High Income Child Benefit Charge penalty for failure to notify chargeability
Not strictly an area of law we cover but may be of interest as a tax tribunal case relating to child benefit and tax penalty in connection with high income charge - the penalty was not overturned but reduced due to HMRC failings -judge’s comments include -
‘To my mind these penalties raise the uncomfortable spectacle of one arm of HMRC penalising a taxpayer for not telling them that another arm of HMRC made a payment to him or his partner…
… a taxpayer is potentially penalised for not letting HMRC know that he has chargeable income so that they can send him a tax return in which he can tell them what they already know.’
... another case showing you can succeed in appealing high income child benefit charge on ‘reasonable excuse’ grounds - Turley v Revenue and Customs  UKFTT 123 (TC) (7 April 2021) - First-tier Tribunal accepts claimant’s reasons, including his having claimed child benefit before the charge was introduced, for being unaware of obligations.
Another HICBC case - this time at the UT…
In The Commissioners for HM Revenue and Customs v Jason Wilkes  UKUT 0150 (TCC) the First-tier Tribunal found that, although the appellant was liable to the HICBC for the years in question, he had not been required to file a self-assessment tax return, and therefore the ‘discovery assessments’ made by the HMRC officer -
‘were not validly raised because the officer in question had not discovered any “income which ought to have been assessed to income tax” within section 29(1)(a) Taxes Management Act 1970’
HMRC argued that the word ‘income’ in section 29(1)(a) should be interpreted as meaning including any amount liable to income tax. However, dismissing HMRC’s appeal the Upper Tribunal concluded -
109. In our view, HMRC express the purpose of s 29(1)(a) TMA too broadly. For the reasons we have given above we cannot infer from the wording of the provision a broad intention to cover any shortfall in income tax.
110. Section 29(1)(a) TMA is not inextricably linked to the self-assessment regime. Further, as we have demonstrated there are other powers available to HMRC to ensure that the HICBC is assessed. The fact that in relation to some of those powers, particularly the power to require the filing of a self-assessment return, the relevant time limit may be shorter than that available in respect of a discovery assessment in our view is not sufficient to lead us to conclude that the absence of the power to raise a discovery assessment in certain circumstances makes the situation unworkable or absurd. Consequently, we can find no basis on which we should adopt a strained interpretation of the meaning of s 29(1)(a) TMA, either as contended by HMRC or as we think it would in fact need to be interpreted to apply to the HICBC.
The Guardian reports -
[ Edited: 12 Jul 2021 at 02:41 pm by Daphne ]
It is thought that 160,000 people have paid penalties for nonpayment. HMRC has been backdating claims as far as 2013, with more than £2.5bn raised.
Last week, one of those chased, Jason Wilkes, challenged HMRC’s right to claim the charge for previous years. It has pursued him for £4,000 based on the fact his wife had received child benefit between 2014 and 2017.
Wilkes said he was unaware of the new charge ‒ which HMRC accepted ‒ but also argued its use of the “discovery” powers was unfair in his situation.
A “discovery” is a power held by HMRC that allows it to reopen closed periods and issue bills for previous years where it wants to.
The upper tribunal found that the tax department could not impose the charge based on discovery assessments where the person liable had not filed a self-assessment tax return for the year in question. It followed a decision in favour of Wilkes by the first-tier tribunal.
James Austen, a partner at the law firm Collyer Bristow, which represented Wilkes, says the case has ramifications for thousands of others.
“The terrible design of the HICBC left many of the affected taxpayers – in particular those who paid tax by PAYE – simply unaware of it,” Austen says, adding that HMRC has until the end of July to decide whether or not to appeal. If it does not, Austen would expect HMRC to “do the right thing” and refund those in the same boat as Wilkes.
Article from LITRG on the Wilkes case: