Fines for middle class families who try to claim child benefit

Higher rate taxpayers who fail to declare that their partners are claiming child benefit will be fined under planned welfare reforms.

Legislation will require those earning more than about 42,000 a year to inform HM Revenue and Customs if anybody in their household is claiming the benefit.

The Treasury said that non-disclosure would be breaking the law and result in "penalties".

There have been claims that the withdrawal of child benefit from households with a higher rate taxpayer is unenforceable.

Claimants - usually mothers - will be expected to stop drawing the money if they or their partners are on 40 per cent tax. The threshold for that will be about 42,000 from next April.

A Treasury spokesman insisted the change would go ahead from 2013 as announced by Chancellor George Osborne.

"In line with the administration of tax, HMRC will take action in cases of non disclosure of information which is relevant to a person's tax affairs," he said.

"This will include the issuing of penalties. As we said at the time, the Government will bring forward legislation to implement this change in due course."

A senior Tory MP warned earlier that the proposed shake-up would be "virtually unenforceable".

Ian Liddell-Grainger, chairman of the all-party parliamentary group on taxation, said the move would be impractical until HMRC was able to process real-time information.

But Prime Minister David Cameron said he did not foresee any problem with compliance.

"What we said at the time was that it would be a very simple approach which is to say that if there's a higher-rate taxpayer in the family you don't get child benefit," he said when quizzed over the fines policy at a post-EU summit press conference in Brussels.

"Now I don't start from the proposition that we are all appalling cheats and liars and tax evaders and the rest of it and I am quite sure this change will secure the very generous revenues that the Office of Budget Responsibility have pencilled in.

"So I do not predict a problem."

Shadow chancellor Alan Johnson has written to Mr Osborne calling for an end to the "significant confusion" surrounding who would be hit by the measure.

Would a single mother have to spend a certain number of nights with a new partner before his tax status meant she lost her right to child benefit, Mr Johnson asked.

"Would she have to keep a record of the number of nights she stayed with him?

"Would the answer vary if the nights were spent in her property or his?" he went on.

There were many other potential anomalies, he suggested, asking whether the cut would affect, for example, a mother of two whose older child becomes a higher-rate taxpayer while living at home or a single mother who moves back in with her parents - one of whom earns above the threshold or with a sister whose husband pays higher rate tax.

"I understand that HMT said yesterday that those who did not self-certify themselves as ineligible would be 'fined'.

"Could you confirm that even in cases where an individual is not certain whether they are eligible to continue receiving child benefit or not, and does so to avoid losing out, that person may still be fined?" he said. "We already knew that your plans were unfair. But what has been increasingly clear is that the plans simply haven't been thought through."