The cut in child benefit for middle-class parents should be delayed for three months to give the Government time to address the "complex" issues involved and to raise public awareness about the controversial policy, the accountancy profession has warned George Osborne.
The benefit cut, which will be introduced in just over eight weeks’ time, is mired in confusion because of the complicated way it will be enforced.
In a written submission to the Chancellor ahead of next month’s Autumn Statement, the Institute of Chartered Accountants of England and Wales (ICAEW) has urged him to delay the cut from January to April in order to give families more time to prepare.
Under current plans, any household where one person earns more than £60,000 will lose entitlement to full child benefit from January 7. Households with one person earning between £50,000 and £60,000 will lose some of the benefit depending on how much that person earns.
However rather than simply pay people in this earnings bracket less, the Government will pay the full amount and then “claw” the money back via people’s tax returns. HM Revenue & Customs only started to write to people it thinks will be affected last week.
The ICAEW criticized the system as “burdensome”.
It said that a three-month delay will allow HMRC to address the “practical problems” of having “nearly half a million” extra self-assessment tax returns to process.
In the submission seen by The Daily Telegraph , the group’s chief executive Michael Izza said that a postponement until April 6 will “allow HMRC to address practical problems, raise public awareness and coincide the reform with the new tax year”.
He added: “This single policy is symptomatic of a wider problem. HM Treasury is setting policies… which are impossible for HMRC to implement without creating complex, burdensome processes and requirements for taxpayers and businesses.”
Catherine McKinnell, the shadow Treasury minister, said: “The ICAEW are right to raise the alarm bell with George Osborne. His child benefit policy hasn’t been properly thought through and is proving to be a costly administrative nightmare.
“And it is unfair too, with some families on as much as £100,000 keeping every penny of their child benefit but one earner families on £50,000 seeing theirs cut. If Ministers really wanted those on the highest incomes to pay more they should cancel their tax cut for people on over £150,000 rather than targeting families on £50,000.”
A Treasury spokesman said there are no plans to delay the implementation. At present child benefit is worth £20.30 a week for the first child and £13.40 a week for subsequent children.
The Chancellor will make his Autumn Statement on Wednesday December 5.