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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Zzaman v Revenue and Customs (HICBC - discovery assessment) [2025] UKFTT 539 (TC) (03 April 2025)
URL: https://www.bailii.org/uk/cases/UKFTT/TC/2025/TC09520.html
Cite as: [2025] UKFTT 539 (TC)

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Neutral Citation: [2025] UKFTT 539 (TC)

Case Number: TC09520

FIRST-TIER TRIBUNAL

TAX CHAMBER

By remote video hearing

 

Appeal reference: TC/2023/16087

 

Keywords HICBC - discovery assessment - application of section 97 Finance Act 2022 - whether assessment validly made - yes– dangers of the use of AI to produce statement of case - appeal dismissed.

 

Heard on: 17 March 2025

Judgment date: 3 April 2025

Before

 

TRIBUNAL

 

JUDGE DAVID HARKNESS

HANNAH DEIGHTON

 

 

Between

 

BODRUL ZZAMAN

Appellant

and

 

THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS

Respondents

 

Representation:

 

For the Appellant:         Mr Zzaman in person

 

For the Respondents:    Mr Max Simpson, Litigator of HM Revenue and Customs' Solicitor's Office

 


DECISION

Introduction

1.             The hearing took place on 17 March 2025 using the Teams Video system.  The documents to which we were referred were an appeal bundle of 499 pages (including within it a statement of case from by Mr Zzaman), an authorities bundle of 878 pages and an 8 page request for further and better particulars,  all prepared by HMRC.  We also had an email from Mr Zzaman dated 12 March 2025 and an email from HMRC dated 17 March 2025 attaching additional case law authorities.  We heard witness evidence from Mr Zzaman,  Ms Elizabeth Butler and Mr Richard Lambert.

2.              Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings.  As such, the hearing was held in public.

Decision

3.             The Tribunal decided that the appeal in respect of tax in the amount of £2,501 for tax year 2018-19 should be dismissed.

Summary

4.             This was an appeal against a discovery assessment made under s29 Taxes Management Act 1970 ("TMA") in the amount of £2,501 in respect of the High Income Child Benefit Charge ("HICBC") for tax year 2018-19.  Originally HMRC had assessed additional amounts for tax years 2013-14 to 2017-18 and penalties under Schedule 41 Finance Act 2008 for tax years 2013-14 to 2018-19 but these tax charges and penalties were dropped by HMRC before the hearing. 

5.             Mr Zzaman's argument was that he should not suffer a HICBC tax charge for 2018/19. Mr Zzaman put forward a variety of reasons which are set out in more detail below, but in summary Mr Zzaman asserted that the case of HMRC v Jason Wilkes [2021] UKUT 150 (TCC) ("Wilkes") applies to his circumstances; the retrospective legislation in s97 Finance Act 2022 was unfair; calculating adjusted net income ("ANI") was difficult especially for a PAYE employee like him with fluctuating income; HMRC had access to all of his income and tax records and therefore ought to have notified him of any additional liabilities; and that HICBC itself was unfair and breached his and his wife's human rights.    

6.             While we appreciated the passion and eloquence with which Mr Zzaman put forwards his arguments and the ingenuity of the AI tool that he had used to help prepare his submissions, we were not persuaded that his arguments gave us grounds to allow the appeal.

Findings of fact

7.             We found the following facts which were not disputed:

(1)          For tax year 2018-19, Mr Zzaman had income in excess of his spouse, did not file a self-assessment tax return, had adjusted net income in excess of £50,000 and was in receipt of child benefit;

(2)          On 23 April 2021, HMRC Officer Cain identified that Mr Zzaman had not notified chargeability to the HICBC for the tax year 2018-19 and that there was a loss of tax in respect of that tax year;

(3)          Having identified those facts, on 23 April 2021 Officer Cain was able to decide that Mr Zzaman had a liability to HICBC which had not been declared;

(4)          Accordingly, on that date, Officer Cain had discovered income which ought to be chargeable to income tax which had not been assessed or declared;

