In Toby Hextall v HMRC [2023] TC8804, the First Tier Tribunal (FTT) found discovery assessments looking to reclaim unpaid High Income Child Benefit Charge were not valid as they had been raised out of normal assessment time limits. The taxpayer had acted reasonably, despite not registering for self-assessment

  • Mrs Hextall claimed child benefits from January 2015.
  • Mr Hextall’s income exceeded £50,000 in 2015-16 and he was required to Register for Self-Assessment and pay the High Income Child Benefit Charge (HICBC).
  • Following nudge letters in November 2019, Mr Hextall phoned HMRC in December 2019 and confirmed his earnings had exceeded £50,000 for the years in question.
  • HMRC issued Discovery Assessments for 2015-16, 2016-17 and 2017-18 on 13 May 2021.
  • Following an unsuccessful Statutory Review, Mr Hextall Appealed to the FTT on the basis that the assessments were invalid and made out of time.

The FTT found that:

  • The decision in HMRC v Jason Wilkes [2022] EWCA Civ 1612 (Wilkes) meant that appeals made against discovery assessments seeking to charge HICBC on or before 30 June 2021 would be allowed provided that:
    • The issue of valid discovery, whether HICBC represented income, was an issue in the case, and;
    • This issue had been raised, at that time, by the appellant or the tribunal.
  • The appeal against the assessments on the grounds raised in Wilkes was dismissed as:
    • While Mr Hextall had lodged his appeal on 7 June 2021, it did challenge the validity of the discovery assessment on the basis that the HICBC was not income. 
  • The 2015-16 and 2016-17 discovery assessments had been raised out of time as:
    • HMRC could only raise discovery assessments for four years after the end of the tax year of assessment as Mr Hextall had taken reasonable care as:
      • Child benefit was claimed while earnings were below £50,000 and no correspondence was received from HMRC once earnings exceeded that threshold letting him know his obligations.
      • He instigated contact with HMRC shortly after receiving nudge letters.
      • His wife cancelled her child benefit claim immediately.
      • HMRC and child benefit literature lacked clear guidance as to what to do if salaries increased.

The appeal was allowed in part.

Useful guides on this topic

Register for Self Assessment
How to register for Self Assessment. If you need to file a Self Assessment tax return and you have not previously registered for tax and you also need to pay your Income Tax liability (both of which should be done by 31 January), you need to register for Self Assessment and obtain your own Unique Tax Reference code (UTR).

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?

Discovery Assessments
When can HMRC issue an assessment outside of the normal statutory time limits? What conditions must be met? What are your rights of appeal and defences?

Discovery Assessment: At a glance
What is a Discovery Assessment? When can HMRC make a Discovery? What are the time limits for Discovery Assessment?

How to appeal an HMRC decision
Disagree with an HMRC decision? How to appeal, what type of decision can you appeal and what are your different options when you disagree with HMRC? What are the key steps in making an appeal?

Statutory Review (by HMRC)
What is a Statutory Review? Is it automatic? What happens in a Statutory Review? Can you challenge a Statutory Review's findings? Can you influence a Statutory Review? 

HMRC wrong to back-date High-Income Child Benefit Charge assessments
 In HMRC v Jason Wilkes [2022] EWCA Civ 1612 the Court of Appeal (CoA) found that HMRC was unable to use the Discovery Assessment provisions to back-date assessments for unpaid High-Income Child Benefit Charges in past years. The charge is not 'income' for tax purposes.

External links

Toby Hextall v HMRC [2023] TC8804


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