HMRC loses another child benefit case

Courts are flooded with high earners who could be owed cash after invalid assessments

became involved again and presented the usual argument that HMRC had conducted a large media campaign in 2012 and 2013 which should have alerted Mr Brown that he could become liable for the HICBC.

However, the judges were unimpressed by this argument, noting that at the time Mr Brown’s income was well below £50,000, so neither he nor his wife would have paid much attention to it.

They were equally unimpressed by HMRC’s briefing in 2012 directed at higher rate taxpayers because Mr Brown was not a higher rate taxpayer.

The supervisor claimed that two letters were sent to Mr Brown in 2019 who said they were not received. No proof was provided by the supervisor and the judges ruled that the letters had not been sent. In the event the judges dismissed the assessments because they had been incorrectly raised by the HICBC team, rather than by the inspector who made the discovery.

The judges noted that the instruction manual for tax inspectors says that a discovery cannot be made simply by HMRC or by a team.

The result meant that no tax or penalties were due for Mr Brown, but the judges went further. HMRC had claimed penalties at 27pc, seven percentage points higher than it had previously agreed to in correspondence.

The judges found this alarming, describing it as “an issue of extremely serious concern”.

I am surprised that this case came to court. It is concerning that HMRC were seemingly unaware of the significance of both the Tooth case and the instructions in its own manual. It is also alarming that its representatives failed to bring to the attention of the judges the agreed penalty rate.

Mr Brown represented himself. He could easily have given in and paid the tax and penalties rather than fight for his rights. However, like Mr Tooth he stood his ground and won. He is to be

Mike Warburton was previously a tax director with accountants Grant Thornton. Email your tax question to Mike to be answered in a future column. All letters are anonymised. Email questions to

taxhacks@ telegraph.co.uk congratulated for doing so. It seems unlikely that this is an isolated case. If this has become common practice within HMRC there could be many thousands of people who have paid tax on invalid assessments.

The Tooth case did not establish new law; it clarified what has been the law for many years. It may be possible to reclaim tax wrongly paid for up to four years – or longer if HMRC is at fault.

When I put my concerns to HMRC a spokesman responded: “We apologise to Mr Brown for not identifying the reduction in the penalty during the litigation process.

“This was a mistake and we are putting appropriate measures in place to prevent this happening in the future. We will not be appealing the tribunal’s decision. However, first tier tribunal decisions are non-binding and it therefore does not influence other cases.”

HMRC has chosen not to appeal the Paul Brown case despite seeming to disagree with the decision.

The HMRC spokesman said: “We also do not agree with the relevance of the Supreme Court decision in HMRC v Tooth [2021] UKSC 17 to the question of validity of the assessment. We will not be carrying out a review and overpayment relief claims should not be made on the basis of the first tier tribunal’s view.”

Our courts are currently flooded with HICBC cases. Most of these arise from people failing to appreciate that they should have notified HMRC of their liability to the charge.

The amounts, while significant to the individuals involved, are almost certainly outweighed by the costs to the Treasury, and therefore the rest of us, in taking these cases to court.

The child benefit system is administered by HMRC, which holds all the information necessary to identify when a charge is required. It would remove the cost and concern to those involved if the law placed the obligation on HMRC to identify tax due rather than individual taxpayers.