A landmark judgment by the Court of Appeal has been passed, but sadly thousands of middle class families will not be able to benefit from it as PM Rishi Sunak updated the legislation used to beat this particular case.
HM Revenue and Customs lost their case, which concerned the recovery of backdated Child Benefit payments for a claim period of three years.
HMRC had argued that benefit had been paid to a person who had received a pay rise leading to gross salary over £50,000. Child Benefit should be repaid via the Self Assessment Tax Return at a rate of 1 percent per £100 earned over £50,000, and it is repaid by the parent with the higher income. The repayment is called the 'high income tax charge'.
In this case HMRC had chased the benefit recipient more than four years since the benefit was claimed. The benefit claim period was between 2014 and 2017.
Normally HMRC can only demand tax from assessments of tax years up to four years in the past, but they argued in court that they were using a 'discovery assessment', thereby allowing them to disregard that rule.
The Court of Appeal rejected this argument and threw out the demand. Unfortunately a change to the Finance Act legislation in 2021 by Rishi Sunak changed the method of 'discovery' to investigative powers - meaning an appeal would no longer successfully work for appeals brought after the date of change, June 30th 2021.
180,000 Child Benefit recipients have been financially assessed by HMRC for non-paid tax charges. 400 cases are currently awaiting first-tier tribunal hearings.