FAMILIES receiving child benefit could be due a tax refund after a landmark legal ruling.
Parents have to pay a tax charge on the benefit if either earn more than £50,000.
But a court has ruled that this charge cannot be made by HMRC using its "discovery powers" if no self-assessment has been filed.
One family has successfully challenged how HMRC charges those that are classed as high earners for child benefit and legal experts claim this could pave the way for other parents to get refunds.
Most parents can claim £84.60 a month in child benefit for their first child – or £21.15 a week.
They can also claim £56 for each extra child, which works out at £14 a week.
The government introduced new rules in 2013 that said anyone earning more than £50,000 has to pay a high income child benefit charge (HICBC) to continue receiving it.
What is child benefit?
CHILD benefit is a form of government support paid to parents.
THERE are two child benefit rates, one for the eldest child and another for younger children.
- You get £21.15 per week for your eldest or only child (£1099.80 a year)
- You get £14 for each of your other children (£728 per year, per child)
- You get the money for each child under 16 (or under 20 if they stay in approved education or training)
- If families split up, how much you'll get for each child depends on how you claim.
- If you have 2 children and one stays with you and the other stays with your ex-partner, you’ll both get £21.15 a week for each child.
- If one parent claims for all the children, you get £21.15 for the eldest and £14 for each younger child.
- Only one household can claim for each child
You may have to pay a tax charge if you (or your partner’s individual income is over £50,000. This is known as the ‘High Income Child Benefit Charge’.
The charge is equal to 1% of a family’s child benefit for every £100 of income that is over £50,000 each year.
HMRC calculates how much you owe from your self-assessment tax return.
If an individual’s income is over £60,000 then the charge will equal the total amount of the child benefit.
The Sun has previously covered complaints that this change wasn't well-publicised and has left parents with unexpected tax bills.
Backdated bill of £4,000
Jason Wilkes was hit with a backdated tax bill of £4,000 after the taxman contacted him in 2018 to say he may owe the tax due to his earnings.
The taxman used its investigation powers to launch a discovery assessment to look into his income.
But Mr Wilkes challenged this with his wife Samantha.
He said he was unaware of the change and also queried whether HMRC was allowed to use discovery assessments to investigate his affairs.
He argued that HMRC could not use this discovery method as it was only relevant for those who complete a self assessment tax return, which he doesn't.
Mr Wilkes won a first-tier tribunal case and HMRC lost an upper tribunal appeal last week.
Law firm Collyer Bristow, which helped Mr Wilkes with the appeal, said other affected parents who have been charged in this way could be able to seek refunds or have investigations scrapped.
James Austen, partner and head of tax disputes for Collyer Bristow, said: "The upper tribunal’s decision comprehensively overturns any argument that HMRC can issue discovery assessments in HICBC cases where taxpayers have not been filing self-assessment tax returns.
"Hundreds of thousands of taxpayers who have been anxiously awaiting this decision will be elated, and one hopes that HMRC will swiftly reimburse those who have been wrongly charged.
"HMRC has resorted to discovery assessments almost by default for far too long: this judgment will hopefully cause them to think more carefully about their proper use in future."
However, HMRC has claimed it is too early to say if other families are owed refunds.
A spokesperson said: "We are considering the upper tribunal’s decision.
"All of the taxpayers who have been assessed are still liable to the HICBC, and nothing in the tribunal’s judgement calls that into question.
"It is for the taxpayer to notify HMRC when they are liable to HICBC, and we will continue to contact customers where we can to inform them they may be liable to pay HICBC to help them get their tax affairs right."
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