HMRC is facing calls to refund thousands of people it chased for extra tax payments as a result of its controversial high income child benefit charge. A tribunal ruled last week that the revenue could not pursue a man for £4,000 back taxes it claimed he owed because of his wife’s child benefit payments. It has led to calls for refunds to others who paid up in similar circumstances. The government introduced the high income child benefit charge (HICBC) in 2013 to claw back some or all of the child benefit paid to couples where at least one partner earned more than £50,000 a year. The new charge led to thousands of people facing tax demands of up to 100% of payments made to their partner. Workers who knew nothing about the charge, or who after receiving a pay rise or a company car found they earned more than the threshold, were chased by HMRC. It is thought that 160,000 people have paid penalties for nonpayment. HMRC has been backdating claims as far as 2013, with more than £2.5bn raised. Last week, one of those chased, Jason Wilkes, challenged HMRC’s right to claim the charge for previous years. It has pursued him for £4,000 based on the fact his wife had received child benefit between 2014 and 2017. Wilkes said he was unaware of the new charge ‒ which HMRC accepted ‒ but also argued its use of the “discovery” powers was unfair in his situation. A “discovery” is a power held by HMRC that allows it to reopen closed periods and issue bills for previous years where it wants to. The upper tribunal found that the tax department could not impose the charge based on discovery assessments where the person liable had not filed a self-assessment tax return for the year in question. It followed a decision in favour of Wilkes by the first-tier tribunal. James Austen, a partner at the law firm Collyer Bristow, which represented Wilkes, says the case has ramifications for thousands of others. “The terrible design of the HICBC left many of the affected taxpayers – in particular those who paid tax by PAYE – simply unaware of it,” Austen says, adding that HMRC has until the end of July to decide whether or not to appeal. If it does not, Austen would expect HMRC to “do the right thing” and refund those in the same boat as Wilkes. “It could accept the tribunal decision but not contact those affected, in which case each person would have bring their own case. Most people will not be able to assess their next steps until HMRC decides how to respond,” he says. HMRC said: “We are considering the upper tribunal’s decision. All of the taxpayers who have been assessed are still liable to the HICBC, and nothing in the tribunal’s judgment calls that into question. “It is for the taxpayer to notify HMRC when they are liable to HICBC, and we will continue to contact customers where we can to inform them they may be liable to pay HICBC to help them get their tax affairs right.” Stefanie Tremain, a director at the tax advisers Blick Rothenberg, says the case could open the floodgates. “HMRC could now see individuals making a claim to recover tax which was wrongly assessed – it’s uncertain how successful such claims would be and HMRC are likely to resist them on the basis that the position was accepted and agreed, but HMRC are now in a difficult position.” How the tax charge works With child benefit, you get £21.15 a week, or £1,100 a year, for the oldest child, and £14 a week, or £728 a year, per additional child. This is clawed back via the tax system if either partner in a couple has an adjusted net income of more than £50,000. The HICBC is 1% of the amount of child benefit for each £100 of income on a sliding scale between £50,000 and £60,000. For those earning more than £60,000, the charge is 100%. The charge is paid by whoever earns above the threshold – not the person receiving the benefit. In some cases, men who had moved in for as little as two years with a new partner and their child found themselves being chased for thousands of pounds even after they had split up. Parents and carers can choose to opt out of getting child benefit payments and avoid it, and many families have done this. However, there are other benefits to claiming it. Each year your claim can be counted as a qualifying year towards your state pension, so it can be worth keeping it on.