(5)          On 3 June 2021, Officer Cain wrote to Mr Zzaman, alerting him to the fact that he had not notified his liability to HICBC and inviting him to contact HMRC, explaining that, if he did not, HMRC would issue assessments for the tax they considered to be due for various years including 2018-19;

(6)          On 11 June 2021, Mr Zzaman contacted HMRC by telephone (twice) regarding how he should calculate his ANI. Information regarding this was provided to him and he was advised to contact HMRC once he had completed his calculations;

(7)          On 6 January 2023, HMRC wrote to Mr Zzaman providing an update on his case (while the letter did not say so expressly, this was in the light of the pause in HMRC's HICBC work following the Wilkes case), inviting him to provide information to HMRC and explaining that, if he did not, assessments would be issued;

(8)          On 20 January 2023, Mr Zzaman contacted HMRC providing the requested information and disclosing his ANI for 2018-19 (and other years not relevant to this appeal);

(9)           On 24 January 2023, Officer Tavener issued an assessment (the "Assessment") in respect of tax year 2018-19 in the amount of £2,501;

(10)      On 2 February and 15 March 2023 Mr Zzaman contacted HMRC by telephone, among other things confirming receipt of the Assessment;

(11)      On 8 May 2023, Mr Zzaman appealed the Assessment to HMRC and on 26 October 2023 Mr Zzaman lodged an appeal in respect of the Assessment with the Tribunal.

Law

Self-Assessment regime

8.             Under the self-assessment regime, the onus is primarily on the taxpayer to make and file tax returns containing the information reasonably required in order to establish the amounts of income tax for which that taxpayer is chargeable.

Discovery Assessments

9.             There are limited circumstances in which HMRC may issue assessments where a return has not been made or is incomplete or inaccurate. Section s29(1) TMA as now in force provides:

(1)          If an officer of the Board or the Board discover, as regards any person (the taxpayer) and a year of assessment:

(a) that an amount of income tax or capital gains tax ought to have been assessed but has not been assessed,

(b) that an assessment to tax is or has become insufficient, or

(c) that any relief which has been given is or has become excessive,

the officer or, as the case may be, the Board may, subject to subsections (2) and (3) below, make an assessment in the amount, or the further amount, which ought in his or their opinion to be charged in order to make good to the Crown the loss of tax.

10.         Sub-paragraphs 29(2) and (3) cover the situation where the taxpayer has made a return and are not relevant here since Mr Zzaman had not made a return. 

11.         The ordinary time limit for making an assessment is set out at s34 TMA:

   "34(1) Subject to the following provisions of this Act, and to any other provisions of the Taxes Acts allowing a longer period in any particular class of case, an assessment to income tax or capital gains tax may be made at any time not more than 4 years after the end of the year of assessment to which it relates".

12.         The burden of proof is on HMRC to show that a loss of tax has been discovered, but if that is shown, the burden falls to Mr Zzaman to show that the assessment is incorrect. 

13.         In Jerome Anderson v HMRC [2018] UKUT 159 (TCC), the Upper Tribunal provided helpful guidance on the tests which must be met for a discovery to have been made for the purposes of s29(1) TMA.  The concept of a "discovery" by an officer involves the application of a subjective test, as to the officer's state of mind, and an objective test as to whether it is open to an officer to have that state of mind.  The subjective test is that the officer must believe that the information available to them points in the direction of there being an insufficiency of tax: "something more than suspicion of an insufficiency of tax [but] it need not go so far as a conclusion that an insufficiency of tax is more probable than not".  The objective test is that the officer's belief is one which a reasonable officer could form. We therefore approached this issue using two questions: (a) did the Officer believe that there was an insufficiency? and (b) was that belief one which a reasonable officer could form?

