Picture the scene. Chris and Alex are at the hospital celebrating the birth of their first child. Ever practical, Alex starts drawing up a list of jobs to be done: send photos to grandma; stock up on nappies; register for child benefit. 'No need', says Chris, 'after that pay rise last January I now earn £65,000 a year so there is no point: any benefit we get will be completely clawed back in tax'. 'OK' says Alex and they go to discuss what colour to paint the nursery.
Ok, so perhaps not many conversations about tax actually go on in the maternity ward but at some point many couples will have had this conversation. What they fail to realise is that they have made a fundamental mistake. There is a big difference between registering for child benefit and claiming it. You can register for child benefit but elect not to receive it. Why on earth would you do that?
Registration for child benefit will automatically entitle a non-working recipient to qualify for National Insurance Credits. These are taken into account when determining the amount of state pension and certain other (not all) state benefits. So even if somebody elects not to receive child benefit they should still register. Those who fail to register are more likely to be women with child caring responsibilities.
Why I am raising this now? The Treasury Select Committee has been in correspondence with The Treasury about the number of people who may have failed to register for child benefit because they didn’t understand the difference between registration and making a claim, and it appears that no statistics are available.
The committee is also concerned about the way HMRC has publicised this issue. When the high income child benefit charge was first introduced, in 2013, HMRC launched a big publicity campaign about the changes. There are different views about how successful this was, but at least there was a real attempt at communication. But of course people who didn’t have children then will not have paid much attention to an information campaign aimed at those with children so they may well not know how the rules work when they come to have children of their own.
There is an important point here which goes far beyond child benefit. How much responsibility should the individual citizen have to keep up to date with tax changes and what obligations should HMRC have to tell people about changes which may affect them? This is an issue which the tax tribunals constantly have to consider when dealing with penalty cases where the taxpayers argue that they had a reasonable excuse because HMRC had not told them about something which they should have done. There is no consistency in the way that tribunals have approached this knotty problem.
HMRC can’t be expected to keep everybody informed about every potential tax change that might affect them. Even if they could none of us would want to be bombarded with communications every day from HMRC just in case, say, we had a business in Uzbekistan and needed to know about a new tax treaty with the country!
But there is a strong argument that for major changes HMRC does have an obligation to notify individuals and businesses of changes which will have a direct effect on them. To take two examples: Making Tax Digital and Brexit will bring fundamental changes to the tax affairs of millions of businesses. HMRC is communicating about both but the question is whether or not that communication is getting to the right people and giving clear messages. I suppose that we will only know when changes start to happen, by which time it might be too late.