Jun 27, 2019 | TC blog

HMRC Refunds £1.8m Child Benefit Penalties

HMRC has paid £1.8m in refunds to nearly 5,000 taxpayers as a result of cancelling ‘failure to notify’ penalties in high income child benefit charge (HICBC) cases, on the grounds that there was a “reasonable excuse”.

There has been a rise in cases related to higher rate taxpayers who had not informed the tax authority that they would opt out of child benefits as they earned over £50,000, after complicated changes to child benefit payments were introduced by former Chancellor George Osborne in 2013.

The lack of awareness about the complexities of the HICBC was also highlighted in recent research into the rollout of changes to child benefit, with criticisms regarding poor communication from HMRC and the tone of penalty demands.

In 2018 HMRC was forced to review thousands of cases where a ‘failure to notify’ penalty was issued between 2013 and 2016, to taxpayers who had not registered for the HICBC. At this time, the understanding of what constituted a “reasonable excuse” was also reassessed.

HMRC investigated 35,000 cases where taxpayers who had reasonable excuses for not notifying their liability, with parents receiving an average refund of £370. These refunds were issued to families in a range of circumstances, including changes to one partner’s income and the formation of new partnerships.

In total, £1.8m of refunds have been made in nearly 5,000 cases. Despite record refunds, it is not yet clear that the underlying problems of complexity and poor communication have been resolved.

Becky O’Connor, personal finance specialist at Royal London, said: “The bulk refund of penalty charges is an unprecedented move by HMRC and was the right thing to do. It is also an attempt to draw a line under complaints. However, there are many more law-abiding parents who did not realise that they should have paid the charge and who have not had a refund. The way the charge was introduced was unfair and confusing and these refunds do not go far enough.”

HMRC is improving child benefit forms, guidance and communications by providing options to pay the charge or to claim child benefit but elect not to receive payments. This way the claiming parent can continue to receive non-monetary benefits such as National Insurance credits, without having to pay HICBC.

If you would like more information or to find out if you may be affected, get in touch with our tax team on 01383 628800 or email

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