Belloul – Ignorance of the law was a 'reasonable excuse' 

In Bachir Mohamed Belloul v HMRC [2020] UKFTT 312, the First-tier Tribunal (FTT) held that a taxpayer's ignorance of the law was a 'reasonable excuse' for failing to notify HMRC of his liability to pay High Income Child Benefit Charge (HICBC).

Background 

Mr Belloul received child benefit for tax years 2013/14, 2014/15 and 2015/16. For all three tax years, Mr Belloul was an employee who earned over £50,000 and all of his taxes were paid through his employer’s PAYE payroll.

In 2012, prior to the introduction of the HICBC, HMRC issued a number of press releases which detailed the introduction of the charge and advised high income child benefit parents to register for self-assessment. Similar further press releases were issued in 2014, 2018 and 2019. Information regarding the HICBC was also available on HMRC’s website. 

Mr Belloul claimed that he was not aware of these press releases, nor of the requirement to complete a self-assessment tax return, until he received a letter from HMRC in October 2017 (HMRC claimed that it had sent an SA252 letter to Mr Belloul in August 2013). Following receipt of the October 2017 letter, Mr Belloul contacted HMRC to discuss his position. 

Mr Belloul argued that neither he nor his wife were aware of the change in law imposing the HICBC and this constituted a 'reasonable excuse' for having failed to notify HMRC of his chargeability to HICBC. HMRC disagreed and issued penalties to Mr Belloul, pursuant to Schedule 41, Finance Act 2008, for failing to notify chargeability under section 7, Taxes Management Act 1970. Mr Belloul appealed to the FTT.

FTT decision 

The appeal was allowed and the penalties quashed. 

The key issue for the FTT to consider was whether Mr Belloul had a reasonable excuse for not notifying HMRC of his chargeability to HICBC. The FTT noted that the legal principles it had to consider with regard to reasonable excuse were those set out in Christine Perrin v HMRC [2018] UKUT 156 and commented that, in certain circumstances, ignorance of the law can be a reasonable excuse (despite HMRC omitting key paragraph [82] of Perrin from its Skeleton Argument for the hearing, which the FTT Judge was critical of). However, the FTT agreed with HMRC that it had no duty to notify Mr Belloul of his liability to the HICBC and that lack of specific notification could not, on its own, be a reasonable excuse.

The FTT adopted the test formulated in The Clean Car Co Ltd v C&E Commissioners [1991] VATTR 234, in determining whether Mr Belloul’s ignorance of the law was objectively reasonable.  

The FTT concluded, on the facts of this case, that Mr Belloul did have a reasonable excuse for failing to notify chargeability to HMRC for the following reasons:

1. For all three tax years, Mr Belloul was an employee and all of his taxes were paid through his employer’s PAYE payroll; he was not within the self-assessment regime and so there was nothing that put him on notice that the HICBC had been introduced;
2. There was nothing which prompted Mr Belloul to access the information regarding the HICBC on HMRC’s website or put him specifically on notice of the changes. The Judge commented: "In my view it is not incumbent on the objectively reasonable taxpayer without notice of a change in tax law to go rummaging through all of HMRC’s information on the off chance that there might be something which is hidden away in it which is relevant to his tax position";
3. The first time Mr Belloul became aware of the requirement to complete a self-assessment tax return was when he received a letter from HMRC in October 2017 and upon receipt of this letter, he acted promptly in contacting HMRC; and 
4. There was no conclusive corroborating evidence that Mr Belloul had been sent or received the earlier SA252 letter from HMRC in August 2013. The FTT commented that if it had found sufficient evidence of this it would have been very difficult for Mr Belloul to claim ignorance of the requirement to register for self-assessment and submit a tax return declaring the child benefit.
   

Comment 

Although it will be a matter of judgement for the FTT in each case whether it was objectively reasonable for the particular taxpayer, in the circumstances of the case, to have  been ignorant of the requirement in question and for how long, it is clear that ignorance of the law can constitute a 'reasonable excuse' for failing to notify HMRC. Ignorance of the law was also accepted by the FTT as a reasonable excuse in the recent penalty appeal cases of Leigh Jacques v HMRC [2020] UKFTT 311 and Vivian Hill v HMRC [2020] UKFTT 316. 

 The decision can be viewed here.