David Thompson Loses Tribunal Case Over High Income Child Benefit Charge due to Company Car
The First-Tier Tribunal (Tax Chamber) dismissed the appeal of David Thompson, a taxpayer who faced a £5,202 charge and £902.80 in penalties for failing to notify HMRC of his liability under the High Income Child Benefit Charge (HICBC). This decision, handed down by Tribunal Judge Nigel Popplewell on May 9, 2024, highlights the stringent enforcement of tax liabilities related to child benefit claims for higher-income earners.
The Case
The case revolved around Thompson's failure to declare his liability for HICBC for the tax years 2016/2017 to 2019/2020. The HICBC applies to individuals whose adjusted net income exceeds £50,000 (now £60,000) and who receive or whose partner receives child benefit. Despite earning above this threshold due to his salary and taxable company car benefits, Thompson failed to notify HMRC, resulting in a "discovery assessment" from HMRC, which led to the charges and penalties.
Key Arguments and Ruling
Thompson, who represented himself, argued that he was unaware of his liability as his earnings from salary alone were below the £50,000 threshold. He contended that HMRC failed to adequately notify him of the potential tax liability, arguing that he had only realized the issue after discussing it with colleagues and taking action to opt out of child benefit in January 2020. However, the tribunal found that Thompson had been sent multiple notifications by HMRC, including a "nudge" letter and a final reminder, which were not returned undelivered.
The tribunal, referencing the legal principles set out in previous cases, including HMRC v Tooth [2021] UKSC 17 and Christine Perrin v HMRC [2018] UKUT 156, ruled that Thompson's ignorance of the law was not a reasonable excuse. The judge found that Thompson had ample opportunity to rectify his tax situation but failed to do so in a timely manner.
Impact and Implications
The tribunal's decision underscores the importance of taxpayers understanding their obligations under the HICBC. The ruling makes it clear that reliance on ignorance of the law is insufficient, especially when HMRC has provided direct communications outlining potential liabilities.
For taxpayers, this case serves as a cautionary tale: the burden of compliance falls squarely on the individual, and failure to act on notifications from HMRC can result in significant financial penalties.
David Thompson now faces a total bill exceeding £6,000, a stark reminder of the financial consequences of failing to properly manage tax obligations.
Right to Appeal
Thompson has the right to apply for permission to appeal the tribunal's decision within 56 days of the ruling. However, given the tribunal's detailed consideration and dismissal of his arguments, any further legal challenge may prove difficult.
This ruling may encourage HMRC to continue rigorous enforcement of the HICBC, potentially leading to more taxpayers being caught out if they fail to understand the full scope of their tax liabilities.
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