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ESC A19 and HICBC

Any point in appealing HICBC for the last 4 years?

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Has anyone had any luck using ESC A19 to appeal a HICBC assessment for a client who has always been within PAYE and thought her tax was all in order?

She was a basic rate tax payer when the charge first came in so didn't receive anything from HMRC about its introduction and was under the limit for a few years afterwards. 2015/16 was the first year she tipped over and has now received a HICBC assessment for that year and now also every year since.

I am going to be appealing a separate tax assessment for the same client using ESC A19 for an earlier year anyway and wondered if it was worth tackling the HICBC at the same time (which she dealt with on her own and had paid already before I was appointed).

Also, I've only ever written in before but I see HMRC website says you can appeal by phone or post. Has anyone ever got it dealt with in a phone call?

Thanks

Replies (36)

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By Matrix
23rd Nov 2020 18:52

I would advise the client to pay the tax plus interest as soon as possible.

You can only appeal the penalties, do a search for similar cases.

Is appealing by phone a new thing, I doubt you would get through to a decision maker. You really need a well written appeal with solid grounds so don’t think it would transfer to a call.

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Replying to Matrix:
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By tltodman
23rd Nov 2020 20:27

Thanks. She had already paid the assessment for the 4 years & interest/penalties shortly before she got herself an accountant so I'm just looking at what the options are. No harm in trying to appeal the penalties. Nothing ventured.

As to the phone appeal I didn't know you could either until I looked online today at this page https://www.gov.uk/hmrc-did-not-act

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Replying to Matrix:
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By tltodman
23rd Nov 2020 20:27

Thanks. She had already paid the assessment for the 4 years & interest/penalties shortly before she got herself an accountant so I'm just looking at what the options are. No harm in trying to appeal the penalties. Nothing ventured.

As to the phone appeal I didn't know you could either until I looked online today at this page https://www.gov.uk/hmrc-did-not-act

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By Refs1
23rd Nov 2020 18:54

We have had a play with a couple of these. Somewhere there is a flowchart on HMRC system, we managed to get some penalties cancelled although the tax remained. Always worth a challenge, if you don’t ask you won’t get. I think ESC A19 fails even though I don’t think it is fair. I suggest you raise a complaint with HMRC and see what happens.

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By Not Anonymous
23rd Nov 2020 20:18

Do you genuinely think your client passes the reasonable belief element of ESC A19?

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Replying to frankfx:
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By Refs1
23rd Nov 2020 23:18

Useful Rossmartin always worth a read, TBH was drafting an appeal on something else this evening before left the office and this link will help with that as like some of the wording. Thanks

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By Justin Bryant
24th Nov 2020 12:33

Interesting that no-one is suggesting s118(2) RE FTN defence after the recent >140 comment thread on all that.
https://www.accountingweb.co.uk/any-answers/very-interesting-hicb-taxpay...

There is the other potential defence mentioned in the above link (that has not fared too well in the Tribunal recently, but RT still has high hopes for it I believe).

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Replying to Justin Bryant:
Psycho
By Wilson Philips
25th Nov 2020 16:22

D'uh. s118(2) hasn't been suggested because FTN is not in point in this case (assuming that HMRC could successfully argue carelessness).

EDIT - yes it is, as regards penalties :¬)

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Replying to Wilson Philips:
By SteveHa
25th Nov 2020 15:51

Based on the OP I would argue that FTN is very much in point. TMA S7 makes it clear that liability to HICBC is explicitly a notifiable subject, and the OP explicitly suggests that no such notification was made.

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Replying to SteveHa:
Psycho
By Wilson Philips
25th Nov 2020 16:21

It may be a notifiable subject but regardless of whether the taxpayer has notified HMRC have the right to assess within the normal time limits and s118(2) is of no help here (it might have been had we been talking about penalties, but the OP makes no mention of penalties). Had we been talking about an extended time limit due to FTN then yes s118(2) would be in point. But we are not. So it isn't.

EDIT - I see that the OP has in fact mentioned penalties in subsequent posts, but nothing in the question. So s118(2) might well be in point re those (but not the tax).

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Replying to Wilson Philips:
By SteveHa
25th Nov 2020 19:15

I don't disagree that S118 is of no help, and have said as much elsewhere. I was simply highlighting that there is (or probably is) a S7 FTN here, too.

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Replying to SteveHa:
Psycho
By Wilson Philips
25th Nov 2020 20:37

I think we agree. Although, I would say that s118(2) might in fact be of help as regards the penalties. But not, as others have said, the tax.

