HICBC Arrears

Penalties

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I have a client who only recently noticed that he couldn't earn over £50000 and claim Child Benefit.

Has anyone had any recent experience with penalties on this charge ?    What's the likelihood of success ?  His only excuse is that he was unaware of it and was unrepresented at the time, which wouldn't be much of an excuse if it wasn't so widespread.

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Replying to RedFive:
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By lionofludesch
08th Aug 2019 15:40

Thanks - but it's very vague. I was looking for hard experience.

One interesting point is that this guy has been paying too much tax (aside from his HICBC). In round numbers, his HICBC is £4000 but he hasn't bothered claimed higher rate relief on his pension, which comes to £1500 so he only owes £2500.

HMRC bizarrely seem to want to treat the HICBC separately from the pension which, apart from the inconvenience, means they want to charge a penalty on the whole £4000 rather than the £2500 he owes.

It doesn't seem right to me .....

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Replying to lionofludesch:
RedFive
By RedFive
08th Aug 2019 15:58

Sorry just thought it would help as I remembered a song and dance in the media about it last year.

Anyway I disagree with you. His HICBC charge is £4k and therefore penalty based on that.

Just because his threshold is raised due to pension contributions that doesn't effect the £50k withdrawal point for HICBC, it just means he pays less tax.

Of course I am just pontificating here, not relying on hard facts. Maybe someone will be along shortly to correct me or direct you to the legislation.

I don't agree with the HICBC as a concept, however I don't agree with taxpayers ducking their responsibilities as it has been around for long enough now.

Just like being caught doing 80 in a 70, if you get done stop whinging and just pay up.

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Replying to RedFive:
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By lionofludesch
08th Aug 2019 16:12

How has his threshold increased because of pension contributions ?

That's not the situation at all - nor could it ever be.

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RedFive
By RedFive
08th Aug 2019 16:28

I'm confused. Maybe its just that you are speaking Yorshire and I am talking Geordie (or cobblers).

Hasn't his pension conributions raised his basic rate limit (in my speak; threshold) so he therefore pays less higher rate tax?

Isn't that what you mean by "claiming higher rate relief on his pension".

Apologies if I've misunderstood, perhaps time for me to back out of here and stick to helping people with missing MTD obligations.

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Replying to RedFive:
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By lionofludesch
08th Aug 2019 16:34

RedFive wrote:

Hasn't his pension conributions raised his basic rate limit (in my speak; threshold) so he therefore pays less higher rate tax?

Yes, but his adjusted net income is after deducting his pension contributions.

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Replying to RedFive:
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By Cathy Milligan
12th Aug 2019 10:12

Hi Red Five, I have successfully signed up 18 MTD clients but for one of them, although appearing in my ASA as an MTD client, my software (IRIS) and bridging software (VitalTax) both do not show his next "obligation". Any advice?

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Replying to Cathy Milligan:
RedFive
By RedFive
12th Aug 2019 10:31

Hi Cathy,

First try opening a Business Tax Account (BTA) for the client, adding VAT then view obligations. Some are missing altogeher (it states no return due) and a couple I had missed this quarter and showed the next quarter dates incorrectly.

See here https://www.accountingweb.co.uk/any-answers/mtd-client-sign-up

Or download this great bit of software that is free and shows the obligation date. If blank then that is the same as in the BTA where is states 'No return due'.

https://easymtdvat.com/

How to fix?

Once armed with the knowledge that it is either missing or wrong date then ring VAT helpline at 9am sharp (helpline opens at 8am but MTD team don’t start until 9. Any time after that and they are too busy so won’t put you through) and insist on speaking to the MTD team as you have an ‘obligation date error’.

Once through to them they feed it up the line and a week or so later you will have the correct stagger date.

ONLY HMRC can fix it. And only on the helpline which is awful as takes ages to answer then they try and fob you off if you aren't armed with 100% facts as above.

All mine were fixed and I could then file successfuly but I've had a couple since where I have filed and then the next quarter date has gone back to 'no return due' so we are not out of the woods yet and clearly HMRC still have issues with it.

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By Paul D Utherone
09th Aug 2019 08:57

There is a lot of discussion on this on the HMRC Agent Forum.

There was an HMRC review of penalties for the earliest years - here https://www.gov.uk/government/news/review-for-high-income-child-benefit-... - and comment suggests that cancellation of, or at least suspension on fairly easy easy terms is possible. As ever it looks as though response to appeals is inconsistent and may need further chasing to achieve a good result

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Replying to Paul D Utherone:
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By lionofludesch
08th Aug 2019 17:01

Thanks Paul and Justso.

I always intended to appeal - just trying to assess the likelihood of success.

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Replying to lionofludesch:
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By legerman
12th Aug 2019 10:35

lionofludesch wrote:

Thanks Paul and Justso.

