Hundreds of thousands of taxpayers to be affected as landmark case challenges high income child benefit charge


  • The outcome of this case will affect hundreds of thousands of taxpayers subject to the controversial High Income Child Benefit Charge (the HICBC)
  • The decision will set a precedent on HMRC’s ability to issue Discovery Assessments to levy the HICBC beyond the usual four-year time limit for tax assessments

Today, the Upper Tribunal will hear HMRC’s appeal in the leading HICBC case (HMRC -v- Wilkes). The case addresses whether HMRC may impose the HICBC by means of “Discovery Assessments”, which enable HMRC to demand tax outside the normal four-year assessment limit. If Mr Wilkes is successful, it will mean HMRC was wrong to impose the charge on hundreds of thousands of taxpayers in the UK.

The HICBC was introduced in 2013, and since 6 April 2021 it has affected wholly basic-rate taxpayers. It is intended to claw back Child Benefit payments from those whose “Adjusted New Income” for tax purposes exceeds £50,000. Mr Wilkes was subject to the HICBC between 2014-17, which he, in common with many taxpayers in his position, was unaware of at the time.  HMRC wrote to Mr Wilkes in November 2018 to tell him that he might be liable to pay the HICBC. After checking the position, Mr Wilkes notified HMRC that he was liable. At that point, HMRC issued Mr Wilkes with Discovery Assessments for underpaid tax. Recognising that Mr Wilkes had a “reasonable excuse” for not paying the HICBC at the time, HMRC did not seek to impose penalties on him.

Mr Wilkes (represented by his wife, Mrs Samantha Wilkes) successfully appealed against the Assessments in the First-tier Tribunal (FTT): according to the FTT, HMRC have no power to impose the charge by means of Discovery Assessments.

If the Upper Tribunal upholds the FTT’s decision, it will mean that HMRC never had power to issue Discovery Assessments for the HICBC – and therefore the Discovery Assessments issued by HMRC were invalid.  It is not yet known precisely how many Discovery Assessments HMRC has issued in HICBC cases. In principle, none should survive a finding in favour of Mr Wilkes by the Upper Tribunal.

The Upper Tribunal’s decision in this case will, for the first time, set a binding precedent on whether HMRC is able to impose the HICBC by means of a “Discovery Assessment” outside the normal four-year time limit for tax assessments.

This appeal is on a number of narrow but important technical points relating to the proper meaning of the word “income” in section 29 Taxes Management Act 1970 (which confers on HMRC the power to issue discovery assessments in certain circumstances).

Commenting ahead of the hearing, James Austen, Partner and Head of Tax Disputes at Collyer Bristow LLP, acting for Mr Wilkes, said:

“I am delighted to support Jason and Sam Wilkes in this appeal. Their case raises important questions about HMRC’s power to issue Discovery Assessments in HICBC cases, often years after the event. Following this case, we will know for the first time whether HMRC were right to issue Discovery Assessments for the HICBC against hundreds of thousands of taxpayers. Affected families will want to follow the outcome closely.”

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