Jackie Hall

Written by: Jackie Hall

Jackie Hall


Ambiguity surrounding High Income Child Benefit charge HICBC might land you in trouble

When the HICBC was first introduced there was heavy criticism of the impact of the legislation, in particular the need to understand the personal circumstances of both partners in a household. This doesn’t sit well with independent taxation, the complexity of working out adjusted net income and the fact that it is based purely on the income level of the higher-earner in a couple. This applies regardless of who receives the benefit, the level of income of the lower-earner or indeed whose child the benefit payments are in respect of.

It is not surprising then that individuals have in some cases failed to report the charge correctly, possibly resulting in penalties for ‘failure to notify’. There was much criticism of HMRC for charging penalties to those who may not have received details of its marketing campaign if they were not already in the self-assessment regime. As a result, HMRC retrospectively granted a ‘reasonable excuse’ for the failure to notify in cases where child benefit was claimed before the HICBC was introduced and one partner’s income subsequently increased above £50,000. It also granted the same excuse for recipients where a HICBC arose as a result of the formation of a new partnership. This meant that no penalty applied in these circumstances.

However, for the years 2016/17 onwards HMRC is no longer accepting ignorance of the charge as a reasonable excuse, as it has written directly to all those to whom it believes the charge may apply. Subsequently a number of cases have come before tax tribunals claiming reasonable excuse. Many of these have been dismissed, confirming that ‘ignorance of the law’ does not constitute a reasonable excuse. While the details of each case differ slightly, many appeals are founded on the taxpayer being completely unaware of the HICBC legislation. 

In one such case, Kevin Ramsdale v HMRC [2020] UK FTT 155 (TC), it seems that a husband may have been penalised for simply not knowing his wife was claiming the benefit despite having discovered the liability himself and promptly disclosing it to HMRC. This perhaps indicates that ignorance of the facts themselves is also not considered to be a reasonable excuse. As such, the case does little to allay the initial criticisms.

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