In Mr Meades v HMRC [2023] TC088440, the First Tier Tribunal (FTT) found that, despite HMRC’s misunderstanding of the legislation, a taxpayer was subject to the High-Income Child Benefit Charge (HICBC) as he was still ‘entitled’ to Child Benefit paid to his divorced wife. 

  • Mr Meades married on 5 March 2010 and, in December 2012, the couple had a child.
  • During this marriage to the Child’s Mother (CM), Mr Meades took responsibility for the paperwork. He claimed Child Benefit, which was paid into the bank account of CM.
  • In July 2017, Mr Meades separated from CM.
    • Mr Meades moved out, leaving CM and the child in the family home.
    • There was no formal maintenance agreement. Mr Meades paid £500 a month to CM. He also paid their household bills, including the mortgage.
  • The marriage with CM was dissolved on 4 April 2019.
  • Mr Meades married his second wife (Mrs Meades) in November 2019.
    • They lived together as partners for the whole of the 2019-20 tax year.
  • HMRC opened an enquiry into Mr Meades’ 2019-20 tax return, before later issuing a Closure notice increasing his liability by £1,076 on the basis that he had been liable to the High-Income Child Benefit Charge (HICBC).
  • Mr Meades Appealed to the First Tier Tribunal (FTT).

The HICBC applies where a person’s Adjusted Net Income (ANI) exceeds £50,000, and one or both of Conditions ‘A’ and ‘B’ are met.

HMRC’s Statement of Case said that Mr Meades came within Condition B.

The FTT found that:

  • Condition B would only have applied if CM had been Mr Meades’ partner during 2019-20. Clearly, this was not the case; Mrs Meades was his partner during that tax year.
  • HMRC had misunderstood and misapplied the HICBC legislation.

The FTT considered whether HMRC’s misunderstanding of the law meant that Mr Meades’ appeal should be allowed but decided that it had a duty to consider whether Mr Meades came within Condition A.

Condition A could only be met where Mr Meades was entitled to the Child Benefit in 2019-20 and his ANI was higher than that of Mrs Meades.

The FTT found that:

  • Mr Meades’ ANI was higher than that of Mrs Meades.
  • CM was entitled to Child Benefit because the child lived with her. However, Mr Meades was also entitled because he provided financial support for the child.
    • Where two people are both entitled to Child Benefit, the person with whom a child is living generally has priority.
    • This rule is subject to an exception: where one person has 'already been awarded' the Child Benefit, that person has priority.
  • Mr Meades’ entitlement, therefore, had priority over CM's, because he had been awarded Child Benefit during 2019-20.
  • Mr Meades was entitled to the Child Benefit and was liable to the HICBC.

The appeal was dismissed.

Comment

The FTT observed that it was surprising that Mr Meades’ liability to the HICBC could depend on the income of Mrs Meades, who was not related to the child.

Had Mr Meades cancelled the Child Benefit claim before 6 April 2019, CM could have made a new claim and Mr Meades would not have been liable to the HICBC.

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? 

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?

Closure notices
When does HMRC issue a Closure Notice? Can a taxpayer demand one? Are there appeal rights? 

External link

Mr Meades v HMRC [2023] TC088440


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