Amendments to s29

14.         The words in s29(1)(a) TMA were amended by Finance Act 2022 following the decision in Wilkes. Section 97 Finance Act 2022 provides that the amendment has effect for tax year 2020-21 and earlier years but only if the discovery assessment is a "relevant protected assessment".  A discovery assessment is a relevant protected assessment in respect of HICBC in certain circumstances.  So far as relevant, s97 provides:

(5) But a discovery assessment is not a relevant protected assessment if it is subject to an appeal notice of which was given to HMRC on or before 30 June 2021 where-

(a) an issue in the appeal is that the assessment is invalid as a result of its not relating to the discovery of income which ought to have been assessed to income tax but which had not been so assessed, and

(b) the issue was raised on or before 30 June 2021 (whether by the appellant or in a decision given by the tribunal).

(6) In addition, a discovery assessment is not a relevant protected assessment if

(a) it is subject to an appeal notice of which was given to HMRC on or before 30 June 2021,

(b) the appeal is subject to a temporary pause which occurred before 27 October 2021, and

(c) it is reasonable to conclude that the temporary pausing of the appeal occurred (wholly or partly) on the basis that an issue of a kind mentioned in subsection (5)(a) is, or might be, relevant to the determination of the appeal.

(8) For the purposes of this section an appeal is subject to a temporary pause which occurred before 27 October 2021 if--

(a) the appeal has been stayed by the tribunal before that date,

(b) the parties to the appeal have agreed before that date to stay the appeal, or

(c) HMRC have notified the appellant ("A") before that date that they are suspending work on the appeal pending the determination of another appeal the details of which have been notified to A.

          (9) In this section ... "notified" means notified in writing.

Mr Zzaman's Statement of Case

15.         Mr Zzaman confirmed that his written statement of case had been prepared with the assistance of AI.  The statement set out a number of grounds on which Mr Zzaman asserted his appeal should succeed.  In certain respects these grounds were unclear (we inferred this was because the statement had been generated using AI) and Mr Zzaman could not expand on these significantly in his oral presentation.  We set out below our summary and analysis of the various grounds of appeal advanced in Mr Zzaman's statement of case.  For convenience we have briefly summarised each of Mr Zzaman's assertions, followed by the case law cited in support and our observations on the arguments advanced.

Ground one

16.         Mr Zzaman's appeal should succeed on the same basis as the taxpayer in Wilkes and the changes to s29 TMA should not apply retrospectively to Mr Zzaman because the retrospective element of this legislation is unfair and violates the rule of law.

17.         In support of this proposition Mr Zzaman cited Wilkes, R v R [1992] 1 AC 599; R (on the application of Bhatt Murphy) v Independent Assessor [2008] EWCA Civ 755; Unilever Italia SpA v Central Foods (2000) C-443/98 [2000]; and National & Provincial Building Society v United Kingdom [1997] 25 EHRR 127. The Unilever citation given by Mr Zzaman in his statement of case was "[2000] 2 ALL ER 804" which was a citation neither the Tribunal nor HMRC was able to locate.  The nearest case name and details is that cited here and it is that case which the tribunal considered in evaluating Mr Zzaman's arguments.

18.         We carefully considered the cases cited by Mr Zzaman in support of this proposition.

(1)          R v R concerns the question of whether a husband attempting sexual intercourse with his wife against her will was immune from a charge to attempted rape; it is an important House of Lords decision in the context of the development of the common law in the light of changing circumstances but of tangential relevance at best to this appeal.

(2)          R (on the application of Bhatt Murphy) v Independent Assessor concerns the legitimate expectations in relation to miscarriages of justice; in this appeal legitimate expectation within the meaning of that case did not appear to us to be a relevant factor. But even if it had been, questions of legitimate expectation and detrimental reliance are ones over which this tribunal has no jurisdiction; such questions would have to be brought by way of judicial review in the High Court.

(3)          Unilever Italia is a case of the European Court of Justice concerning whether a national court is required, in civil proceedings between individuals concerning contractual rights and obligations, to refuse to apply a national technical regulation; we could not see its relevance to this appeal. 

