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UK Government told child benefit cuts may be discriminatory

The Telegraph reports that the Institute of Chartered Accounts for England and Wales has informed the Government that cutting child benefit for higher earners through the tax system could break European law.

From January 7th 2013, parents earning between £50,000 and £60,000 will lose some of their child benefit on a sliding scale; while any household where one person earns more than £60,000 will lose entitlement to child benefit altogether.

This week, 1.2 million letters are due to be sent out to affected families by HM Revenue and Customs, informing them of the changes. Although people earning over £50,000 but below £60,000 will be able to elect to continue receiving the benefit, a calculated amount will be taken back by the Government through a ‘tax charge’ imposed on their earnings.

According to the Telegraph, David Heaton, the chairman of the tax faculty at the Institute, has said that recouping child benefit through the tax system could expose the Coalition Government to a legal challenge.

This is because some EU citizens working in Britain remain part of the social security system in their home country, which means they continue to receive those national family benefits. However, HMRC cannot claw back benefits paid to people in the UK by other EU states through the UK tax system. This could disadvantage British workers in relation to their European colleagues.

Heaton commented: “You could find yourself in a British office, sitting next to a colleague from elsewhere in Europe who is paid the same as you, has the same number of children as you and is receiving benefits for them, but who is not facing the same tax charge from HMRC as you. That is discriminatory.”

Heaton pointed out that it is a basic principle of EU law that there should be no discrimination between migrant workers and those who work in their home country.

According to BBC News, HMRC has replied that the child benefit cuts legislation is “fully compliant with EU law”; although they admit that the child benefit changes only apply to those people working here who are subject to UK tax.

This is not the only controversial aspect of the new legislation. For example, in future a family with one parent earning £50, 000 would lose some of their child benefit; whereas a family where both parents earn £49,000 would keep all their child benefit.

Although the Government is trying to reduce the deficit for the good of the country, it might be politically damaging if the new child benefit system is widely criticised as unfair.

Original story:

The Telegraph

BBC

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