Cutting child benefit for middle-class parents breaks European laws and could be challenged in court, ministers have been told.
In the week that 1.2m letters outlining cuts to Child Benefit are sent out, the Institute of Chartered Accountants in England and Wales (ICAEW) has revealed it wrote to ministers earlier in the year warning that European citizens working in Britain will not necessarily have their payments reduced, making the new rules "discriminatory".
The letter described the change in rules as "seriously flawed in principle and in practice" and says it "could be an operational and reputational disaster for the Government and HMRC".
From January next year, Child Benefit will be withdrawn gradually from families where one parent or partner earns more than £50,000 and withdrawn entirely from those where someone earns more than £60,000 a year.
The ICAEW claims that British families who lose out could challenge the Government because they would be at a disadvantage over some EU citizens working in Britain who would continue to receive benefits from their own country – under separate social security systems.
"Two UK-resident high earners working in the same grade of job for the same employer may therefore have different tax liabilities because one is a migrant worker and one is not. This is fundamentally incompatible with the UK's EC Treaty obligations," said the accountancy body.
HM Revenue and Customs has insisted the new rules for British citizens comply with EU laws.
Meanwhile, a think-tank has warned that government reforms intended to encourage job claimants to find work could in fact leave many households worse off.
The Joseph Rowntree Foundation (JRF) questioned whether computer systems at the Department for Work and Pensions would be able to cope with the introduction of the new universal credit, which is due to replace a raft of out-of-work benefits from October 2013.
It warned that the overall effect of Work and Pensions Secretary Iain Duncan Smith's benefit changes would be to add to the complexity of a benefits system which they were supposed to simplify.
The DWP maintained that Universal Credit "will help millions of people by making them better off in work than on benefits".
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