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HM Revenue & Customs is keen to ensure that people who may be affected by the new High Income Child Benefit Charge register for Self Assessment by 5 October.

Why? Because those who are liable, are at risk of a financial penalty if they “fail to notify” HMRC that they are caught by the new High Income Child Benefit Charge (HICBC).

TaxationWeb’s Mark McLaughlin observed:

“To an extent, you have to sympathise with HM Revenue & Customs. They know that it costs them money to deal with Self Assessment (SA) tax returns and they will normally try to keep people out of SA if taxpayers don’t really need to be in the regime – but thanks to the Chancellor, there will probably now be hundreds of thousands of taxpayers who have to fill in tax returns for the first time.

And I think it’s clear that they would prefer taxpayers not to be in the regime: they point out in their press release - Time is Running Out for Higher Income Parents to Register for Self Assessment that taxpayers can come out of Self Assessment later on by giving up Child Benefit completely; although I think I’d have preferred them to emphasise that despite the tax charge, Child Benefit may still make many people better off.

I also think that HMRC could have done better to point out that, strictly, a “failure to notify” penalty is only on the tax underpaid by the Self Assessment deadline of 31 January. So, if a taxpayer caught by the new charge misses the notification deadline, they can still avoid a penalty if they make sure they have paid their tax liability in full by the due date. Of course, HMRC will not want people contacting them in the last week in January, asking to set up an SA tax file!

For those who miss the opportunity and are potentially caught out, I think there are some real problems for HMRC when it comes to charging penalties – for instance, can they say that people have acted unreasonably, if hundreds of thousands of them miss the deadline? Is it reasonable then for them to be charged a penalty? And is it reasonable for one taxpayer to be charged a penalty if it’s another taxpayer who actually received the Child Benefit? There may be some interesting cases coming out in the tax tribunals if people contest their penalties – assuming, of course, that there is sufficient capacity for them to be heard.”