HM Revenue & Customs (HMRC) is facing calls to refund thousands of taxpayers after a tribunal ruling challenged the way it collects the high income child benefit charge (HICBC). The Upper Tribunal ruled last week that HMRC could not pursue a man for £4,000 in back taxes using 'discovery' powers, as he had not filed a self-assessment return for the years in question.
The HICBC, introduced in 2013, claws back child benefit from couples where one partner earns over £50,000 a year. Many taxpayers were unaware of the charge, leading to penalties for non-payment. HMRC has raised over £2.5bn from the charge, with 160,000 people paying penalties.
Jason Wilkes, represented by law firm Collyer Bristow, successfully argued that HMRC's use of discovery assessments was unfair. James Austen, a partner at the firm, said the ruling has 'ramifications for thousands of others' and urged HMRC to refund those in similar situations. HMRC has until the end of July to decide whether to appeal.
HMRC stated it is considering the decision and noted that taxpayers remain liable for the charge. However, tax experts warn that the ruling could open the floodgates for claims. Stefanie Tremain of Blick Rothenberg said HMRC is now in a 'difficult position' and may resist refunds, but individuals may seek to recover wrongly assessed tax.
The charge applies on a sliding scale between £50,000 and £60,000, with full clawback above £60,000. Parents can opt out of child benefit to avoid the charge, but claiming it counts towards state pension entitlements.
