Qasim Latif v The Commissioners for HMRC
[2024] UKFTT 277 (TC)
Paul Baron v The Commissioners for HMRC
26 January 2024
[2024] UKFTT 102 (TC)
First-tier Tribunal
A man didn't know about a tax he owed until HMRC contacted him. The court said he didn't have to pay the tax for the first two years because he had a good reason for not knowing. However, he had to pay for the other years because he should have acted sooner after finding out.
Key Facts
- •Mr. Baron appealed discovery assessments for HICBC (Higher Income Child Benefit Charge) and penalties for failure to notify for tax years 2015/16 to 2019/20.
- •Mr. Baron was unaware of HICBC until January 2021.
- •HMRC issued discovery assessments on June 23, 2021.
- •The assessments included HICBC charges of £3,258.00 and penalties of £517.50.
- •Mr. Baron argued that he had a reasonable excuse for not notifying due to his lack of awareness of HICBC and his specific circumstances (military service, no financial responsibility for the children).
Legal Principles
Discovery assessments under Section 29 TMA 1970 are subject to time limits in sections 34 and 36.
Taxes Management Act 1970
A reasonable excuse for not notifying tax liability prevents penalties under Section 118(2) TMA 1970.
Taxes Management Act 1970
Carelessness in bringing about a loss of tax is defined in Section 118(5) TMA 1970.
Taxes Management Act 1970
Penalties for failure to notify are determined under Schedule 41 to Finance Act 2008.
Finance Act 2008
The 'reasonable excuse' test involves a three-step objective assessment of the taxpayer's actions/beliefs in their circumstances (Perrin), also relevant for assessing reasonable care (Hicks).
HMRC v Hicks [2020] UKUT 12 (TCC); Christine Perrin v HMRC [2018] UKUT 0156
Outcomes
Appeal allowed for discovery assessments for 2015/16 and 2016/17.
Mr. Baron took reasonable care due to his objectively reasonable ignorance of HICBC in those years, and the assessments were out of time.
Appeal dismissed for discovery assessments for 2017/18-2019/20 and failure to notify penalties for all years.
Assessments for 2017/18-2019/20 were within the standard time limit. While Mr. Baron had a reasonable excuse initially, he failed to remedy the situation without unreasonable delay after receiving the January 2021 letter.