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Tax agents and accountants are about to receive letters from HMRC warning them that their clients have wrongly reported liability for the high income child benefit charge
Sara White, Editor, Accountancy Daily
The HMRC letter flags potential self-assessment errors in 2021-22 tax returns affecting multiple clients relating to the high income child benefit charge (HICBC) as well as P11D expenses claims and P14 end of year employee reports submitted by employers.
This follows a cross-referencing exercise to check instances where taxpayers are claiming child benefit but not paying the annual charge.
HMRC is focusing on claims for child benefit by high earners with income over £50,000 and has found mistakes relating to claims where the additional child benefit charge should have been paid.
HMRC’s agent compliance team (ACT) started sending out letters on 2 October and the campaign will run all month. HMRC stressed that the letter was not a trigger for opening a formal enquiry or compliance check.
In the letter, HMRC states: ‘We have identified discrepancies in some of your clients returns that you submitted for 2021/22 compared to the information submitted by your clients’ employers or with the information held on HMRC’s systems around child benefit.’
‘The objective of the exercise is to work with the agents so they can agree with their clients a voluntary amendment programme to rectify the errors made in their returns as may be required,’ explained the Chartered Institute of Taxation.
‘The letter explains that HMRC will contact the agent in the next three weeks when further details will be provided (or the agent can contact HMRC before then to arrange a time and date for a call).
‘This is so HMRC and the agent can discuss the taxable benefits, PAYE details, or potential HICBC liabilities of specific clients with a view to enabling the agents to support their clients in correcting any errors as necessary or understanding any discrepancies without the need for a formal enquiry. The letter makes it clear this is not a formal enquiry or compliance check.’
The deadline to amend 2021/22 returns is 31 January 2024 but HMRC wants to get on top of workload by settling issues early.
The letters state that a penalty will not be charged if a voluntary amendment is made by 31 January 2024, but that if one is not made HMRC will review the position and consider issuing a discovery assessment and charging a penalty.
HMRC request that once amendments have been made the agent sends them a spreadsheet via email setting the amendments out and/or explaining why an amendment has not been made. It should be noted that sending a single spreadsheet containing the details of multiple clients can raise client confidentiality issues so agents may wish to discuss and agree an alternative means of communication with HMRC.
This activity follows on from a similar letter that HMRC sent to some agents last year.
However, CIOT said that ‘HMRC has taken on some of the feedback from the previous project and is no longer including a redacted ‘client list’ with the initial letter due to concerns raised by the professional bodies about the use of this approach, adopting the approach of direct contact with the agent after the letter has been sent instead’.
P14 forms
By 19 May after the tax year end, an employer must use form P14 to make a return to HMRC for each employee, showing the following information (SI 2003/2682, reg 73):
• tax year for the return;
• total of relevant payments made by employer during tax year to all employees for
whom the employer was required to prepare or maintain deductions working sheets; and
• total net tax deducted for those payments.
An employer must send HMRC a separate form P14 for each employee, including those who have left or died. Forms must be submitted electronically with form P35.
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