Douglas Lakeland v The Commissioners for HMRC
[2023] UKFTT 978 (TC)
Toby Hextall v The Commissioners for HMRC
25 April 2023
[2023] UKFTT 390 (TC)
First-tier Tribunal
A new dad didn't know about a tax he owed because the government didn't tell him clearly. The judge said the government should have done a better job, and cancelled part of his tax bill, but not all of it.
Key Facts
- •Mr. Hextall's wife received Child Benefit starting January 2015 after their daughter's birth.
- •Mr. Hextall's income exceeded the £50,000 HICBC threshold in 2015-16, 2016-17, and 2017-18.
- •He did not file self-assessment tax returns and HMRC issued discovery assessments in May 2021 for unpaid HICBC.
- •Mr. Hextall appealed, arguing lack of awareness due to insufficient communication from HMRC.
- •HMRC's 'nudge' letters arrived in late 2019, prompting Mr. Hextall to contact HMRC and cease Child Benefit.
- •The Child Benefit claim form contained information about HICBC but was presented in a way that Mr. and Mrs. Hextall missed.
Legal Principles
Discovery assessments under section 29 TMA 1970 for HICBC were invalid before the Finance Act 2022 amendments because HICBC was not considered 'income'.
HMRC v Wilkes [2022] EWCA Civ 1612
Finance Act 2022 amended section 29(1)(a) TMA 1970, allowing discovery assessments for HICBC with retrospective effect, subject to exceptions.
Finance Act 2022, section 97
Time limits for discovery assessments: 4 years (section 34(1) TMA), extendable to 6 years if careless (section 36(1) TMA) or 20 years for failure to notify (section 36(1A) TMA).
Sections 34, 36 TMA 1970
Reasonable excuse: A genuine and objectively reasonable excuse, considering the taxpayer's attributes and circumstances (Perrin v HMRC [2018] UKUT 156 (TCC)).
Perrin v HMRC [2018] UKUT 156 (TCC)
Reasonable care: Conduct assessed by reference to a prudent and reasonable taxpayer in the same position, considering abilities and circumstances.
HMRC v Hicks [2020] UKUT 12 (TCC)
Outcomes
Appeal allowed for 2015-16 and 2016-17 assessments.
Assessments were made outside the four-year time limit, and Mr. Hextall demonstrated reasonable care and a reasonable excuse due to insufficient HMRC communication and unclear information on the Child Benefit claim form.
Appeal refused for the 2017-18 assessment.
Assessment was within the four-year time limit.