose payment of child benefit was stopped by HMRC and instead transferred to her former spouse. Our client is in minimum wage employment, but the children’s father is a higher rate taxpayer and therefore liable to repay the child benefit to HMRC.
The ‘high income child benefit tax charge’ rules, introduced ten years ago, mean that people earning over £50,000 are required to repay a portion of any child benefit they receive, so do not receive the full financial assistance available. Anyone earning over £60,000 has to repay all of the child benefit they receive.
In our client’s case, both parents have 50/50 custody of their child. The impact of HMRC’s decision to award child benefit to the higher earner is that our client – who is the lower earning parent with equal custody – loses out on vital financial support for her child.
Current HMRC practice in cases of 50/50 custody is to exercise its discretion to decide which parent is awarded child benefit. Its own guidance requires it to consider ‘who stands to lose most’ in reaching a decision on which parent should receive the award. In the challenge, we are arguing that HMRC has not properly considered ‘who stands to lose most’ by awarding child benefit to the higher earner, who will have to repay it.
Families who lose out on vital child benefit where parents share 50/50 joint custody need to see a change in HMRC practice.
Owen McCloskey, Head of Social Security at Law Centre NI, said:
“By bringing this judicial review, we want to ensure that – where parents are sharing equal joint custody of children – HMRC will properly consider the impact of higher income tax charges in its decision-making.”
How widespread is this issue?
It is impossible to tell how many families have been or are affected by current practice. A recent Freedom of Information request from Law Centre NI revealed that HMRC has taken approximately 25,000 discretionary decisions across the UK about who should get child benefit since the introduction of the high income child benefit tax charge in 2013.
HMRC does not record how many times an award of benefit has gone to a high-income earner, rather than to the parent with lower income.
Decision makers must decide who stands to lose most, but HMRC guidance does not explicitly refer to the potential impact on the child of a decision to award child benefit to a parent with equal custody who is subject to the higher-income child benefit tax charge.
What is the change we want to see?
We hope that this case will lead to changes in HMRC’s guidance to fully reflect the impact of the High Income Child Benefit Tax Charge on its decision-making.
This will have a wider impact beyond our client and help get more money to where it is needed for families on low-income.
Commenting on the case, Law Centre NI Director, Ursula O’Hare, added:
“Ultimately, it is the child who loses out. Child benefit is a vital financial support to struggling parents and we want to see HMRC apply its discretion in a way that maximises the amount of money reaching children. This means prioritising parents who are not in the high earning income bracket. It is time for HMRC to review its practice to ensure its approach helps lift children out of poverty”.
Law Centre NI would like to acknowledge the support of The PILS Project in this case.