Today saw the publication of a report on the spending review by MPs on the Treasury Committee.
The committee’s comments on defence contracts have been the focus of what media attention the report has gained, but there a few areas of particular interest to tax advisers hidden away in the report.
The committee (para 95; recommendation 15) points out that a person claiming child benefit for a child under 12 is entitled to NI credits, which count towards their state retirement pension and other contributory benefits at a time when they are not earning and paying NI contributions. Unless special measures are introduced, the Government’s proposal to take child benefit away from families where there is a higher-rate taxpayer will take away from the carer in that household the right to claim NI credits.
The committee makes the important point that, when the Government implements its changes to child benefit, clear information will be essential to ensure that parents are aware that if they simply cease to claim child benefit it could affect their pension entitlement.
The CIOT’s Low Incomes Tax Reform Group goes further, and is calling on the Government to preserve national insurance credits for everyone who would be in receipt of child benefit if it were not for the presence of a higher-rate taxpayer in their household.
Of course, this argument will become academic if the Government go ahead with the proposal to abolish the link between state pensions and NI contributions!
Another observation from the Treasury Committee (para 38; recommendation 7) is that, while short-term e-consultation can be useful, “it cannot be a substitute for longer-term engagement with public sector employees and responsiveness to input from stakeholder groups.” The CIOT agrees. Input from stakeholder groups such as CIOT and LITRG is generally made after extensive deliberation and consultation and always with the public interest in mind.
George Crozier, CIOT External Relations Manager, 26/11/10
(with thanks to Tina Riches, CIOT Technical Director, and Robin Williamson, LITRG Technical Director, for their input)