Parents are being warned they could fall into the high income child benefit trap if they claim workplace benefits – such as medical insurance or use a company car.
That’s what happened to Denise Galbraith, 46, who was left suffering from anxiety after a demand dropped through her letterbox in March, stating she owed £5,576 in benefit overpayments.
HMRC told the mum-of-two that because she earned over the £50,000 threshold between 2012 and 2018, she had to repay some of her child benefit back. This is known as the High Income Child Benefit Charge (HICBC).
It also told her she had to pay a penalty fee of 30% on top of her debt because she did not submit a self-assessment at the time.
However, Denise’s earnings never exceeded £42,000, so it made no sense that she had to pay the HIBIC charge or penalty.
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At the height of her career, she earned £44,000 before being made redundant.
Denise got in touch with The Mirror this month after the letter from HMRC landed on her doorstep demanding almost £6,000.
She explained her circumstances to HMRC, adding that she was the sole earner at the time and that her earnings on the statements were incorrect.
She was told it was due to her claiming benefits in kind for her company car and medical insurance.
The tax authority refused to investigate any inconsistencies in her earnings – insisting that she had to pay the tax bill.
An advisor told Denise that the benefits took her income to over £50,000. In some letters, seen by The Mirror, the tax-break added up to £10,000 to her income - but this is not money she ever received.
She wrote to HMRC again, explaining that the figures did not add up – only to be told the letter had gone missing.
She said: “They told me that all benefits in kind are added to your income. This doesn’t show up on your statement though – so how was I to know my income had exceeded the £50,000 barrier?
“They basically told me I owed £6,000 in tax because of my car allowance 12 years ago.”
Denise, who was working for Halifax bank at the time, said she had a company car from her employer.
Now, a full time student hoping to join the NHS, she has been told to cough up thousands for a loophole that could be catching many other working parents out.
The mum of two from Worcester said: “People don’t know they are adding benefits in kind to wages to work out the HIBIC.
“I suffer with anxiety and depression and have become really unwell. I’m now on the verge of failing my course from all the stress this has caused.
“I have been trying to explain this since March, endless phone calls, I even wrote into them many times.
“I don’t have that paperwork and my payslips from 2012, I didn’t know what to do.”
When The Mirror got in touch with HMRC, it agreed to finally investigate Denise’s case.
On Tuesday, she received a call stating they are “waiving the fees and will send it in writing”.
A HMRC spokeswoman told us it has agreed to waive the fees.
A statement said: “Once we received evidence in support of her claim that she did not have a HICBC liability, we swiftly reviewed it and phoned the customer fewer than two working days later to confirm that she is not liable to the charge.
“We are glad to have been able to resolve her case, in line with our aim of getting tax right for everyone.”
The tax authority added that anyone concerned about paying the High Income Child Benefit Charge should get in touch directly.
In cases where the charge cannot be waived, it can set up a Time to Pay scheme based on the earner’s income.
Customers who disagree with their High Income Child Benefit Charge or the penalty for Failure to Notify can also ask for it to be reviewed or make an appeal to an independent tribunal, or take both actions.
The tax body continues to write to tens of thousands of parents who it believes failed to submit a self-assessment in 2013 when the law changed and HICBC was introduced.
