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Repayment of child benefit

Possible defences

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A client received a letter earlier this year due to PAYE income exceeding £100k. Tax return for 17/18 requested and child benefit repayable under Higher Income Charge.

The inevitable has happened as advised and HMRC letter arrived asking about last 5 years.

Client wants to defend/appeal on grounds of not knowing the rules in this area and being a PAYE taxpayer only. Any defence possible?

Income may have been around £60k in the earlier years rising to over £100k currently.

My concern is that HMRC will point to affordability and insist on full repayment.

Any advice, tips and case examples greatly appreciated.

Replies (29)

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By paul.benny
13th Nov 2019 08:58

You client can pay up. Or incur fees trying unsuccessfully to reduce his liability and then pay up.

The change was fairly well publicised at the time; I don't recall whether HMRC issued any general notifications. Ignorance of the law is rarely a defence.

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By SteLacca
13th Nov 2019 09:26

Why do you believe that there may be a defence against the charge itself?

Now if you were asking about a defence against the inevitable penalties, then maybe, depending....

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By Bob Loblaw
13th Nov 2019 09:28

They won't have any recourse to appeal the actual HICBC if that's what you're asking. If they can't afford to pay that element in full, then they'll have to look at a time to pay arrangement.

Was your client aware of the claim from the offset? Where was the Child Benefit paid? A joint account they see every day, or their partner's account that you could argue they have no access to? Outside of an actual reasonable excuse as set out by HMRC, you're probably going to have to hope on a sympathetic/borderline negligent HMRC officer reviewing the case.

As Paul says above, HMRC don't consider ignorance of the law to be an excuse to not follow it. It was a widely publicised campaign and the two FTT cases that used the ignorance excuse that I can think of were both eventually lost by the taxpayer. They both, iirc, used the "don't watch tv, don't read the papers, spend my nights with my head in a bucket of sand and have no idea what's happening in the real world" defense.

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By bernard michael
13th Nov 2019 09:43

Have they submitted SAR's for the years in question ? If so they may have lied in the returns, in which case penalties without excuse

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Replying to bernard michael:
By KPEM online
13th Nov 2019 09:54

Not for these earlier years. No returns were requested each year and are not being requested now. The letter simply asks for boxes to be filled under showing the amount of HICBC liable each year.

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By KPEM online
13th Nov 2019 09:48

Thanks everyone. I am of the opinion that ignorance is no defence and it will not be accepted that HMRC have any responsibility for failures on their part, which is what this clients wants to argue - i.e. they knew my income therefore they should have collected at source.

I was just curious if such a defense has been played out at FTT at all.

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Replying to KPEM online:
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By bernard michael
13th Nov 2019 09:56

KPEM online wrote:

Thanks everyone. I am of the opinion that ignorance is no defence and it will not be accepted that HMRC have any responsibility for failures on their part, which is what this clients wants to argue - i.e. they knew my income therefore they should have collected at source.

I was just curious if such a defense has been played out at FTT at all.


Why not have a go and give us all a good laugh
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Replying to bernard michael:
By KPEM online
13th Nov 2019 10:03

Thanks for the helpful response Bernard. It will be up to the client how they want to approach this, I will advise accordingly on whether or not they would be wasting their time.

By your reply, I believe you concur with my thoughts in that it really is a matter of agreeing a repayment term rather than fight a losing battle.

Bit if it would give you a kick, I am happy to keep you posted and brighten up your day!

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By bernard michael
13th Nov 2019 09:59

Was the client the recipient of the Benefit or the spouse ? If the latter were they aware the Benefit was being received or were they kept in the dark.
You might get an interesting response from HMRC for that excuse

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Replying to bernard michael:
By KPEM online
13th Nov 2019 10:04

What would say would be their response in such circumstances?

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Replying to KPEM online:
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By bernard michael
13th Nov 2019 10:19

It could depend on evidence and might involve the spouse......possible problems there if she has been kept in the dark
One thought to make it worse. No SAR's were requested or submitted doesn't work because they knew or should have know there was tax payable and submitted an SAR without being asked by HMRC

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By lionofludesch
13th Nov 2019 10:32

Firstly, you need to quantify the HICBC. Especially if the taxpayer is on the cusp of £60,000. Make sure all pensions, expenses in employment etc have been properly claimed. This stuff is overlooked surprisingly often by folk who don't do Self Assessment and think their tax code will inevitably be right.

If the taxpayer has been claiming Child Benefit since before 2013, you're probably on a loser. HMRC claim that they had a comprehensive publicity programme which no-one could've avoided noticing. This doesn't explain why they've had to set up a separate unit for the thousands of taxpayers who didn't notice, of course, but they've sticking with the claim anyway. If the taxpayer is a recent claimant, there may be mileage in saying that he overlooked the 2013 campaign as he had no kids at the time.

In any event, folk on this forum have managed to get penalties suspended on the grounds that the taxpayer has taken steps to eliminate the error by electing to fill in a Self Assessment return.

If his pay is over £100k, you shouldn't be paying penalties on any tax due to withdrawal of his personal allowance. That's not culpable.

You should be able to agree some sort of credit terms but there'll be interest, of course, and, given that the income has a steady wage of £100k, you'll be lucky to get it spread over more than a year.

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Replying to Desert Orchid:
RLI
By lionofludesch
13th Nov 2019 10:54

Mmmm - Dessie was a lovely horse.

Anyway - good luck with the Official Error line.

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By Homeworker
13th Nov 2019 10:56

I've just had a former client come back to me on this very subject. He used to be within SA and Child Benefit was declared the first year then he fell below £50k the second year, so did not need to disclose it. HMRC then decided he no longer needed to complete returns (hence we were no longer needed). Unfortunately his earnings went (just) over £50k again and of course HMRC have just woken up to the fact.
Client is upset because it was HMRC who said he no longer needed to file SA returns and wants me to ask for no penalties.

