Douglas Lakeland v The Commissioners for HMRC
[2023] UKFTT 978 (TC)
Neil Wills v The Commissioners for HMRC
20 December 2023
[2024] UKFTT 12 (TC)
First-tier Tribunal
Mr. Wills was hit with a big tax bill for not paying the High Income Child Benefit Charge (HICBC) for several years. He said he didn't know he had to pay. The court agreed he didn't get the notices HMRC said they sent, so they cancelled part of his tax bill and all the penalties.
Key Facts
- •Mr. Wills was assessed HICBC for 2013/14 to 2019/20, with penalties for failing to notify chargeability.
- •He argued he didn't know about the HICBC until February 2021 and that HMRC's contact was delayed.
- •HMRC claimed to have sent letters in 2013 and 2019, but Mr. Wills denied receiving them.
- •The Tribunal allowed the late appeal due to postal strike issues.
- •The assessments totalled £7,319 and penalties £1,356.20.
- •The case hinges on whether HMRC's discovery assessments were valid and timely, and whether Mr. Wills had a reasonable excuse for not notifying.
Legal Principles
HICBC liability is determined by s681B Income Tax (Earnings and Pensions) Act 2003.
Income Tax (Earnings and Pensions) Act 2003
Discovery assessments under s29 TMA 1970 are governed by amendments in s97 Finance Act 2022, addressing the Wilkes case.
Taxes Management Act 1970; Finance Act 2022
Time limits for discovery assessments are four years (s34 TMA 1970) extendable to six years (careless loss) or 20 years (failure to notify under s7 TMA 1970).
Taxes Management Act 1970
Penalties under Schedule 41 Finance Act 2008 are subject to reductions based on behavior and disclosure.
Schedule 41 Finance Act 2008
A reasonable excuse for failing to notify under s7 TMA 1970 negates the 20-year time limit (s118(2) TMA 1970).
Taxes Management Act 1970
The reasonable excuse test is objective (Clean Car Co; Perrin; Archer). Ignorance of the law can be a reasonable excuse depending on the circumstances.
The Clean Car Co Ltd v C&E Commissioners; Perrin v HMRC; Archer v HMRC
Outcomes
Appeal against assessments for 2016/17-2019/20 refused.
Assessments were issued within the four-year time limit.
Appeal against assessments for 2013/14-2015/16 allowed.
Assessments were issued out of time; Mr. Wills had a reasonable excuse for not notifying due to lack of awareness despite HMRC's claims of sending notices. The Tribunal did not believe Mr. Wills received the notices.
Appeal against penalties for all years allowed.
Mr. Wills had a reasonable excuse for not notifying.