TC09631 - [2025] UKFTT 01072 (TC)

HMRC issued a penalty notice for 2016/17 under schedule 41 in respect of the Appellant’s failure to notify her liability to the HICBC under section 7 TMA. As discussed above, the penalty was calculated on the basis that disclosure was prompted, the behaviour was non-deliberate and the minimum penalty percentage was charged.

Paragraph 20 of schedule 41provides that no penalty is due if the taxpayer has a “reasonable excuse” for their failure to notify.

There is extensive case law on what constitutes a reasonable excuse. The Upper Tribunal in Christine Perrin v HMRC [2018] UKUT 0156 (TCC) set out guidance on the approach we should adopt. The Tribunal said at [81]:

“81.

When considering a “reasonable excuse” defence, therefore, in our view the FTT can usefully approach matters in the following way:

(1)

First, establish what facts the taxpayer asserts give rise to a reasonable excuse (this may include the belief, acts or omissions of the taxpayer or any other person, the taxpayer’s own experience or relevant attributes, the situation of the taxpayer at any relevant time and any other relevant external facts).

(2)

Second, decide which of those facts are proven.

(3)

Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, it should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the FTT, in this context, to ask itself the question “was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?”

(4)

Fourth, having decided when any reasonable excuse ceased, decide whether the taxpayer remedied the failure without unreasonable delay after that time (unless, exceptionally, the failure was remedied before the reasonable excuse ceased). In doing so, the FTT should again decide the matter objectively, but taking into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times.

Although Ms Zefi did not specifically claim to have a reasonable excuse, we have considered her grounds of appeal to see if they disclose a reasonable excuse.

She states that the Child Benefit framework is very complex, confusing and misleading, with no actions from HMRC to clarify to citizens that money received must be returned once the threshold is reached.

Although there is a degree of complexity, Ms Zefi has received explanations on multiple occasions of how the system works, how and when the charge arises and has been told that she must submit tax returns to pay the charge. This information was set out in the Child Benefit Claim Form itself.

It was carefully explained in the telephone call of 18 February 2018 when Ms Zefi decided to continue to claim and was informed she must complete tax returns.

She was again advised to check her liability for HICBC in the two nudge letters sent in December 2019 but did not respond.

Following the opening letter of 11 May 2021, she contacted HMRC and referred to her contact with the Child Benefit Office when her income went above £50,000 and said that they (the Child Benefit Office) had told her to register for self-assessment and file tax returns.

Despite this, Ms Zefi submits she was never notified that she should complete a tax return in the relevant years.

There is ample case law which indicates the obligation to notify liability rests on the individual and HMRC is not required to send a notice to file. In any event, as set out above, Ms Zefi had been told on several occasions that she needed to submit tax returns.

Ms Zefi says she was told to do nothing for 18 months. She was indeed informed that all HICBC cases were on hold, but this was only after the opening letter in May 2021. This cannot be an excuse for her failure to notify her liability before that date.

In summary, the Appellant’s Notice of Appeal does not contain any information which could be considered a reasonable excuse for her failure to notify her liability to the HICBC.

Nor do we have any grounds for interfering with HMRC’s decision that there are no special circumstances which would justify a further reduction in the penalty.

Subject to our consideration of the time limit issue below, the penalty for 2016/17 is due.