Jonathan Harwood v The Commissioners for HMRC
[2024] UKFTT 46 (TC)
Patrick Ashe v The Commissioners for HMRC
22 June 2023
[2023] UKFTT 538 (TC)
First-tier Tribunal
Mr. Ashe didn't know about a tax he owed until HMRC told him. The judge said it was reasonable he didn't know, and because HMRC waited too long to tell him, he doesn't have to pay the tax for 2015-2017. He also doesn't have to pay the penalties.
Key Facts
- •Patrick Ashe appealed tax and penalty assessments for High Income Child Benefit Charge (HICBC) for tax years 2015/16 to 2018/19.
- •Ashe was unaware of HICBC until January 2021.
- •HMRC assessments were based on discovery assessment powers under s29 TMA.
- •The Wilkes case challenged HMRC's power to use discovery assessments for HICBC.
- •Section 97 Finance Act 2022 amended s29 TMA retrospectively, creating 'protected appeals'.
- •Ashe's appeal was temporarily paused by HMRC due to the Wilkes decision.
- •Ashe argued reasonable excuse for failing to notify HICBC liability.
Legal Principles
HICBC liability under s681B Income Tax (Earnings and Pensions) Act 2003.
Income Tax (Earnings and Pensions) Act 2003, s681B
HMRC's discovery assessment powers under s29 TMA.
Taxes Management Act 1970, s29
Wilkes case: HICBC is a free-standing charge, not assessable under s29 TMA.
[2020] UKUT 0150 (TCC)
Section 97 Finance Act 2022: Amends s29 TMA to allow discovery assessments for HICBC, with retrospective application for 'protected appeals'.
Finance Act 2022, s97
Section 34(1) & 36(1A) TMA: Time limits for raising HICBC discovery assessments (4 years or 20 years with failure to notify).
Taxes Management Act 1970, s34(1), 36(1A)
Schedule 41 Finance Act 2008: Penalties for failure to notify HICBC liability.
Finance Act 2008, Schedule 41
Section 118(2) TMA: 20-year assessment provision doesn't apply with reasonable excuse for failure to notify.
Taxes Management Act 1970, s118(2)
'Reasonable excuse' defence under Schedule 41, paragraph 20, considering Perrin and Archer case law.
[2018] UKUT 156 (Perrin), [2023] EWCA Civ 626 (Archer)
HMRC v Robertson: Valid tax assessment not required for penalty assessment based on 'potentially lost revenue'.
[2019] UKUT 0202 (TCC)
Outcomes
Appeal allowed for tax assessments for 2015/16 and 2016/17.
HMRC was out of time to raise assessments; Ashe had a reasonable excuse for failing to notify due to unawareness of HICBC.
Appeal stayed for tax assessments for 2017/18 and 2018/19.
Validity depends on the outcome of the Wilkes litigation.
Appeal allowed for all penalty assessments.
Ashe had a reasonable excuse for failing to notify; some penalty assessments were also out of time.