Darren Dunckley v The Commissioners for HMRC
[2023] UKFTT 707 (TC)
Daniel Simmonite v The Commissioners for HMRC
16 August 2023
[2023] UKFTT 721 (TC)
First-tier Tribunal
Mr. Simmonite owed money for a tax related to high income and child benefit. He didn't know he had to tell the tax office specifically, just the benefit office, which wasn't enough. The judge said he didn't have to pay the extra penalty because the tax office hadn't made it clear what he needed to do.
Key Facts
- •Mr. Simmonite's adjusted net income exceeded £50,000 in tax years 2015/16, 2016/17, and 2017/18, triggering High Income Child Benefit Charge (HICBC) liability.
- •Mrs. Simmonite notified HMRC's Child Benefit Office in August 2017 to stop child benefit payments due to Mr. Simmonite's high income.
- •HMRC issued discovery assessments and penalties for non-notification of HICBC liability in April 2021.
- •Mr. Simmonite appealed, arguing notification to the Child Benefit Office was sufficient and he had a reasonable excuse for non-compliance.
- •The appeal was stayed pending the outcome of *HMRC v Wilkes*, which addressed the legality of HICBC discovery assessments under s29 TMA 1970.
Legal Principles
Discovery assessments under s29 TMA 1970 for HICBC were initially deemed invalid in *HMRC v Wilkes*, but were retrospectively validated by s97 FA 2022.
Taxes Management Act 1970 (TMA), Finance Act 2022 (FA 2022), HMRC v Wilkes [2022] EWCA Civ 1612
Notification of HICBC liability must be to the correct HMRC department (not just the Child Benefit Office) under s7 TMA 1970, within 6 months of the tax year end.
Taxes Management Act 1970 (TMA)
Penalties for non-notification are determined by culpability (Schedule 41, Finance Act 2008), with a reasonable excuse defence under paragraph 20, Schedule 41.
Schedule 41, Finance Act 2008
The test for 'reasonable excuse' requires the excuse to be both genuine and objectively reasonable, considering the taxpayer's attributes and circumstances (*Perrin v HMRC*). Ignorance of the law can be a reasonable excuse in certain circumstances.
Perrin v HMRC [2018] UKUT 156 (TCC)
Retrospective application of tax law changes may engage Articles 6 and 7 of the European Convention on Human Rights; however, ordinary tax liabilities are not considered criminal. Penalties linked to pre-existing notification obligations are not retrospective.
European Convention on Human Rights, Articles 6 and 7
Outcomes
Mr. Simmonite is liable for HICBC for the years 2015/16, 2016/17, and 2017/18.
His adjusted net income exceeded the threshold, and the retrospective amendment to s29 TMA 1970 validated the discovery assessments.
Mr. Simmonite is not liable for penalties.
The Tribunal found he had a reasonable excuse due to a lack of clear guidance and communication from HMRC regarding HICBC notification requirements, coupled with his genuine belief that notifying the Child Benefit Office was sufficient.