A taxpayer has won an appeal against penalties imposed for his failure to notify his liability for the high income child benefit charge (HICBC), on the grounds that ignorance of the law was a reasonable excuse and he was not required to ‘rummage’ through all of HMRC’s information sources
Bachir Belloul failed to notify HMRC of his liability to the HICBC for the three years 2013–14, 2014–15 and 2015–16 as he was required to do by TMA 1970, s. 7. The charge is due if a taxpayer earns more than £50,000 annually.
HMRC wrote to Belloul in October 2017 advising him that he might be liable to the HICBC and that he had not registered for self-assessment for the years in question.
Belloul then contacted HMRC and after some further correspondence HMRC issued tax assessments for the HICBC, amounting to £4,780, and in January 2018 issued failure to notify penalties under FA 2008, Sch. 41, which totalled £829.40.
The First Tier Tribunal (FTT) heard Belloul’s appeal against the penalties. [Bachir Belloul and the Commissioners for Her Majesty’s Revenue and Customs, [2020] UKFTT 312, TC07794].
HMRC submitted that it had sent Belloul a letter (an SA252) in August 2013 telling him about the HICBC and urging him to check if he was liable to it. Notwithstanding that, HMRC’s view was that there was no obligation to notify specific taxpayers of how any changes in legislation might affect them.
In its view, it was for individuals to take steps to understand the law and how it applied to them. HMRC did not consider that ignorance of the law provided a reasonable excuse, based on extracts of case law, including from Perrin v R & C Commrs [2018] BTC 513 and Nicholson v Morris 51 TC 95.
For his part, Belloul said he was unaware of his liability for the HICBC until he received the letter from HMRC in October 2017. He claimed that he had not received the SA252 and said if he had had any correspondence he would have acted promptly as he did when he got the letter in October 2017.
The FTT noted that the legal principles it had to consider with regard to reasonable excuse were those set out in Perrin. The tribunal pointed out that ignorance of the law can, in certain circumstances, comprise a reasonable excuse (this was contrary to HMRC’s submission, where the tax authority had failed to extend their case extract to include mention of this).
The FTT adopted the test in The Clean Car Co Ltd [1991] BVC 568 in determining whether Belloul’s ignorance was objectively reasonable.
The FTT found that one of the most crucial circumstances of this case concerned whether HMRC had given an SA252 to Belloul in August 2013. This was because if he had received the letter it would have been very difficult for him to claim ignorance of his responsibilities with respect to the HICBC. The relevant legislation was in TMA 1970, s. 115 and the Interpretation Act 1978, s. 7.
The FTT noted that based on the cases of Edwards v R & C Commrs [2019] BTC 516 and R & C Commrs v Rogers & Shaw [2020] BTC 533, where a taxpayer disputes receipt of a notice, HMRC needs to show corroborating evidence in addition to a computer printout which itself includes no specific address to discharge their burden of proving that a document was given to a taxpayer.
In this case there was no such collaborating evidence, and in fact as Belloul did not act in 2013, but did respond promptly when he received HMRC’s October 2017 letter, this provided cogent evidence that he did not receive a letter in 2013.
The FTT agreed with HMRC that it had no duty to notify Belloul of his liability to the HICBC and that lack of specific notification could not be a reasonable excuse.
However, the FTT did think that it was objectively reasonable for Belloul to have been ignorant of the requirement to complete a self-assessment tax return in light of his liability to the HICBC. This was largely because he was not within the self-assessment regime up to and including the tax years in question, and during the tax years he was an employee so there was nothing that put him on notice that the HICBC had been introduced.
The FTT also noted that there was nothing which prompted Belloul to access the information about the HICBC on HMRC’s website, and again this was reasonable.
Judge Popplewell said: ‘In my view it is not incumbent on the objectively reasonable taxpayer without notice of a change in tax law to go rummaging through all of HMRC’s information on the off chance that there might be something which is hidden away in it which is relevant to his tax position.
‘Is it a reasonable for this taxpayer not to have so rummaged? In my view yes.
‘I can see no reason why he was not entitled to assume that the child benefit regime would not continue unaffected given that he was outside the self-assessment regime, was being paid as an employee, and there was nothing to put him specifically on notice of the changes other than HMRC’s information (press releases etc) together with information on their website of which I have found as a fact that this appellant was not aware.
‘HMRC have not indicated the publications in which those press releases featured, and that they had “trickled down” so that it would have been impossible for any individual in this country not to have seen them.’
HMRC cited Nicholson v Morris 51 TC 95 as authority that ignorance of the law could not be a reasonable excuse. Judge Popplewell took considerable issue with HMRC’s contention that either the case or the extract quoted showed what the tax authority claimed it showed, on the grounds that a clause had been omitted.
The judge was also critical of HMRC’s approach to informing taxpayers about the changes to the child benefit regime.
Judge Popplewell said: ‘It seems to me that in any case, in the case of HICBC, HMRC have, to a limited extent, dug into their vaults even though they claim to be under no obligation on the basis of this extract to do so.
‘They had sent to approximately 800,000 higher rate taxpayers notification that they thought might be affected by the changes to the child benefit regime and followed this up by issuing to a proportion of those an SA252.
‘But I ask myself whether HMRC might not have done better to have informed the Child Benefit Agency of the changes (there is no evidence before me whether they did or did not) and then left it to that agency to notify every single claimant of the law changes.
‘I strongly suspect that that agency did have the names and addresses of everyone who was claiming child benefit, even though HMRC does not. This would have been a proportionate means of promulgating the information about the change of law to the cohort of people who were affected by it.
‘I also think it is unattractive for HMRC to argue that, on the one hand, it has no obligation to dig through its vaults, yet it expects a taxpayer to do so.’
The FTT concluded that Belloul had a reasonable excuse for failing to notify HMRC of his liability to pay the HICBC for the tax years in question, and so allowed the appeal.
Meg Wilson, Croner-i tax writer, said: ‘This decision is very similar to that of Jacques [2020] TC 07793, which was another case heard by Judge Popplewell.
‘Both cases refer to the Upper Tribunal’s decision of Perrin v R & C Commrs [2018] BTC 513, and the principle in para. [82] that in certain circumstances ignorance of the law can be a reasonable excuse.’
