The Commissioners for HM Revenue and Customs v Jason Wilkes [2021] UKUT 0150 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Mrs Justice Falk,Judge Timothy Herrington |
| Neutral Citation | [2021] UKUT 0150 (TCC) |
| Subject Matter | 30 June 2021 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 30 June 2021 |
[2021] UKUT 0150 (TCC)
Appeal number: UT/2020/000354
INCOME TAX – high income child benefit charge – discovery assessment –
whether s 29(1)(a) Taxes Management Act 1970 can be construed as
extending to discovery that respondent should have been assessed to income
tax in respect of the high income child benefit charge
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
THE COMMISSIONERS FOR HER MAJESTY’S
Appellants
REVENUE & CUSTOMS
- and -
JASON WILKES
Respondent
TRIBUNAL:
The Hon. Mrs Justice Falk
Judge Timothy Herrington
Sitting remotely via Microsoft Teams on 26 May 2021
Laura Poots, Counsel, instructed by the General Counsel and Solicitor to HM
Revenue and Customs, for the Appellants
Richard Vallat QC, Counsel, and Marika Lemos, Counsel, instructed by Collyer
Bristow LLP, for the Respondent
© CROWN COPYRIGHT 2021
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DECISION
Introduction
1. This appeal raises a short point of statutory construction in respect of which there
have been conflicting decisions of the First-tier Tribunal. Although the amounts
involved are relatively small, the issues raised are of wider significance.
2. The Commissioners for Her Majesty’s Revenue & Customs (“HMRC”) appeal
against a decision by the First-tier Tribunal (“FTT”) (Judge Citron and Ms Jane
Shillaker) released on 15 June 2020 (“the Decision”). The FTT allowed Mr Wilkes'
appeal against income tax assessments issued by HMRC under s 29 Taxes Management
Act 1970 (“TMA”) for the tax years 2014-15, 2015-16 and 2016-17. The assessments
related to the high income child benefit charge (the “HICBC”) introduced by s 8 and
Schedule 1 Finance Act 2012 (“FA 2012”). They were in the following amounts:
(1) 2014-15: £1,770;
(2) 2015-16: £1,398; and
(3) 2016-17: £1,076.
3. The FTT found that Mr Wilkes was liable to the HICBC for the three years in
question, in the amounts assessed by HMRC. However, it concluded that the
assessments were not validly raised because the officer in question had not discovered
any “income which ought to have been assessed to income tax” within s 29(1)(a) TMA.
4. The FTT granted HMRC permission to appeal against the Decision on 3
September 2020. In their grounds of appeal HMRC contend that on the basis that no
return was submitted by Mr Wilkes, his income had not been assessed to a further
charge of income tax: the HICBC. Accordingly, HMRC made a discovery that there
was income that ought to have been assessed and had not been assessed, and s 29(1)(a)
TMA applied. Alternatively, HMRC contend that on a proper purposive construction
of s 29(1)(a) TMA, the word “income” is to be read as including any amount liable to
income tax. Failing that, there was an obvious drafting error which the FTT failed to
correct.
5. We are grateful for the assistance provided by Counsel in this case, and
particularly wish to thank Mr Wilkes’ legal team, who are acting pro bono.
The Facts
6. References to numbered paragraphs in square parentheses are, unless otherwise
indicated, references to paragraphs in the Decision.
7. The FTT made its findings of fact at [2] and [7] to [11]. They can be summarised
as follows.
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8. During the relevant years, Mr and Mrs Wilkes were married, and Mrs Wilkes was
entitled to, and did, receive child benefit. Mr Wilkes’ adjusted net income for tax
purposes exceeded £50,000 and was greater than that of Mrs Wilkes. Mr Wilkes did
not submit a tax return, and HMRC did not issue him a notice to file.
9. Following a letter received from HMRC asking him to check if he was liable for
the HICBC, Mr Wilkes had two telephone conversations with Officer Pickett of HMRC
on 3 and 18 December 2018. After the second of those conversations, Officer Pickett
formed the view that Mr Wilkes was liable to the HICBC for the tax years in question
that had not been assessed.
10. Mr Wilkes was not charged a “failure to notify” penalty, as HMRC considered
that he had a reasonable excuse for his failure to notify them of his income tax
chargeability under s 7 TMA.
11. However, on 20 December 2018 HMRC issued discovery assessments under s
29(1)(a) TMA for the HICBC in respect of which Mr Wilkes was liable for the years in
question.
Relevant Legislation
The HICBC
12. The taxpayer’s liability for the HICBC arises under ss 681B to 681H Income Tax
(Earnings and Pensions) Act 2003 (“ITEPA”), the relevant provisions having been
introduced by Schedule 1 to FA 2012.
13. Section 681B ITEPA provides for the HICBC, and sets out the conditions that
must be met before a taxpayer is liable for it, relevantly as follows:
“(1) A person (“P”) is liable to a charge to income tax for a tax year if—
(a) P's adjusted net income for the year exceeds £50,000, and
(b) one or both of conditions A and B are met.
[…]
(4) Condition B is that—
(a) a person (“Q”) other than P is entitled to an amount in respect of child benefit
for a week in the tax year,
(b) Q is a partner of P throughout the week, and
(c) P has an adjusted net income for the year which exceeds that of Q.”
14. Section 681C ITEPA sets out how the amount of the HICBC is determined,
relevantly as follows:
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