Ignorance of the Law Is No Defence – Or Is It? Child Benefit Tax Ruling
HM Revenue and Customs (HMRC) must publicise changes in the tax regime and taxpayers are not obliged to go rooting around its website in an attempt to keep up to date. The First-tier Tribunal (FTT) made that point in finding that a father had a reasonable excuse for his delayed payment of tax on his Child Benefit receipts.
Until 7 January 2013, Child Benefit was a universal benefit payable to the parents of any British child. It thereafter became means tested with the introduction of the High Income Child Benefit Charge (HICBC). Under the new regime, parents who earned more than £50,000 a year had part of their benefit withdrawn and, if earning more than £60,000 a year, they would receive nothing at all.
The father was notified by HMRC in 2017 that he should have paid HICBC between 2013 and 2016. He had earned well over £50,000 in each of those years. Back-tax demands for £4,780 were raised against him, together with late payment penalties of £829.40. He paid the tax but appealed against the penalties to the FTT on the basis that he had been unaware of the introduction of HICBC.
The FTT noted that HMRC had issued press releases announcing the change in the law and advising high-income Child Benefit recipients to register for self-assessment. They had also published considerable material concerning HICBC on their website. Although the FTT accepted that the father was not specifically notified of the change, it found that there was no obligation on HMRC to do so.
The FTT nevertheless found that it was objectively reasonable for the father to have remained ignorant of the requirement to complete a self-assessment tax return in light of his liability to HICBC. He had received Child Benefit on a non-means-tested basis for some years before HICBC was introduced and, as he was paid via the PAYE system, he was not otherwise required to make a self-assessment return.
HMRC had presented no evidence as to the extent of publicity received by the press releases or that it would have been impossible for any individual in Britain not to have seen them. The father was a conscientious taxpayer and, had anything prompted him to make inquiries about a change in the regime, he would have swiftly done so.
Save for the press releases and information published on HMRC’s website, there was nothing to put him specifically on notice of the change. It was not reasonable to expect him to go rummaging through all that information on the off chance of finding something hidden away in it which was relevant to his tax position. He had a reasonable excuse for not having paid HICBC on time and the penalty was overturned.