HMRC Lost Right to Assess High-Income Child Benefit Charges

A legal case where HMRC lost the right to assess high-income child benefit charges could open the floodgates for individuals who have already been assessed and paid the tax, said leading tax and advisory firm Blick Rothenberg.

Stefanie Tremain, a director at the firm, said: ‘HMRC has lost an important tax case at the upper tribunal against a taxpayer who successfully argued that HMRC did not have the right to assess the child benefit charge for previous tax years. HMRC could now see individuals claiming to recover tax that was wrongly assessed – it’s uncertain how successful such claims would be. HMRC are likely to resist them on the basis that the position was accepted and agreed upon, but HMRC is now in a difficult position.’

‘The decision, in this case, confirms that HMRC is not able to use the discovery power to assess the child benefit charge where no tax return has been submitted.  HMRC did have other legislative powers to recover the charge, but their use of the discovery legislation was incorrect.’

Stefanie concluded: ‘HMRC tried to charge Mr Wilkes over £4,000 for child benefit tax for earlier tax years (2014–2015, 2015–2016 and 2016–2017). Mr Wilkes argued that HMRC could not use their powers of ‘discovery’ to assess the earlier tax years as he was not required to file a self-assessment tax return and the child benefit charge is not “income” for these purposes – partly an anomaly in the legislation but HMRC’s own use of the discovery power was deemed too broad.’

‘The outcome of the Wilkes case is an important example where HMRC are not always right in their interpretation of the legislation, and taxpayers should be vigilant when receiving requests for information and tax payments and take advice on whether HMRC does actually have the correct authority.’