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Tens of thousands of UK families who ‘unwittingly’ overclaimed child benefit face being investigated by the taxman – and risk huge fines if they fail to repay.

MPs last week gave HM Revenue & Customs (HMRC) powers to probe the financial records of 170,000 households who it suspects wrongly claimed the benefit.

However, observers have claimed that the system is so complicated that many parents simply did not know they had overclaimed.

Under changes introduced in 2013, the full benefit – £21 a week for a first child and £14 a week for further children — is reduced for households where one earner makes more than £50,000. It tapers until the point where households with an earner on £60,000 get nothing.

But families continue receiving the benefit regardless of their income unless they notify HMRC in a tax return then repay it. Many households insist they did not repay it because they were unaware they had to, and would never normally have had to fill out a tax return in the first place.

Tens of thousands of UK parents who ‘unwittingly’ overclaimed child benefit face being investigated by the taxman – and risk huge fines if they fail to repay (stock image)

Tens of thousands of UK parents who ‘unwittingly’ overclaimed child benefit face being investigated by the taxman – and risk huge fines if they fail to repay (stock image)

Tens of thousands of UK parents who ‘unwittingly’ overclaimed child benefit face being investigated by the taxman – and risk huge fines if they fail to repay (stock image)

HMRC will now pursue these families back to 2013 amid fears it could lose a test case on the issue which could cost it millions of pounds.

The taxman will issue so-called ‘discovery assessments’ to workers it believes should pay back child benefit. A discovery assessment can be issued if HMRC officials find ‘careless or deliberate’ behaviour.

In cases where an error has been caused ‘carelessly’, HMRC has the power to trawl through six years of financial records. It can investigate 20 years of financial records if families are found to have acted ‘deliberately’. 

The powers being used by the taxman are normally reserved to investigate the worst tax offences.

HMRC is appealing a decision by the Upper Tax Tribunal which found in favour of the taxpayers. If it loses it will be forced to pay back £2million and could face claims from nearly 170,000 other claimants it is investigating for ‘overclaiming’ child benefit between 2013 and 2019.

MPs last week gave HM Revenue & Customs (HMRC) powers to probe the financial records of 170,000 households who it suspects wrongly claimed the benefit

MPs last week gave HM Revenue & Customs (HMRC) powers to probe the financial records of 170,000 households who it suspects wrongly claimed the benefit

MPs last week gave HM Revenue & Customs (HMRC) powers to probe the financial records of 170,000 households who it suspects wrongly claimed the benefit

Lawyers representing 400 claimants claim that issuing discovery assessments for employees paid through PAYE is unlawful.

James Austen, a barrister at Collyer Bristow, which is bringing the legal case against HMRC, said: ‘In this case there was no tax avoidance and the taxpayers being penalised by this retrospective move were typically oblivious of their responsibilities.’

An HMRC spokesman said: ‘The measure will ensure those liable for these tax charges are treated in a fair and consistent way, and that individuals who do not notify and report their liability to these charges cannot gain an unfair advantage over the majority who follow the rules.

‘The measure does not create new liabilities or obligations for taxpayers, and confirms the longstanding and widely accepted legal position in place before recent tribunal decisions.’

Source: Daily Mail

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