HM Revenue and Customs

3. Mr L complains HMRC imposed Failure to Notify (FTN) penalties in December 2017 when it found him liable for High Income Child Benefit Charge (HICBC).

4. Mr L also complains HMRC is still trying to recover the HICBC and FTN penalties from him. Mr L believes he paid off the amounts in October 2020.

5. Mr L says HMRC’s actions have caused him significant stress and made him physically ill. He says he has spent a long time trying to resolve the issues.

6. As an outcome to his complaint Mr L would like HMRC to cancel any outstanding penalties and refund the penalties he has already paid. He would also like HMRC to pay him a financial remedy for the emotional impact of what happened.

7. HMRC pays Child Benefit to a parent or carer of a child under the age of 16. If the parent or carer earns over a certain amount then their Child Benefit entitlement reduces. The Child Benefit system is not designed to pay reduced payments. This means the recipient must pay back some or all the benefit to HMRC. This is HICBC.

8. HMRC contacted Mr L in December 2017 and said he owed HICBC for the 2013-14, 201415 and 2015-16 tax years. HMRC said it was also charging him an FTN penalty because he had not told it he was earning above the threshold for reduced Child Benefit.

FTN penalties

12. Mr L believes HMRC should not have imposed FTN penalties in 2017.

13. The law says we cannot investigate a complaint where a person has (or had) the option to take legal action, unless we consider this is (or was) unreasonable in the circumstances.

14. We have discussed this with Mr L to understand his circumstances and the outcomes he wants. We do not consider whether legal action would succeed but whether it was a reasonable option to have pursued at the time.

15. As an outcome to his complaint Mr L would like HMRC to remove the FTN penalties. He would also like it to pay him financial remedy for the emotional impact he has experienced due to how long this problem has gone on for.

16. HMRC contacted Mr L on 8 December 2017. HMRC explained it was charging him £619.90 of FTN penalties because he did not tell it he was liable for HICBC.

17. Mr L challenged the FTN penalties in his letter to HMRC dated 14 December. HMRC responded on 16 January 2018 and explained it had not changed its decision. It also said he could request a review from HMRC within 30 days if he disagreed. Alternatively, he could appeal to a tribunal. Mr L did not reply to HMRC or approach a tribunal.

18. Approaching a tribunal is the established route to challenge FTN penalties. The tribunal can instruct HMRC to remove penalties. However, it cannot ask HMRC to pay redress for the emotional impact Mr L has told us about. Despite this, by removing the FTN penalties the tribunal could have effectively prevented the emotional impact Mr L claims.

19. With this in mind, Mr L could have taken legal action to achieve the outcomes he wants.

20. It is likely the tribunal route is no longer open to him due to the time that has passed. However, as the option was available at the time we have considered whether it would have been reasonable for him to pursue then.

21. Mr L explained he did not approach a tribunal at the time because he did not know about the tribunal, and even if he did, he could not afford it.

22. The letters HMRC sent to Mr L at the time clearly direct him to appeal its decision at a tribunal if he disagrees. Therefore, he reasonably knew about this option in 2017.

23. Furthermore, tribunals are generally less formal and are designed to be more accessible. This means Mr L could have represented himself. Whilst an individual can get legal representation for a tribunal, it is not essential. Regardless, it would have been reasonable for Mr L to investigate this possibility further and there is no indication he did so.

24. Therefore, we consider it was reasonable for Mr L to appeal HMRC’s decision at a tribunal when directed. He did not do so, and we cannot identify a good explanation for not pursuing legal action when signposted.

25. Furthermore, HMRC imposed the penalties in 2017. Mr L approached his MP with this issue in 2025. He is therefore significantly outside our one-year time limit. We have not seen a reasonable explanation for that delay either. It means if Mr L did not have a legal route to address this problem, then it is unlikely we could consider this issue.

HICBC

26. Mr L believes he has paid off all the money he owes HMRC. This includes the HICBC, as well as the associated FTN penalties. Mr L has provided several screenshots of his online self-assessment account that show no penalties are due. He has also provided his paper statement showing the same thing.

27. Before we decide if we should conduct a detailed investigation, we look at whether there are signs the organisation has got something wrong. We do this by comparing what should have happened with what did happen.

28. Our Principles set out that organisations should act according to their statutory powers and duties. Therefore, HMRC has an obligation to collect any money that is due.

29. HMRC’s complaint response explained Mr L paid all the HICBC he owed. It added that although Mr L has paid back this money, he had not paid the FTN penalties.

30. On 25 January 2018, Mr L reached an arrangement with HMRC to pay the HICBC and the FTN penalties in instalments. The amount totalled £4,907.91.

31. HMRC and Mr L extended the arrangement on 1 February to include tax he owed from the previous tax year. This increased the total he would pay under the arrangement to £6,537.96. Mr L was paying £200 per month and the last payment was due on 1 October 2020.

32. Mr L called HMRC in April 2020 to query a refund HMRC paid him, as it was less than he expected.

33. HMRC explained it used £865 of the refund to pay off some of the money he owed, specifically unpaid HICBC and self-assessment taxes. It told Mr L he no longer had any HICBC or self-assessment tax debt.

34. However, HMRC has several computer systems to track how much money an individual owes. There is one system that deals with self-assessment returns and HICBC amounts. There is a separate system that holds FTN penalties.

35. The adviser did not check the second system that stored Mr L’s FTN penalties. This meant they missed an opportunity at this point to tell Mr L about this money which he had not paid off. The different systems holding these amounts explains why Mr L’s self-assessment account does not show the FTN penalties.

36. Mr L called HMRC the following month and said he was struggling to make the agreed £200 payments. HMRC explained his FTN penalties were still unpaid but suspended the arrangement. This meant Mr L never paid off the entire amount.

37. In total, Mr L paid HMRC £5,000 over 25 monthly instalments. Along with the money HMRC took from the refund, he paid off £5,865. Given the total amount of HICBC, self-assessment tax and FTN penalties, Mr L owed £6,537.96. This means there was an unpaid balance of £672.96.

38. As Mr L had not paid the total amount he owes, we consider HMRC acted in line with relevant guidance by trying to recover this money from him.

39. Despite this, we recognise HMRC provided inaccurate information about the amounts Mr L owed. This does not excuse him from paying the FTN penalties, but we understand the stress it has caused him. We recognise the frustrating experience he has had.

40. Mr L did not complain to us about how HMRC communicated with him. However, we are pleased to see the AO’s investigation identified HMRC’s communication errors.

41. Complaints and Remedy Guidance sets out HMRC should take steps to stop the same problem happening again when it gets things wrong. It should also make a payment to acknowledge the effects of mistakes and delays. These payments usually range between £25 and £500 depending on how significant the impact has been.

42. We are also pleased to see the AO recommended service improvements and asked HMRC to pay Mr L a financial remedy. We consider this sufficiently puts right HMRC’s poor communication in line with relevant guidance.

1. We have carefully considered Mr L’s complaint about HM Revenue & Customs (HMRC). We have decided Mr L could reasonably have taken legal action on one part of his complaint. We also consider nothing went wrong with the other part of his complaint.

2. We recognise how frustrating Mr L has found the problems he experienced and how the stress of what happened has affected his day-to-day life.