A DAD-OF-TWO has been forced to borrow £20,000 after being hit with a huge surprise tax bill.
Rahul Mehata, 43, was told he was owed the huge sum of money by HMRC after his wife claimed child benefit.
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The IT consultant from Harrow had no idea that he needed to fill in a self-assessment and declare his income because he was earning £70,000 a year.
The high income child benefit tax charge was introduced in 2013, but many parents have complained that they were not made aware of it.
It means that if you earn over £50,000 you need to repay some child benefit, or all of it if you earn over £60,000, via a tax return.
After unsuccessfully appealing the bill with the taxman and with no savings to draw on, the dad had no option but to take out more equity on his family home to cover the bill.
Rahul told The Sun: “Our finances over the last year have been depressing enough.
“And HMRC wanted me to pay them £20,000 for a charge I’ve never heard of? You’ve got to be kidding.
“I have a young family and am struggling to meet the rising cost of living.
“In March, my mortgage term ended and my interest rate jumped from 1.49% to 5.5%.
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“But to make matters worse I had to take more equity out of my home to pay off the HMRC charges.
“It’s a relief to have done it but an increase in utilities and food on top of this is leaving us with no money to save.
“We can’t go on holiday. And we’ll be keeping the heating off over the winter to save enough to get by.”
HMRC has what’s known as power of discovery, where it can make an assessment of someone’s taxes and recover any underpayments in previous years.
Rahul is liable for the bill despite not knowing that his wife, Puri, 42 was claiming child benefit when their sons were born, Janam in 2008 and Siddhardh in 2010.
Child benefit is currently worth £24 a week for the eldest child or only child, adding up to £1,248 a year.
For each subsequent child, parents get £15.90 a week – or £826.80 a year.
Rahul said: “In June last year, I received a letter in the post and was gobsmacked to see that I owed HMRC £12,935.
“It said that I owed money back because I failed to pay the high income child benefit charge – something I had never heard of before.”
“But on top of this, I owed thousands more in interest and late payment fees which meant that I faced losing over £20,000.”
Despite a high-profile legal case where one parent in a similar situation, Jason Wilkes, successfully argued his case to a tribunal, a change to the law since then means HMRC can still pursue Rahul and other parents for the cash.
Rahul has now paid the original bill after losing his own appeal against the charge in April.
But he has now launched a fresh appeal to reclaim back over £3,000 in late payment charges and thousands more in interest fees.
Figures from the Institute for Fiscal Studies (IFS) suggest roughly 200,000 families will go over the £50,000 threshold in the 2023-24 tax year.
An HMRC spokesperson said: “Taxpayers are responsible for notifying us of their high income child benefit charge liability.
“We directly contacted Mr Mehta on five separate occasions before he confirmed his HICBC liability to us.”
What is the high income child benefit charge?
If either parent is earning over £50,000 they have to pay the High Income Child Benefit tax charge.
This means you pay back 1% of your child benefit payments for every £100 of income over this amount.
Once you reach £60,000 of income you have to repay the full amount.
The reduction applies when just one parent or guardian earns more than the threshold, and not on combined household earnings.
That means that two parents earning £49,000 each would not be subject to the rules, despite a combined income of £98,000.
But like Rahul, if just one parent earns over that amount they are subject to the charge.
Parents have been caught out by the complicated rules and extra charges and have been landed with bills for thousands of pounds.
It’s up to parents to notify HMRC if they are liable for the charge and they must file a self-assessment tax return to pay it.
Parents who do know about the charge could also end up missing out on cash.
They can decide to opt out of getting the benefit altogether to avoid having to pay the money back.
But they will miss out on National Insurance credits.
These credits count towards your state pension, so you do not have gaps in your NI record if you’re not working or don’t earn enough to pay NI contributions.
How do I appeal against a tax penalty?
You can appeal to HMRC against a penalty, for example for:
- An inaccurate return
- Sending in your tax return late
- Paying tax late
- Failing to keep adequate records
You’ll need to ask HMRC to look at your case again and consider your appeal.
If HMRC sends you a penalty letter by post, use the appeal form that comes with it or follow the instructions on the letter.
If you do not have an appeal form you can send a signed letter to HMRC instead.
You must include a full explanation of why your return or payment was late, including dates.
You should also include the following in your letter:
- Your name
- Your reference number – for example your Self Assessment Unique Taxpayer Reference (UTR) or VAT registration number
For child benefit appeals – send your letter to:
HM Revenue and Customs — Child Benefit Office
PO Box 1
Newcastle upon Tyne
NE88 1AA
United Kingdom
You usually have 30 days from the date your penalty was issued to appeal.
If you miss this deadline you must explain the reason for the delay so that HMRC can decide if they’ll consider your appeal.
If HMRC do not change the decision and you still disagree, you’ll be offered a review.
If you’ve appealed against a penalty you will not have to pay until your appeal has been settled.
How do I get a review of a tax penalty decision?
If you disagree with a tax or penalty decision, you can either:
- Accept the offer of a review by HMRC and then appeal to the tax tribunal if you’re still not satisfied
- Appeal directly to the tax tribunal
If you accept a review by HMRC you will have your tax decision reviewed by someone at the department who was not involved in the original decision.
This is known as a “statutory review”.
HMRC will tell you when you can have a review.
Reviews usually take 45 days, but HMRC will contact you if it will take longer.
HMRC will write to tell you the result of its review.
If you’re still not happy you can then take your appeal to a tax tribunal.
You can do this if you disagree with HMRC’s review decision – you must usually do this within 30 days of the review decision
But this can take many months.
For further information visit the government’s website.