I always intended to appeal - just trying to assess the likelihood of success.

Expect a long wait. Currently taking in excess of 3 months for a decision.

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By justsotax
08th Aug 2019 16:56

I would definitely appeal....get the revenue to prove they wrote a warning to the client of the charge (indeed why didn't HMRC issue a Return as presumably they have had this info for some time)....indeed the government have a list of claiments….so THEY have no excuse.

There comes a point when even if you have an idiot taxpayer, the revenue manage to out idiot them (if there is such a saying) and deserve to have it thrown back in their face!

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By Tax Dragon
08th Aug 2019 19:12

What's the 4k v 2.5k point? Is this about potential loss of revenue? "Never mind sir that we're only 2.5k down. We could have lost 4k."

There must be clarity as to whether that's right?

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Replying to Tax Dragon:
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By lionofludesch
08th Aug 2019 22:28

The point ? The penalties are a percentage. A percentage of £4k is 60% more than a percentage of £2½k.

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Replying to lionofludesch:
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By Tax Dragon
08th Aug 2019 23:36

Only one of those can be technically right. The basis for determining penalties is laid down in law, is it not?

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Replying to Tax Dragon:
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By lionofludesch
09th Aug 2019 10:02

Yes - I have it in my mind that Income Tax and HICBC are different taxes, though.

I'll let you know how we get on.

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Replying to lionofludesch:
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By raycad
14th Aug 2019 11:58

I have a client who was referred to me specifically (and only) to deal with HMRC's Debt Management Unit as regards the tax debt thrown up by HICBC having been omitted from the SATRs by the existing accountant. (I'm told that no questions were asked of the client as to whether he even had any children, so no surprise there!)

HMRC attempted to code out the tax debt by issuing a massive K code in MARCH of a particular tax year (and for that tax year). Naturally this didn't work and so the tax debt simply rolled over (and doubled up into the next tax year). That wasn't entirely successful either. Anyway, to cut to the chase, despite multiple years and mounting tax debts, they didn't impose penalties, even though they were entitled to. As other posters have said, Revenue practice on this is inconsistent.

On the question of the imposition of penalties, the answer is this. If the taxpayer is within the SA system TMA requires penalties to be charged on the "tax difference": that is the difference between the tax determined to be due after enquiry and the tax liability shown on the return. This "difference" is after claiming any reliefs or making other tax adjustments which emerge from such an enquiry. So, in the example mentioned, the penalties would be on the net £2,500, not on the £4,000.

If however, the taxpayer is not within SA then the HICBC tax shortfall alone would be the figure on which any penalty would be levied. Fair? Certainly not! But that's income tax for you, isn't it?!

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Replying to raycad:
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By Tax Dragon
13th Aug 2019 14:47

I'm not sure that's right. (I'm not sure it's wrong either, I'm just asking!) I thought penalties were harmonised?

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Replying to lionofludesch:
By SteveHa
12th Aug 2019 16:10

HICBC isn't a tax at all. It's just something else tagged onto HMRC's remit.

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Replying to SteveHa:
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By lionofludesch
12th Aug 2019 16:31

SteLacca wrote:

HICBC isn't a tax at all. It's just something else tagged onto HMRC's remit.

How do you define "tax" ?

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Replying to lionofludesch:
By SteveHa
12th Aug 2019 16:34

Not as repayment of something you weren't entitled to receive.

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Replying to SteveHa:
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By lionofludesch
12th Aug 2019 16:46

What if he didn't receive it ?

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Replying to lionofludesch:
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By Tax Dragon
12th Aug 2019 17:05

HICBC is an income tax charge.

R & C Commrs v Robertson [2019] talks about the potential loss of revenue point that I tried (but obviously failed) to make above.

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By bernike79
12th Aug 2019 10:51

I had similar situation this month. But in this occasion it was one off, because the taxpayer's income year before was below £50K and the following tax year also below £50K threshold.

Admitted oversight on the taxpayer side and the HMRC agent agreed to suspend the penalty provided that he will meet their conditions - e.g. submit on time, declare the child benefit and pay on time in the next 12 months. So it was a good outcome. Worth a try.

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By SimonStone
13th Aug 2019 08:32

How did HMRC become aware of the underpayments? I recently took on a new client in a similar situation, who wanted to rectify matters so we approached HMRC with details of the child benefit to be repaid.

My client was charged interest (which seemed fair enough), but was spared any penalty charges.

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Replying to SimonStone:
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By lionofludesch
13th Aug 2019 14:28

SimonStone wrote:

How did HMRC become aware of the underpayments ?

Dunno. They didn't say.

That in itself may answer the question - HMRC told the client that he owed £4000+. Client was blissfully unaware.

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