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Replying to Homeworker:
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By bernard michael
13th Nov 2019 11:05

Homeworker wrote:

I've just had a former client come back to me on this very subject. He used to be within SA and Child Benefit was declared the first year then he fell below £50k the second year, so did not need to disclose it. HMRC then decided he no longer needed to complete returns (hence we were no longer needed). Unfortunately his earnings went (just) over £50k again and of course HMRC have just woken up to the fact.
Client is upset because it was HMRC who said he no longer needed to file SA returns and wants me to ask for no penalties.


Hence my point that a return should have been submitted due to a change in circumstances with tax due
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Replying to Homeworker:
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By lionofludesch
13th Nov 2019 11:21

Homeworker wrote:

I've just had a former client come back to me on this very subject. He used to be within SA and Child Benefit was declared the first year then he fell below £50k the second year, so did not need to disclose it. HMRC then decided he no longer needed to complete returns (hence we were no longer needed). Unfortunately his earnings went (just) over £50k again and of course HMRC have just woken up to the fact.
Client is upset because it was HMRC who said he no longer needed to file SA returns and wants me to ask for no penalties.

Just over £50000 ? So a few quid in HICBC ? Penalty 20% of that ?

We're arguing about buttons, aren't we ? In any event, suspension will take less effort than a waiver.

Can you quantify "just" ?

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Replying to lionofludesch:
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By Homeworker
18th Nov 2019 13:32

I am not sure a small increase in earnings is a "change in circumstances" in the taxpayers mind!
He owes £340 for two years but I am pleased to say that HMRC have now accepted the figures and said they won't charge penalties!
Now I just need to find out if they will deal with 2018/2019 informally, rather that have the hassle of going back in to SA for one year only, as the child benefit stopped last year.

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Replying to Homeworker:
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By bernard michael
18th Nov 2019 13:47

Homeworker wrote:

I am not sure a small increase in earnings is a "change in circumstances" in the taxpayers mind!
He owes £340 for two years but I am pleased to say that HMRC have now accepted the figures and said they won't charge penalties!
Now I just need to find out if they will deal with 2018/2019 informally, rather that have the hassle of going back in to SA for one year only, as the child benefit stopped last year.

Was it stopped due to age of child or canceled by the Mother/Parents?
If the latter it will eventually effect her State Pension intitlement

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Replying to bernard michael:
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By lionofludesch
18th Nov 2019 18:19

bernard michael wrote:

Homeworker wrote:

I am not sure a small increase in earnings is a "change in circumstances" in the taxpayers mind!
He owes £340 for two years but I am pleased to say that HMRC have now accepted the figures and said they won't charge penalties!
Now I just need to find out if they will deal with 2018/2019 informally, rather that have the hassle of going back in to SA for one year only, as the child benefit stopped last year.

Was it stopped due to age of child or canceled by the Mother/Parents?
If the latter it will eventually effect her State Pension intitlement

I beg to differ, I'm afraid. Provided the claimant has registered for Child Benefit, disclaiming it will not affect her pension. She will still gain credits.

She may, of course, be continuing to work. Who knows ?

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By MJShone
13th Nov 2019 11:38

Pssoibility of penaties being reduced/suspended, but no possibility whatsoever of not having to pay the HICBC. See here: https://www.gov.uk/government/news/review-for-high-income-child-benefit-...

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Replying to MJShone:
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By lionofludesch
13th Nov 2019 11:47

MJShone wrote:

Pssoibility of penaties being reduced/suspended, but no possibility whatsoever of not having to pay the HICBC. See here: https://www.gov.uk/government/news/review-for-high-income-child-benefit-...

Oh - absolutely. Goes without saying, surely.

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Replying to lionofludesch:
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By MJShone
14th Nov 2019 09:18

Lion - I may be being thick but I don't understand what you're saying. There's no chance the taxpayer will get away with not paying the HICBC. However, he might escape a penalty. HMRC have published the line they're taking on that, but I know that they're not always sticking to it, so the taxpayer may be lucky.

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Replying to MJShone:
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By lionofludesch
14th Nov 2019 17:02

MJShone wrote:

Lion - I may be being thick but I don't understand what you're saying. There's no chance the taxpayer will get away with not paying the HICBC. However, he might escape a penalty. HMRC have published the line they're taking on that, but I know that they're not always sticking to it, so the taxpayer may be lucky.

Always ask.

Don't expect.

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Replying to lionofludesch:
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By MJShone
18th Nov 2019 12:24

Ask whether the client can be forgiven the tax that is properly due, you mean?

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Replying to MJShone:
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By lionofludesch
18th Nov 2019 18:21

MJShone wrote:

Ask whether the client can be forgiven the tax that is properly due, you mean?

Well, if you like.

Though I would estimate the chances of that happening at 0%.

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By Paul D Utherone
13th Nov 2019 22:11

I believe HMRC have been reviewing and cancelling penalty charges, particularly in PAYE only cases, but not the actual charge itself.

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Replying to Paul D Utherone:
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By MJShone
18th Nov 2019 12:25
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Replying to MJShone:
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By lionofludesch
19th Nov 2019 09:58

MJShone wrote:

You're right: https://www.gov.uk/government/news/review-for-high-income-child-benefit-...

Yet, on another thread, we are today told of a case where HMRC were not interested in collecting HICBC prior to 2015/16.

It's a helluva scattergun approach to tax collection.

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By bernard michael
19th Nov 2019 09:47

Homeworker

You're correct sloppy wording by me. The OP's wife was already claiming so is protected . Not claiming is what effects the pension

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