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Is your ex-partner receiving child benefit for your child? Read this.
Some taxpayers have recently been told by HMRC that they owe a substantial amount as they have not paid the high income child benefit charge. These taxpayers thought the charge didn't apply to them because the child benefit payments were being paid into their ex-partner’s bank account. But because they remained the legal claimant of the benefit after separation, the charge still applied.
If your, or your (new) partner's adjusted net income is over £50,000 and your ex-partner is paid child benefit for your child, you should check who the claimant of the child benefit is to avoid the charge arising unexpectedly. This is especially important if it is some years since the original child benefit claim was made, as you may not remember who made the claim. In some cases, the charge might be avoidable. Your ex-partner might also be missing out on National Insurance credits for their state pension.
Who is the child benefit claimant?
When thinking about child benefit, it is important to distinguish between:
the claim itself, and
the payment of the benefit.
Child benefit is always claimed by an individual – not a couple. The person who makes the claim – by which we mean the person who signs the child benefit claim form (or completes it online) – is called the ‘claimant’.
However, a child benefit claimant can choose to have the payment paid into any bank account. This could be:
the claimant’s own account, or
someone else’s account (such as the claimant’s partner’s), or
a joint account (such as between the claimant and their partner).
In some cases, it is also possible to opt out of receiving child benefit payments altogether, in order to avoid liability to the high income child benefit charge. In such a case, there is still a claim, but no payments are being made.
When deciding to make a claim for child benefit, it might feel like it doesn’t matter which person fills in the form and therefore which person is the claimant. If the initial claim was several years ago, you may not even remember who the claimant was.
However, it is important to understand which individual is the child benefit claimant, as this is the person who – in the first instance –
may be liable to the high income child benefit charge (unless their partner has a higher adjusted net income), and/or
is eligible to receive national insurance credits (though these can be transferred – see below).
The claimant is also:
responsible for notifying HMRC of any changes which affect the award, and
the person liable to repay the benefit if it is overpaid.
If you are unsure who the claimant is, and you don’t have any correspondence from when the claim was initiated to check, you can contact the Child Benefit office.
The high income child benefit charge on separation
If you are the child benefit claimant and you separate from your partner, it is possible to be liable to the high income child benefit charge, even if:
the child benefit payments are made directly to your ex-partner, and/or
the child does not live with you.
The high income child benefit charge may even be payable by your new partner, if you have one and they have a higher adjusted net income than you, even though they may have nothing to do with the child benefit claim, the payments, or indeed the child. See the following example:
James and his ex-partner Catherine have a 6-year-old daughter, Elizabeth. James claimed child benefit in 2017 when Elizabeth was born. On the form, he instructed that the payments should be paid into Catherine’s bank account.
Neither James nor Catherine have ever had adjusted net income above £50,000, so they did not worry about the high income child benefit charge.
James and Catherine separated in October 2022 and they now live separately. James continues to live at the same address. They share equal responsibility for Elizabeth, who spends alternate weeks at each parent’s house. When the couple separated, they did not make any change to the child benefit claim, so Catherine continued to receive the payments into her bank account.
James now has a new partner, Rachel, who has just moved in with James. Rachel’s adjusted net income is £65,000.
In this situation, Rachel would be liable to the high income child benefit charge – even though she may be unaware of the child benefit arrangements between James and Catherine! This is because the high income child benefit charge rules compare who has the highest adjusted net income between the claimant and their partner – ignoring who actually receives the payments. As James originally claimed the child benefit, and didn’t change that when he separated from Catherine, he is the claimant for HICBC purposes. If the higher of the two adjusted net incomes
is above £50,000, then the high income child benefit charge applies to the person with the higher adjusted net income.
In order to avoid this situation, the most obvious way is for James to stop his child benefit claim and for Catherine to make a fresh claim in her own name. If Catherine (and any new partner she may have) has an adjusted net income of no more than £50,000, then the high income child benefit charge would not be payable. However, if Catherine (or any new partner she may have) has an adjusted net income of more than £50,000, the person with the higher adjusted net income would then be liable to the charge.
Suppose in the above situation that James’s new partner, Rachel, has an adjusted net income of £45,000 instead of £65,000, and that Catherine’s adjusted net income increases to £55,000 after separation.
You may think that Catherine might avoid liability to the high income child benefit charge because she is, technically, not the claimant and is not the claimant’s partner. However, special rules would apply in this situation which transfer liability from the claimant to the person receiving the payments.
Note we publish separate guidance on how to calculate and report the high income child benefit charge in the year of separation.
Can I retrospectively change who claimed child benefit?
Our understanding is that the child benefit rules do not allow this.
It is therefore very important to understand who the child benefit claimant is, especially if you separate from your partner.
Claiming child benefit after separation
If you are a claimant who is not receiving the child benefit payments because they are being paid into your ex-partner’s bank account, you should consider whether this arrangement continues to be appropriate.
However, if you, as the claimant, require the national insurance credits which result from the claim and the high income child benefit charge is not in point, this may justify the claimant being (or remaining) different from the person receiving the payments.
