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HICBC Arrears


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A new client came to me with a tale of woe last Christmas, having received an assessment for HICBC covering the five years 2012/17.

We've now agreed the HICBC due (in two years he earned between £50k and £60k) but I would appreciate thoughts on the following.

1.  Apart from the HICBC, he has overpaid tax, mainly on his private pension (he didn't realise he could claim higher rate relief <sigh>).  However, interest and penalties have been calculated on the HICBC due, not the actual underpayment of tax).

2.  He's been charged a 20% penalty for not having a reasonable excuse.  I was looking at James Robertson v HMRC 2017[TC6410] which the taxpayer won on the grounds that HMRC could not make a discovery as HICBC is not income and no notice to file was given by HMRC.  Has anyone had any success with this case ?   Apart from James Robertson, obviously.

Is this worth pursuing or would I be wasting my time ?

HICBC repayable is £3991, interest £399, penalties £798 - as charged by HMRC and disputed in part.

Replies (4)

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By SteLacca
26th Sep 2019 09:52

With HICBC assessments by HMRC, the first thing I check is who the HICBC was paid to (the taxpayer or their partner), an if it was the taxpayer's partner, I will address penalties and request suspension with my first reply to HMRC. This has, to date, worked out well.

As for reasonable excuse, there is nothing in law that requires one partner in a relationship to divulge their personal financial arrangements to the other.

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By unearned luck
30th Sep 2019 02:35

You mentioned 'an assessment' [for each year?] but surely there would have been two (1 IT and 1 pen)? I'm being pedantic because the only reason I can think of why the penalty assessments are not being automatically reduced is that there was no appeal against them. If there are appeals against the penalties then they should be reduced in line with the PLR which is the tax that should have been SA'd if things had been done properly. See Robertson in the UT. Have HMRC said why they aren't amending the penalties?

Mr Robertson only appealed his penalties, the FTT's remarks are obiter dicta and HMRC, of course, don't agree with them. You would have to go the FTT. We need a volunteer as a test case. Good luck. I'll help.

As for RE:

Did HICBC apply for the first year?
What did the CB claim form say to client about the HICBC? The current version has a big warning on page 1 for those earning over £50K.
Consider para 82 of Perrin in the UT.
See here:

The flowchart summarises HMRC's view on RE in these cases.

Why did it take HMRC until December 2018 to pick-up the HICBC issue when HMRC promise in the Charter to be helpful and efficient when they had the 2012/13 data in 2013 and the 2013/14 data in 2014 and so on (except for, perhaps, the partner's income). People in your client's position face more fines that otherwise because of HMRC's tardiness in making use of the data they hold. Complain. It won't get you anywhere but will make me feel better.

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By lionofludesch
12th Oct 2019 17:55

Just an update .....

We got a partial victory, sort of ......

The client owed, in round numbers, £4000 in HICBC, with about £400 interest and £800 penalty at 20% - £5200 in total.

However, he had overpaid in terms of unclaimed pension premiums and expenses in employment to the extent of £2000.

HMRC wanted him to pay the £5200 and then claim the £2000 from the PAYE department, which they would repay in several months time when he reached the top of the queue.

We managed to persuade them to net the two off and only charge interest and penalties on the difference.

Good result, as one year was technically out of time and he's saved £600 in interest and penalties. Happy with that.

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Replying to lionofludesch:
By unearned luck
12th Oct 2019 19:14

Well done.

I agree that getting HMRC to follow their own manual at times can be difficult. HMRC have even been known to resile from what their manuals say before the Tribunals.

From EM3901 (calculation of lost duty):

"The allowances, deductions and basis periods should be those which would have applied if
•assessments in the correct figures had been made at the proper time
•the taxpayer had made full and timely returns
•the taxpayer had claimed all the reliefs to which he was entitled."

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