HICBC - Discovery assessments - Refund

markgul

Hi All,

I was hit with a large bill from HMRC couple of years ago when I discovered I fall into the High Income Child Benefit charge due to my wife claiming the benefit. HMRC waived the penalty fees, however I still had to pay a large sum. I paid the charge for the past few years and I have then been filling my self assessment for the last 2 years...

Recently on the news, I've been following the Jason Wilkes case against HMRC where he has won a case regarding  ‘discovery assessments’ for underpaid tax for previous years, which allows HMRC to reopen closed tax years and issue new charges for those years (exactly what happened to me).

I would like to know if anyone else falls into this category and how we could try and ask HMRC for a refund? 

Jeremy535897

Presumably you did not complete a SA return for the years in question?

You can read a summary of the issues here:
https://www.rossmartin.co.uk/sme-tax-news/5606-hicbc-is-not-income-under-the-discovery-rules

The problem that summary identifies is that HMRC may use the mechanism of a simple assessment to replace the discovery assessment they used, according to that summary. It is also conceivable that a further appeal, or a retrospective change in the law, may be sought.

Other commentators are more bullish. See https://ifamagazine.com/article/hundreds-of-thousands-of-taxpayers-to-benefit-as-hmrc-loses-landmark-case-challenging-high-income-child-benefit-charge/

markgul

That's correct, there was no SA return for the years in question and was done based on some basic calculations. 

Jeremy535897

You can read the full judgment here:
https://assets.publishing.service.gov.uk/media/60dc5a51e90e07717b84dc52/Jason_Wilkes_decision.pdf

I would expect HMRC to appeal, and if they fail, to use the simple assessment mechanism (section 28H TMA 1970). They can go back to 2016/17 and have 20 years to do so.

tigrul

Has there been any update on this case? I am in the same situation as the original poster - is it worth trying for a refund, and if so, how?

Dead_keen

https://www.bailii.org/uk/cases/UKUT/TCC/2021/150.html

126. ... The officer could not fairly be described as having discovered that there was income that had not been assessed. Rather, he discovered that Mr Wilkes should have paid the HICBC. The assessment made was one to make good that loss of tax.

127. We therefore determine this issue in favour of Mr Wilkes.

tigrul

Dead_keen said:

https://www.bailii.org/uk/cases/UKUT/TCC/2021/150.html

126. ... The officer could not fairly be described as having discovered that there was income that had not been assessed. Rather, he discovered that Mr Wilkes should have paid the HICBC. The assessment made was one to make good that loss of tax.

127. We therefore determine this issue in favour of Mr Wilkes.

As I understand it, HMRC had until end of August to appeal - anyone know how that went? Then I guess, if they didn't appeal we could consider asking for a refund? Hoping someone can help on next steps (if any) those affected should take

Dead_keen

No idea.  But I wouldn't expect it to be publicly known for quite a while as their is a process (e.g. getting permission to appeal for the UT or the CoA).  If HMRC gets permission, you'll be able to track it here: https://casetracker.justice.gov.uk/  If they don't, it won't appear on any list to say that it hasn't got it. 

sheramber

Although the charge tot ax was raised under the wrong  section  the charge iss till due.

If HMRC  cancel the discovery assessments ( note;  it  is only those who were issued discovery assessments that are affected) then HMRC can raise an assessment under the  appropriate  section.

This was mentioned in the article quoted above.

Dazed_and_C0nfused

sheramber said:

Although the charge tot ax was raised under the wrong  section  the charge iss till due.

If HMRC  cancel the discovery assessments ( note;  it  is only those who were issued discovery assessments that are affected) then HMRC can raise an assessment under the  appropriate  section.

This was mentioned in the article quoted above.

I think there are a couple of complications here though.

The judge reference Simple Assessment but as I understand it the legislation for that only covers the 2016:17 tax year onwards.

So replacing the discovery assessment with a Simple Assessment would potentially be possible for the last few years.

But 2016:17 is outside the normal window HMRC use so not sure how that would stack up?

And for the earlier years, 2015:16 and older, the obvious route for HMRC would be to now issue a Self Assessment return and let each individual self assess their HICBC.  But again those years are not normally ones HMRC issue returns for now.

I suspect there is some head scrathching going on in HMRC at the moment trying to square this particular circle!

tigrul

Really interesting comments. Is it worth contacting HMRC asking whether I am due any refund, or just wait until they work out their response to the judgement?