Note that the claimant will normally only continue to be eligible for child benefit after separation if there is no competing claim which takes priority and either:
the child lives with the claimant (other than for temporary periods where they might live with someone else, such as in shared custody arrangements), or
the child lives with someone else permanently, but the claimant contributes towards the cost of providing for the child at a rate at least equal to the amount of child benefit.
The above rule means that if you claim child benefit after separation but the child does not live with you and you are not contributing towards the cost of providing for that child, then rather than paying the high income child benefit charge, the child benefit itself may need to be paid back to HMRC.
If you have any change of circumstances after separation which affects your entitlement to child benefit, such as the one described above, you must tell HMRC.
National insurance credits
Since 6 April 2010, a person who is ‘awarded’ child benefit (in practical terms we understand this means the claimant) for a child under 12 is automatically credited with Class 3 National Insurance credits for that week. They can count towards a person’s state pension entitlement, so if a person does not otherwise have a ‘qualifying year’ for state pension purposes (for example, if they do not work and they do not get National Insurance credits for any other reason) the credits can have a direct financial benefit.
If the claimant does not need the credits themselves, they can usually apply to transfer them to the other parent (or carer) if that person lived with the claimant and shared responsibility of the child.
The time limit to do so is usually within a year of the end of the tax year – so for the 2022/23 tax year, the application should be made prior to 5 April 2024. However, HMRC say that you can still apply late and if your circumstances are ‘reasonable’ then they can still make the transfer if you meet the conditions.
For more information and to make the application, see GOV.UK.
These National Insurance credits can only be transferred to another person who lives with the claimant. For separated parents, the credits can therefore only be transferred in this manner for periods prior to living separately. It does not matter if you ended your relationship prior to physically living apart.
However, credits can still be transferred to the other parent for periods after you no longer live with them via a separate mechanism. These are known as Specified Adult Childcare Credits and have been available since 6 April 2011. Unlike the credits described above, there is no statutory deadline to make the application.
You cannot apply for Specified Adult Childcare Credits for periods where the transferee carer lived with the claimant – the normal rules for transferring child benefit National Insurance credits rules take priority in this situation.
If HMRC have said you need to pay the high income child benefit charge
We are aware of some cases where HMRC have written to individuals saying that they are liable to the high income child benefit charge in respect of child benefit payments which have been paid into the bank account of their ex-partner (with whom they no longer live). Recently, such a case was heard in the First-tier Tribunal. The liability for the charge has come as a surprise to the individuals.
HMRC correspondence has made reference to the high income child benefit charge applying in the following situation:
- "you had an individual income of over £50,000,
- either you or your partner received Child Benefit payments during the tax year,
- your income for the tax year was higher than your partner’s - the partner with the higher income has to pay the charge if both partners have income over £50,000”
The guidance on GOV.UK similarly refers to you or your partner ‘getting’ child benefit.
In the cases we have seen, the individual who received the letter from HMRC saying they may need to pay the high income child benefit charge read the information from HMRC and assumed the charge does not apply to them. Although they had income over £50,000 for the relevant tax year, neither they or their new partner were receiving child benefit payments.
The wording does not explicitly say that the charge would not apply in this situation – but it does suggest that would be the case.
Unfortunately, even if guidance from HMRC is misleading on the point, legally the charge still applies to the claimant if they (or their partner) exceed the income threshold – regardless of who receives the payments.
If HMRC have charged your penalties for the error or failure to notify, then you may appeal those penalties if you had a reasonable excuse for the missed obligation. If you felt the guidance or correspondence from HMRC was misleading, this may be grounds for a reasonable excuse.
Complaining to HMRC
You may also wish to complain to HMRC if you found HMRC’s advice misleading on whether the charge would apply. If HMRC’s advice caused you financial detriment (for example, because you would have otherwise ended the child benefit claim and avoided the charge), then you should make this point.
There is also a legal principle, known as ‘legitimate expectation’, which can override HMRC’s duty to collect the amount of tax which is strictly due. In other words, HMRC can be bound by incorrect advice if strict conditions are met. This would mean that you don’t have to pay the charge. You can read more about this on GOV.UK.
If you feel that the conditions are met, you can:
make this case in any complaint you make directly to HMRC, and/or
apply for judicial review – though this can be prohibitively expensive and there are strict time limits.
There is a further possibility which is to appeal on ‘legitimate expectation’ grounds against the assessment to the First-tier Tribunal. However, such an argument is usually considered to be outside the jurisdiction of this tribunal and you will need to frame your case carefully to avoid it being rejected. You should seek professional advice on this.
A further potential remedy may be to argue that you made a serious mistake relating to the law and that no rational person would have proceeded as you did had they been aware of the consequences.
Where this applies, in certain circumstances the courts can ‘rectify’ a document (in this case, the child benefit claim might be ‘rectified’ so that the person receiving the payments made the claim instead).
However, this route is untested in the context of a child benefit claim.
This is not an exhaustive list. With any of these routes, we suggest you take professional advice.
If you find yourself in this position, we would be interested to hear from you. Please use our Contact Us facility. However, please note that we cannot provide individual advice or casework support.
Contact: Tom Henderson (click here to Contact Us)
First published: 11/08/23