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May 22, 2020

It was an Honest Mistake: High Income Child Benefit Charge

Parents and caregivers can claim for Child Benefit, which is a tax-free payment calculated by reference to the number of eligible children in the household.

Since the introduction of the High Income Child Benefit Charge (HICBC) in 2012, many taxpayers have been caught out by the charge, resulting in the issue of penalties by HMRC. Indeed, the failure to notify HMRC of the liability was so widespread that last year HMRC reviewed the penalties and confirmed that they would be cancelled if they met a number of conditions.

Ramsdale v HMRC (2020)

In the recent case of Ramsdale v HMRC (2020), the First Tier Tribunal considered whether being unaware that your partner was claiming Child Benefit was a reasonable excuse for failing to notify HMRC of a liability. Whilst the judge was sympathetic to Ramsdale's situation, ultimately the appeal was dismissed.

The Facts

  • During the period 2012/13 - 2016/17, Ramsdale was subject to the HICBC. This was because his income exceeded £50,000, he was the higher earner, and his wife was claiming Child Benefit.
  • HMRC made assessments for the underpaid tax and issued penalties for each of the tax years for failing to notify HMRC of the liability.
  • It was not disputed that a liability to HICBC arose, however Ramsdale appealed the penalties on the basis that he had a reasonable excuse.

The Case

Mr Ramsdale's argument was that he had a reasonable excuse for not notifying HMRC of his liability to the HICBC. In particular, it was noted that he was unaware that the HICBC had been introduced. Furthermore, he was not aware that his wife was still receiving Child Benefit as the payments were made into her sole bank account.

The Decision

The test for whether a taxpayer has a reasonable excuse for failing to notify HMRC of a liability is an objective one - were the taxpayer's actions reasonable in light of their experience and other relevant attributes?

It was held that on the facts it was not reasonable for Ramsdale to have been ignorant of the requirement to notify liability to HICBC. This was down to the fact that he probably received a letter from HMRC regarding the charge and there was an extensive publicity campaign when it was introduced.

Furthermore, it was found that it was not reasonable for Ramsdale to believe that his wife had ceased to receive Child Benefit. Viewed objectively, it was thought that a taxpayer would have discussed the matter with their partner. Interestingly, it was noted that if he had asked his wife whether she was claiming Child Benefit and she said no, that would be a different matter.

What Should I Do?

If you are subject to the HICBC but have not reported this in your self-assessment tax returns then a disclosure may be required. Please feel free to contact a member of our team to discuss your situation in more detail.

Related Articles

Ignorance is Bliss? - Child Benefit & Failure to Notify

Benefit of the Doubt – Cancellation of Failure to Notify Penalties for the High Income Child Benefit Charge

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