Box – child benefit charge interpreted as 'income' for the purpose of discovery assessments

14 October 2020

In Martin Richard Box v HMRC [2020] UKFTT 353 (TC), the First-tier Tribunal (FTT) dismissed the taxpayer's appeal concerning liability to pay the high-income child benefit (HICB) charge, on the basis that the charge constituted income for the purpose of discovery assessments.


Schedule 1, Finance Act 2012,  amended provisions in the Income Tax (Earnings and Pensions Act) 2003 (ITEPA), by introducing HICB charges in Chapter 8, Part 10, ITEPA. In summary, with effect from 7 January 2013, households where a parent’s ‘Adjusted Net Income’ (ANI) exceeds £50,000 in a tax year are affected by HICB charges.  For each £100 over the threshold of £50,000, a 1% tax liability arises on the amount of child benefit received in that year. Where a parent’s ANI is £55,000, the HICB charge equates to 50% of the sum of child benefit received and when the higher earner of a household has an ANI of £60,000 or above, the HICB charge equates to 100% of the child benefit received. 

Martin Richard Box (the Appellant) had been living with his partner, who received child benefit payments, and his partner's daughter. The Appellant's income exceeded the £50,000 threshold for the HICB charge. The Appellant failed to pay the HICB charge and did not submit a tax return for the 2013/14 to 2015/16 tax years.  

On 4 May 2017, HMRC issued discovery assessments to the Appellant, pursuant to section 29(1), Taxes Management Act 1970 (TMA) (the Assessments). The Appellant appealed the Assessments on the grounds that (a) he had been unaware of the HICB charge, as he thought it was not relevant to him, and (b), although he would have paid it if he had known, HMRC should not be entitled to pursue the debt so long after it had accrued (the Court of Appeal in Tooth v HMRC [2019] EWCA Civ 826, held that it is possible for a discovery to become 'stale' such as to render invalid an assessment made under section 29(1), TMA). 

HMRC submitted that it had made a valid discovery. Upon the Appellant confirming his income during a telephone call on 21 April 2017, the HMRC Officer concerned reached the conclusion that there was a tax loss which was objectively justifiable on the evidence. The Assessments were issued shortly after the discovery occurred and accordingly the discovery was not stale.  Furthermore, the Assessments were raised within the statutory time limit of four years as required by section 34, TMA. 

HMRC also submitted that it would undermine the income tax system if the FTT did not interpret charges, such as the HICB charge, as an income tax charge.

FTT decision

The appeal was dismissed. 

In the view of the FTT, HMRC had been correct in concluding that there was a loss of tax and issuing the Assessments. The Appellant could have asked his partner about the child benefit and his ignorance of the charge was irrelevant to the validity of the Assessments. The Appellant's ignorance in this regard was only relevant to the issue of penalties. 

As to whether the discovery which HMRC had made had become stale, the judge said that a discovery occurred when it "newly appeared to an HMRC officer, acting honestly and reasonably, that there was an insufficiency in an assessment" and not when new information becomes available to HMRC. HMRC's reasoning that the fact it had had the relevant information for some time before an officer analysed it, did not render the Assessments stale, was endorsed by the FTT. HMRC was not too late to seek payment of the debt as it was within the four year statutory time period provided by section 34, TMA. 

Consistent with the recent decision in Haslam v HMRC [2020] UKFTT 304 (TC), the FTT also held that the HICB charge was income, for the purposes of section 29, TMA. The legislation does not explicitly state that the HICB charge is 'income', but if the statute was interpreted otherwise it would mean that a taxpayer who was liable to pay the HICB charge and who did not file a tax return, could not be issued with a discovery assessment. The FTT referred to Inco Europe Ltd v First Choice Distribution (a firm) [2000] 2 All ER 109, which established that, in cases where there is a clear drafting error, in discharging its interpretative function, a court may add words, or omit words, or substitute words, from a statute in order to cure any drafting error. The FTT therefore concluded that the legislation should be read so that the HICB charge is treated as income for the purpose of discovery assessments.


This decision is one of a number of recent decisions relating to the  HICB charge (see the conflicting decisions in Haslam and Wilkes v HMRC [2020] UKFTT 256 (TC)). The FTT has again applied a purposive interpretation to the legislation in order to treat the HICB charge as 'income', so that HMRC is able to assess taxpayers by issuing a discovery assessment under section 29, TMA. The appeal in Wilkes is proceeding on appeal to the Upper Tribunal and that tribunal may provide some much needed clarification regarding the HICB charge and HMRC's assessing powers in relation thereto.  

The decision can be viewed here.

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