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Replying to Wilson Philips:
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By unearned luck
26th Nov 2020 00:31

It's not quite true that s118(2) is of no help here. The first year of liability is 2015/16; HMRC will need an ETL DA if it is/was issued after 5/4/20. No help for later years though.

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Replying to Wilson Philips:
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By unearned luck
26th Nov 2020 00:31

It's not quite true that s118(2) is of no help here. The first year of liability is 2015/16; HMRC will need an ETL DA if it is/was issued after 5/4/20. No help for later years though.

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Replying to unearned luck:
Psycho
By Wilson Philips
26th Nov 2020 13:04

Hmmm ... true that an ETL DA would be required. But 2015/16 would be within the 6-year careless behaviour time limit. So I can't see that s118(2) would be a defence. (Unless you were trying to argue that the liability arose as a failure to take reasonable care, thus invoking s118(2) to ignore that failure. However, I think it would be difficult to come up with a RE as to why you had failed to take reasonable care.)

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Replying to Wilson Philips:
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By unearned luck
27th Nov 2020 00:56

Restating your post, you are saying that that in certain circumstances a taxpayer must:

a) have an RE
b) Put the default right within a reasonable time of the RE ending, and
c) not to have been careless
To defeat a tax or penalty assessment.

A very Justinian view of the law!

Clearly making an error despite taking reasonable care and having a reasonable excuse for failing to do something have similarities, but they apply in different circumstances. Carelessness involves a sin of commission; you cannot carelessly do nothing. A failure to notify is a sin of omission. It is not susceptible to carelessness. Can you think of a situation where a taxpayer has a winning RE for not giving notice and has yet been careless?

FWIW HMRC take the view that an RE prevents an assessment in years 5 and 6 being valid. See item 3f CH56100.

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Replying to Wilson Philips:
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By unearned luck
27th Nov 2020 00:56

Restating your post, you are saying that that in certain circumstances a taxpayer must:

a) have an RE
b) Put the default right within a reasonable time of the RE ending, and
c) not to have been careless
To defeat a tax or penalty assessment.

A very Justinian view of the law!

Clearly making an error despite taking reasonable care and having a reasonable excuse for failing to do something have similarities, but they apply in different circumstances. Carelessness involves a sin of commission; you cannot carelessly do nothing. A failure to notify is a sin of omission. It is not susceptible to carelessness. Can you think of a situation where a taxpayer has a winning RE for not giving notice and has yet been careless?

FWIW HMRC take the view that an RE prevents an assessment in years 5 and 6 being valid. See item 3f CH56100.

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By SteveHa
24th Nov 2020 09:26

Legislation brings HICBC within scope of S7 TMA 1970, and so I wouldn;t bank on being able to use anything.

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Replying to SteveHa:
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By Justin Bryant
24th Nov 2020 09:30

Ah, somone else who agrees with me!

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Replying to Justin Bryant:
By SteveHa
24th Nov 2020 12:19

Well, I was referring specifically to TMA 1970 S7(3)(c), or more to the point, the failure to meet that test for exemption.

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Replying to SteveHa:
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By Justin Bryant
24th Nov 2020 12:36

Well, I at least agree with you on that re FTN (others here think different vis a vis RE & s118(2) defence).

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Replying to Justin Bryant:
By SteveHa
24th Nov 2020 14:50

Well, yes, but since S7 includes an absolute time limit, I don't see 118(2) being in point except in the case of reasonable excuse, and even then that would only mitigate penalties. The HICBC will remain payable whatever.

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Replying to SteveHa:
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By Justin Bryant
24th Nov 2020 15:47

Again, agreed (but we seem to be in the minority here on that!)

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Replying to Justin Bryant:
By SteveHa
25th Nov 2020 10:06

I find it oddly comforting that I'm fighting in your corner for a change.

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Replying to SteveHa:
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By Justin Bryant
25th Nov 2020 10:34

Well, I don't blame you. To my knowledge I've never been proved wrong here on anything (and I'm happy to be proved wrong on that!). (Except when I've misread a question or whatever of course.)

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Replying to Justin Bryant:
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By Tax Dragon
25th Nov 2020 10:43

Justin Bryant wrote:

...I've never been proved wrong here on anything...

Being wrong isn't a crime, Justin. I think if you took a more balanced - even a 'balance of probabilities' - view, you might recognise that you are not always 100% correct.

However, I for one do take what you say seriously. You know a lot that I do not, so I would be a fool not to.

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Replying to Justin Bryant:
Psycho
By Wilson Philips
25th Nov 2020 20:41

Justin Bryant wrote:
To my knowledge I've never been proved wrong here on anything

Well, you’ll deny it of course but it’s been proved (by you) that you don’t know the difference between novation and assignment, as a result of which your comments were wrong.
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Replying to SteveHa:
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By unearned luck
25th Nov 2020 02:43

Justin is being mischievous and is using references to s 118(2) out of context.

