Darren Dunckley v The Commissioners for HMRC
[2023] UKFTT 707 (TC)
Richard Chattaway v The Commissioners for HMRC
5 September 2023
[2023] UKFTT 752 (TC)
First-tier Tribunal
The tax court said the person owed back taxes for a special child benefit tax, but they didn't have to pay the extra penalty because they didn't know about a small part of the rules and the government didn't prove they got a warning letter.
Key Facts
- •Appellant assessed to High Income Child Benefit Charge (HICBC) for tax years 2014/15, 2018/19, and 2019/20, totaling £3,530.
- •Penalties of £527.20 assessed for failure to notify chargeability under section 7 Taxes Management Act 1970 (TMA).
- •Appellant's adjusted net income exceeded £50,000 in the tax years in question due to benefits not recorded on P60s.
- •HMRC sent letter SA 252 in 2013 and a 'nudge' letter in 2019, but the appellant claims not to have received them.
- •HMRC discovered the tax loss on 4 March 2021.
- •Appellant appealed against both the HICBC charge and the penalties.
Legal Principles
HICBC liability criteria: adjusted net income > £50,000, partner's income less than appellant's, entitlement to child benefit.
Section 681B Income Tax (Earnings and Pensions) Act 2003
HMRC's discovery assessment powers under section 29 TMA, amended by section 97 Finance Act 2022 to include HICBC.
Section 29 TMA, Section 97 Finance Act 2022
4-year and 20-year assessment limits under section 34(1) and 36(1A) TMA; 20-year limit doesn't apply with reasonable excuse under section 118(2) TMA.
Sections 34(1), 36(1A), 118(2) TMA
Penalties for failure to notify under Schedule 41 Finance Act 2008; 30% penalty reduced based on prompted disclosure or special circumstances; reasonable excuse defense.
Schedule 41 Finance Act 2008
Reasonable excuse test: objective test considering taxpayer's actions, knowledge, and circumstances; ignorance of the law can be a reasonable excuse.
Christine Perrin v HMRC [2018] UKUT 156; The Clean Car Co Ltd v C&E Commissioners [1991] VATTR 234; William Archer v HMRC [2023] EWCA Civ 626
Outcomes
Appeal against HICBC charge dismissed.
Appellant's adjusted net income exceeded £50,000; assessment was a valid and timely 'protected appeal'.
Appeal against penalties allowed.
Appellant had a reasonable excuse due to ignorance of how benefits affect adjusted net income; insufficient evidence that the 'nudge' letter was received; timely response after discovering liability.