Today’s Blog is about HMRC putting severe pressure on a dyslexic taxpayer (Mr Benjamin Erridge) to immediately settle high-income child benefit charges (HICBIC) which caused him needless financial loss and distress and his subsequent battle with the tax office at the first-tier tax tribunal (FTT).
Background to the case
Mr Erridge is chronically dyslexic, with very poor reading skills. He was, until 2020, a PAYE employee receiving salary, benefits and bonuses. He and his wife have three children, born in 2002, 2008 and 2013, for whom Mrs Erridge claimed child benefit. When the HICBC was rolled out in 2013, Erridge’s adjusted net income (ANI) was below the £50,000 threshold. However, from 2013/14 onwards, his earnings crept above the threshold.
HMRC sent Erridge a “nudge letter” in January 2021, to which he replied with a handwritten letter asking for assistance but not surprisingly, given HMRC’s woeful track record on responding to correspondence, he received no response.
He then posted to HMRC what information he could and in June 2021, they advised him that he appeared to owe HICBC for the years 2012/13 to 2018/19. Erridge then called HMRC to ask what he should do, only to be told that HMRC had suspended work on all HICBC cases, and he would be contacted in due course.
Dirty tactics
The reason for HMRC’s suspension of all HICBIC cases was due to an ongoing court case regarding their habit of issuing discovery assessments and whether or not they were a lawful means to collect HICBC. Once the Wilkes court case had been settled (in HMRC’s favour) the government issued retrospective legislation in the 2022 Finance Act re-enabling the use of discovery assessments.
HMRC then issued assessments totalling £15,374 and penalty notices totalling £4,150.98 to Mr Erridge, which he appealed and asked for time to pay. HMRC’s response was to ignore the appeal, give no time to pay and threaten him with a debt-recovery agency, if he didn’t pay immediately. Erridge panicked, put his house on the market and sold it for less than market value, enabling him to pay HMRC the tax, penalties and interest.
Did the taxpayer have a reasonable excuse?
Following Mr Erridge’s payment of £19,884.34 (tax, penalties & interest) to HMRC he subsequently submitted a further appeal, which was rejected and so the case ended up before the FTT.
The tribunal judge established the following as fact:
- Erridge first became liable to the HICBC in 2013/14 due to a large bonus.
- Although Mrs Erridge had claimed child benefit for their third child in April 2013, this was before the claim forms had been updated to include information about the HICBC.
- He was unaware of his HICBC liability until he received the nudge letter, at which point he contacted HMRC to ask for assistance in relation to the historical figures. On receiving no response, he did his best to work out his position and notified HMRC.
Judge Redston had to decide whether or not the taxpayer’s lack of awareness amounted to a reasonable excuse for someone in his position? As so often before, HMRC argued that its campaign of publicity for the HICBC meant that no reasonable taxpayer would be unaware. But, as had many judges before her, Judge Redston did not accept HMRC’s arguments and made four critical observations:
- When HICBC was first announced, Erridge’s income was well below the threshold, and a “reasonable taxpayer in his position would not have retained information about a tax change that was not relevant to him”.
- He completed a tax return in 2012/13, issued in error due to an HMRC cock-up, when they confused his NI number with someone else’s, but that he did not have any HICBC liability to disclose. “No reasonable taxpayer would have read pages of guidance about areas of the tax system that did not apply to him,” said Redston.
- The hypothetical “reasonable taxpayer” in Mr Erridge’s position” would also have to be a dyslexic person who struggled to read.
- When he received the nudge letter (at which point he objectively became aware of HICBC), he acted promptly despite initially receiving no response from HMRC.
The FTT concluded with the finding that Mr Erridge had a reasonable excuse for failing to notify liability and all penalties were cancelled.
Postscript
HMRC has a four-year time limit to issue assessments and as Erridge did have a reasonable excuse, HMRC could only validly assess up to four years from the end of each relevant tax year. The assessments were made in November 2022, by which stage 2018/19 was the only valid year. The assessments for all other years were therefore cancelled.
Mr Erridge’s had argued that if HMRC had issued assessments when the nudge letter was sent, his appeals would have benefited from the Wilkes judgment and the assessments would have been invalid. Instead, HMRC deliberately delayed assessing until the retrospective legislation had been passed, enabling the assessments to be “protected” from appeal.
Judge Renton sympathised with Erridge but explained that the FTT also had no power to take action in this area and also that she could also not do anything about HMRC being in clear breach of its own debt management policy by neither postponing collection pending any appeal nor allowing time to pay. She did however strongly hint that HMRC should waive the remaining 2018/19 liability, and expressed her regret that she did not have the power to do so herself.
Accountant’s view
Over the years I have posted many Blogs on HMRC’s disgraceful bullying of ordinary taxpayers. Whilst in this case Mr Erridge will get back, most of his payments to the tax office, nevertheless he has suffered needless financial loss on his house sale and a great deal of distress. My advice to him and anyone else in a similar situation, is to seek recourse at the independent adjudicator at https://www.gov.uk/guidance/contact-the-adjudicators-office and the very best of luck.
