TQOTW: HICBC
My client currently has income over £50k but has been separated from her husband who is currently claiming child benefit. Do we need to put the high income child benefit charge (HICBC) on her tax return? The client never sees the money and does not think it would be fair for her to be subject to a charge.

Where an individual, or their partner, is entitled to child benefit, we need to consider whether there is an income tax charge imposed on the higher earner where one or both partners’ adjusted net income exceeds £50,000.

Adjusted Net Income
Adjusted net income is essentially net income with deductions for gross gift aid donations and gross pension contributions that have had relief at source. Perhaps a less common adjustment, but we also have to add back any relief received for payments to trade unions or police organisations (s58 ITA 2007).
It is assumed that your reference to “income over £50k” means that the client’s adjusted net income is over £50k. If the client’s income needs to be reduced by any gross gift aid donations or pension contributions and this results in her adjusted net income being less than £50k, then we would not need to consider the HICBC.

Condition A or B
In addition to adjusted net income exceeding £50k, s681B ITEPA 2003 sets out conditions A and B of which the client is only required to meet one for the HICBC to apply.
Condition A requires your client to be entitled to an amount of child benefit for a week in the tax year AND for there to be no partner throughout that week that has a higher adjusted net income than your client’s.
Condition B is met if your client has a partner that is entitled to an amount of child benefit for a week in the tax year AND your client’s adjusted net income exceeds her partner’s.
In order to fully assess if either condition is met, we also need to determine the definition of “Partner” and whether the husband from which she has separated would meet this definition.

Meaning of “Partner”
Her husband will be a partner for the purposes of the HICBC if one of two conditions are met under s681G ITEPA 03.
Condition 1 – requires the persons to be married to, or civil partners, of each other and are neither separated under court order or under circumstances where the separation is likely to be permanent
Condition 2 – is that the persons are not married to, or civil partners of, each other but are living together as if they were

If your client and her husband do not fall under either of the above, then the husband would not be a ‘partner’.

Conclusion
If your client is not entitled to the child benefit, then she will not meet condition A above. Even if she does not have a partner, both parts of condition A need to be met because it is an ‘AND’ test.
If your client and her husband are separated and it is likely to be permanent, then the husband does not fall within the definition of “partner”. So long as he was not a partner for any week during the tax year in which the husband was entitled to child benefit, then your client will not meet condition B above.
If neither condition A nor B above are met, your client would not be subject to the HICBC.

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VIP Tax Adviser
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Vivienne is a Chartered Tax Advisor who has gained valuable tax experience from working in specialist tax advisory firms prior to joining the team at Croner-i. She has worked mainly with owner managed businesses and high net worth individuals advising them on their tax affairs. Vivienne is a generalist but particularly enjoys working on tax matters that involve property, such as CGT, PPR and SDLT as well as advising on tax implications for unincorporated businesses.

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