Any assessment by HMRC must ordinarily be issued within 4 years of the end of the YoA. If there has been a failure to give notice under s 7 then the time limit is extended to 20 years. However, s 118(2) deems there not to have been a failure to notify if the taxpayer had, broadly, an RE for not giving notice and thus the time limit is not extended.

In the OPs case this might apply to 2015/16 only if any DA was issued after 5/4/20.

REs are, of course, also defences to FTN penalties. Two types of RE have found favour so far with some FTT judges. Ignorance of the facts "my wife didn't tell me that she had claimed CB" and ignorance of the law "my wife didn't pass on to me the info about HICBC in the CB bumf she had received and I had no other way of knowing about such a convoluted and counter-intuitive tax charge" - see para 82 of Perrin for the latter half of that defence.

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Replying to unearned luck:
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By unearned luck
25th Nov 2020 03:12

I agree with Justin about there being a second defence mentioned in the very long thread, namely that HIBCA isn't income and does not fit s 29(1)(a), but some FTT judges have taken a very strained contrary view.

It seems that in the OP's case the recipient of the CB is the same person that is liable to the HIBCA, if so this is the only defence going.

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Replying to unearned luck:
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By Justin Bryant
25th Nov 2020 09:33

Re your 1st comment above, not quite and no mischief intended I can assure you. If you read it in full you will see that there is a rather crucial further RE requirement/condition in s118(2) that basically makes it not work in practice* as a FTN DA defence (although many here disagree with that view for one reason or another as we know).

*If it was that easy everyone would be doing it as they say.

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Replying to Justin Bryant:
Psycho
By Wilson Philips
25th Nov 2020 15:26

I assume that the rather crucial requirement that you refer to is the need to remedy the failure without unreasonable day. As pointed out several times, such remedy does not necessarily involve a payment of tax.

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Replying to Justin Bryant:
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By unearned luck
26th Nov 2020 01:20

Where the law permits an RE defence it universally comes with the requirement that the default is put right within a reasonable time of the excuse ending. It is not as difficult as you suggest for this requirement to be met otherwise successful late filing penalty appeals, for example, would be as rare as hen's teeth. But they are not - see here:

https://www.accountingweb.co.uk/tax/hmrc-policy/hmrc-cancels-270000-late...

"The FOI [response] revealed that due to taxpayers having a reasonable excuse HMRC withdrew 270,000 penalties in 2016, 610,000 in 2015 and 400,000 in 2014."

If your assertion is limited to HICBA FTN cases then in the Very Long Thread at least three cases were mentioned where FTN penalty appeals succeeded. I think that two of these cases were first mentioned by you.

If your thesis is that the requirement to correct the failure within a reasonable time of the excuse ending in s 118(2) is different from (what I consider to be) the same requirement in para 20(2)(c) sch 41 FA08 then I look forward to reading why you think that.

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By Refs1
25th Nov 2020 20:08

I think people raise good points technically over this. The sad fact is morally this is unfair as HMRC have badly managed these cases and indeed similar Paye cases, for example on Car benefit. Taxpayers under Paye are just ordinary people raising families, yet HMRC continue to raise assessments and tax calculations for often many thousands and blow the family budgets out the window causing undue stress, when they knowingly have the information in there poorly run systems.

Why does it always happen just before christmas? As accountants we have a moral duty to challenge these situations.

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Replying to Refs1:
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By Tax Dragon
26th Nov 2020 07:33

People are making technical points because they are all that matter. Reliance on what you find moral (and, presumably, by extension, what you find immoral) opens the door to chaos.

You find it immoral that HMRC can collect back tax. Refs2 might find it equally immoral that people could be unjustly enriched by not having paid what they were due to pay.

The law may be seen as the arbiter to these competing moral views. What the law says (as explained more technically precisely by other respondents here) is that they should pay the tax limited in innocent cases to four years.

Both Refs might consider it unfair for such people to be penalised for ignorance. The law agrees. It provides a defence against penalties. Again, other respondents have discussed this. At length.

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Replying to Tax Dragon:
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By Tax Dragon
26th Nov 2020 08:01

Worth adding that there's a concession from the law that might address some of your moral outrage. That concession was the subject of the OP. Discussion about the concession has been somewhat hijacked by and become lost in the technical discussion on other matters. Which is a shame.

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By tltodman
25th Nov 2020 21:04

Thanks enormously for all for your valuable comments and contributions. Have been reading with interest and will now be better informed to get my ducks in a row

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