A higher rate taxpayer has part won an appeal at the First Tier Tribunal over penalties and payments related to High Income Child Benefit Charge stretching back seven years
The appellant Neil Wills represented himself at the FTT and was disputing a demand from HMRC for £8,675 for High Income Child Benefit Charge (HICBC) non-payment and penalties covering the 2013-14 tax year up until 2019-20.
Wills also disputed HMRC’s accusation of a failure to notify chargeability under section 7 Taxes Management Act 1970 (TMA 1970). The penalties came under Schedule 41 Finance Act 2008.
HMRC sent a demand for £7,319 and penalties amounting to £1,356.20 on 9 February 2021. The penalties were reduced as Wills had claimed the failure to notify was not deliberate and the disclosure was not prompted.
From 2013 to 2019 the penalty charge was calculated at 20%, reduced to 10% for the 2019-20 tax year.
In Wills’ first contact with HMRC via letter he said: ‘I have received a High Income Benefit Charge for which I had no knowledge of. I have always been in the PAYE scheme and had received no information that I had to file a self assessment.
‘I fail to see why it has taken seven years to notify me of my error when this could have been resolved in 2015. I urge you to reconsider.
‘As soon as I have received notification of this I have contacted you immediately without delay by a number of phone calls. I received no paperwork regarding this over the last seven years.’
At this point, HMRC notified Wills of his right to ask for a review of the assessment to which the same outcome was found and the appellant was notified on 7 September 2022.
Wills made six grounds of appeal against the penalties, stating that the first contact he had with HMRC about the penalties was in 2021 and he made contact with HMRC ‘immediately’. Secondly, he was not aware that earnings over £50,000 required a self assessment tax return.
Wills said he had always been taxed via PAYE and that he had been earning this amount for a number of years, saying: ‘Why did they not do this seven years ago, when the amounts owed were much less?’
HMRC’s lawyer, Victoria Halfpenny said that HMRC first sent a letter to Wills in 2013, which he claims to have not received. Wills asked HMRC to prove the letter was sent, adding: ‘This is a huge amount of tax to have to repay in a financial crisis.’
However, the appeal was received late, with Wills blaming a postal strike for receiving the letter on 30 September 2022, the letter was dated 7 September 2022.
Tribunal judge Jeanette Zaman said: ‘I concluded that it was in the interests of justice to admit the appeal.’
Ignorance of the law can ‘comprise a reasonable excuse’, according to Judge Zaman as was the case in Perrin v HMRC. Zaman also accepted that press releases from HMRC during the period of the appellant being penalised could be missed and therefore it was possible to be unaware of the charge.
Judge Zaman found that Wills had a reasonable excuse for not paying the charge for the tax years 2013-14 to 2015-16 as he was not aware of the charge and always paid tax via PAYE.
Zaman said: ‘Having made this finding of fact, I consider that Mr Wills was ignorant of his obligation to notify HMRC of his liability to the HICBC until he received the letter of 9 February 2021 and that this was objectively reasonable in the circumstances.’
However, Wills’ appeal against the four tax years 2016-17 to 2019-20 was refused as the Judge did not accept that he had not received the letters at this time.
Halfpenny said: ‘There is no dispute as to Mr Wills’ address. HMRC’s records show that they were informed of Mr Wills’ address in Stoke Heath in 2002, the file copies of the 2019 letters had this address printed on them, this was the address used for the letter in February 2021 which Mr Wills did receive and is used by him on his notice of appeal.’
Wills’ appeal was successful for the tax years from 2013-14 to 2015-16, but refused for 2016-17 to 2019-20.