Lack of awareness of High-Income Child Benefit Charge is not a reasonable excuse

In Diana Cuffie v HMRC [2021] TC08191, the First Tier Tribunal (FTT) dismissed the taxpayer’s appeal against failure to notify penalties in respect of the High-Income Child Benefit Charge.

• Ms Cuffie re-registered for Self Assessment in 2013. According to HMRC’s records, this was for the purpose of notifying her liability to the High-Income Child Benefit Charge (HICBC).
• Tax returns for 2012-13 to 2016-17 were submitted.
  • No self-employment income was declared in 2012-13 or 2013-14.
  • A liability to the HICBC was reported for all years.
• Ms Cuffie contacted HMRC in 2015 to advise that her self-employment had ended. HMRC had no record of this contact.
• In March 2017, Ms Cuffie closed her self-assessment record via an online request.
• Ms Cuffie remained liable to the HICBC after her self-assessment record was closed, but failed to notify HMRC.
• HMRC charged Failure to notify penalties totalling £531 for the period 2016/17 to 2018/19.

Ms Cuffie Appealed to the FTT on the basis of having a Reasonable excuse. She:

• Was not aware of her HICBC liability: her previous tax returns were prepared by her accountant.
• Had not received any support regarding the HICBC.
• Did not intend to fail to pay her liability.
• Was not aware of the continued need to file tax returns. She:
  • Paid tax via PAYE.
  • Was not advised by HMRC that she would still need to complete tax returns after her self-employment ceased.

The FTT dismissed the appeal, finding that Ms Cuffie did not have a reasonable excuse for the failure to notify.

• A taxpayer who is conscious of their tax obligations would have:
  • Checked the returns prepared by their accountant and been aware of the HICBC liability.
  • Established whether there was any continuing liability or reporting obligation after ceasing self-employment.
• In these circumstances, Reliance on a third party does not constitute a reasonable excuse.
• Ms Cuffie’s lack of awareness of the HICBC was not objectively reasonable in the circumstances.

Useful guides on this topic

High-Income Child Benefit Tax Charge
What is the High-Income Child Benefit Charge? Who pays it? Can you appeal against an assessment? Are there any useful cases from the tax tribunals? 

Penalties: Failure to Notify
What tax penalties apply if you fail to notify HMRC that you are chargeable to tax? Can they be appealed or reduced?

Appeals: Grounds for Appeal Toolkit
What grounds are there to appeal a tax penalty? How can you word a tax appeal? Can you appeal HMRC errors? What is a reasonable excuse? 

Grounds for Appeal: Reasonable excuse
What is considered to be a 'reasonable excuse' when a taxpayer makes an appeal against a tax compliance failure?

How to appeal a tax penalty
What are the steps in making an appeal? What should your appeal cover? What does recent case law say on this topic?

External link

Diana Cuffie v HMRC [2021] TC08191