Jonathan Harwood v The Commissioners for HMRC
[2024] UKFTT 46 (TC)
Sarah Manzi v The Commissioners for HMRC
24 June 2024
[2024] UKFTT 563 (TC)
First-tier Tribunal
A woman didn't know about a tax on child benefit for high earners. She got a confusing letter and a bad phone call from the tax office, leading to late tax. The judge said she had a good excuse for the lateness of her tax for the earlier years, so she didn't have to pay those taxes or penalties, but still has to pay for the later years.
Key Facts
- •Mrs. Manzi was assessed HICBC for tax years 2014/15 to 2019/20.
- •Assessments were made under Section 29 Taxes Management Act 1970 (TMA).
- •Late payment interest and penalties were also assessed.
- •Mrs. Manzi appealed, claiming reasonable excuse for non-notification.
- •The Tribunal considered the validity of the assessments, time limits, and whether a reasonable excuse existed for the penalties.
Legal Principles
Discovery assessments under s.29 TMA require a discovery by a specific HMRC officer (HMRC v Tooth).
HMRC v Tooth [2021] UKSC 17
Section 97 Finance Act 2022 amended s.29 TMA, allowing HICBC to be assessed via discovery assessment. Assessments for years prior to 2021/22 are 'protected' unless specific conditions are met.
s.97 Finance Act 2022
HMRC has a 4-year window for HICBC discovery assessments (s.34 TMA), extendable to 6 years if the taxpayer is careless (s.36(1) TMA) or 20 years if deliberate (s.36(1A) TMA). A reasonable excuse negates the 20-year assessment (s.118(2) TMA).
s.34, s.36, s.118 TMA
No meaningful distinction exists between 'reasonable care' and 'reasonable excuse' (Hextall v HMRC). The test for reasonable excuse is objective, considering the taxpayer's attributes and circumstances (Rowland v HMRC, Perrin v HMRC, Clean Car Company v C&E Commissioners).
Hextall v HMRC [2023] UKFTT 390, Rowland v HMRC (2006) STC (SCD), Perrin v HMRC [2018] UKUT 156, The Clean Car Company v C&E Commissioners [1991] VATTR 234
For penalties under Schedule 41 FA08, a reasonable excuse negates liability. Three situations are explicitly excluded as reasonable excuses (Paragraph 20(2)(a-c), Sch 41 FA08).
Paragraph 20, Schedule 41 FA08
There's no legal right of appeal against interest (HMRC v Gretton).
HMRC v Neil and Megan Gretton [2012] UKUT 261 (TCC)
Outcomes
Appeal allowed in part.
Assessments for 2014/15-2017/18 were out of time due to Mrs. Manzi's reasonable excuse (ignorance of the law, exacerbated by HMRC advice), while those for 2018/19 and 2019/20 were valid and in time.
Penalties discharged.
Mrs. Manzi had a reasonable excuse for failing to notify due to ignorance and misleading HMRC advice.
Interest remains payable on assessments for 2018/19 and 2019/20.
There is no legal right of appeal against interest; however, interest on the time-barred assessments is discharged.