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2 minute read
1 July 2021
The Upper Tribunal has handed down its decision in HMRC’s appeal in the leading HICBC case (HMRC -v- Wilkes  UKUT 0150 (TCC)). In a binding judgment, the Upper Tribunal has decided that HMRC may not impose the HICBC by means of “Discovery Assessments” where the individual liable to the charge did not file a SA tax return. As HMRC has lost this appeal, it means they were wrong to impose the HICBC by Discovery Assessments on hundreds of thousands of UK taxpayers subject to the HICBC but not filing SA tax returns.
The HICBC was introduced in 2013. Despite being termed a ‘high income’ charge, since 6 April 2021 it has affected wholly basic-rate taxpayers. It is intended to claw back Child Benefit payments from couples where one partner’s “Adjusted New Income” for tax purposes exceeds £50,000. Mrs Wilkes claimed Child Benefit, yet it was Mr Wilkes that became liable to the HICBC for the tax years 2014-17. In common with many taxpayers in his position, he was unaware of it at the time. HMRC wrote to Mr Wilkes in November 2018, informing him that he might be liable to pay the HICBC. After checking the position, Mr Wilkes notified HMRC that he was indeed liable. At that point, HMRC issued Mr Wilkes with Discovery Assessments for unpaid tax, but did not seek to impose penalties on him (recognising that Mr Wilkes had a “reasonable excuse” for not paying the HICBC at the time).
Mr Wilkes (then represented by his wife, Mrs Samantha Wilkes) successfully appealed against the Assessments in the First-tier Tribunal (FTT). The Upper Tribunal has now confirmed the decision of the FTT: HMRC had no power to impose the charge on Mr Wilkes by means of Discovery Assessments.
As a result (and subject to a further appeal or a retrospective change in the law), HMRC never had power to issue Discovery Assessments for the HICBC to taxpayers who had not submitted SA Tax Returns – and therefore those Discovery Assessments issued by HMRC were invalid. It is not yet known precisely how many Discovery Assessments HMRC has issued to individuals in circumstances similar to those of Mr Wilkes. In principle, none should survive this judgment. Affected taxpayers will now be looking to HMRC to withdraw existing assessments and/or seeking reimbursement.
“I have been delighted to support Jason and Sam Wilkes in this appeal, and the outcome is a wonderful vindication of their case. The Upper Tribunal’s decision comprehensively overturns any argument that HMRC can issue Discovery Assessments in HICBC cases where taxpayers have not been filing self-assessment tax returns. Hundreds of thousands of taxpayers who have been anxiously awaiting this decision will be elated, and one hopes that HMRC will swiftly reimburse those who have been wrongly charged. As in Jason’s case, HMRC has resorted to Discovery Assessments almost by default for far too long: this judgment will hopefully cause them to think more carefully about their proper use in future.”
1 July 2021
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