(4)          National & Provincial Building Society v United Kingdom is a European Court of Human Rights case concerning whether retrospective tax legislation was lawful; that is a more relevant issue to this case although we noted that in that case the court found that the retrospective legislation was lawful. 

In summary we did not find that any of these cases materially assisted us in considering this appeal.

19.         In relation to this ground of appeal, we found that the arguments put forward by Mr Zzaman were not persuasive. In contrast, we considered that retrospective legislation in the United Kingdom in the field of taxation is not in principle unlawful. While it is uncommon, there have been many examples of such legislation and the principle that this is potentially lawful is  recognised in the so called "Rees Rules".   Mr Zzaman did not put forwards any persuasive reasons why the retrospective legislation in s97 Finance Act 2022  was unlawful.

Ground two

20.         This assertion was in summary that the calculation of ANI for HICBC is difficult, especially for a person with fluctuating income.  This argument was principally advanced in Mr Zzaman's statement of case in relation to whether Mr Zzaman had a reasonable excuse in relation to the penalties HMRC had originally raised but which had been dropped before the hearing.  It did not seem to us that this assertion provided a ground of appeal in relation to the appeal we were hearing.  That it may be difficult to calculate a tax liability does not provide grounds for the tax liability not to arise.

Ground three

Mr Zzaman asserted that HMRC had access to details of his income and tax records through the PAYE system and therefore could have notified him of any discrepancies or additional liabilities. He had no reason to believe he owed any tax in relation to HICBC because HMRC did not flag any issues with him at the time. Mr Zzaman asserted, citing as authority Garnmoss Ltd trading as Parham Builders v HMRC [2012] UKFTT 315 (TC) and HMRC v Hok Ltd [2012] UKUT 363 (TCC) that HMRC has a duty to clearly communicate tax obligations to taxpayers and disputed that he had received "nudge letters" from HMRC in relation to the HICBC.  Garnmoss concerns whether a surcharge period for VAT had been communicated to the taxpayer and Hok whether HMRC had timeously notified a taxpayer of a default.  These are both instances where the relevant legislation puts an onus on HMRC to notify a taxpayer for a liability to arise. Neither case seemed to us to be authority for a general proposition that HMRC has an obligation to notify a taxpayer of a liability to HICBC.  We could find no authority for that proposition. In our judgment, HMRC have no general duty to inform a taxpayer whether they are liable to the HICBC. It is up to the taxpayer to monitor their own financial situation. This is the case even if, as will invariably apply where a taxpayer is on PAYE, HMRC have a record of the taxpayer's earned income.

Ground Four

21.             Mr Zzaman asserted that the contact he had made with HMRC on 11 June 2021 to clarify how Adjusted Net Income  would be calculated made it clear that he intended to appeal once he had gathered all the relevant figures. He asserted that this meant he should be able to benefit from the Wilkes decision and (in effect) that the Assessment was not a relevant protected assessment for the purposes of s97 Finance Act 2022. 

22.         Section 97(5) prevents an assessment from being a relevant protected assessment in certain circumstances but only if it is subject to an appeal "notice of which was given to HMRC on or before 30 June 2021".  For this purpose, an appeal must be in writing (see s31A(1)(a) TMA).  Mr Zzaman's contact with HMRC in June 2021 was not in writing and was made before he had been assessed in respect of HICBC.  Therefore we concluded that the contact he had made with HMRC on 11 June 2021 did not preclude the Assessment from being a relevant protected assessment.  There was no suggestion that a "temporary pause" was in place precluding the Assessment from being a relevant protected assessment by reason of s97(6). 

Ground Five

23.          Mr Zzaman asserted that HICBC is unfair since it unfairly penalises single-income families. While we were sympathetic to this point, it did not seem to us that it gave grounds for Mr Zzaman's appeal to succeed. While a taxpayer may believe the law is unfair or unjust (either in its general application or in its specific application to their circumstances), the Upper Tribunal in HMRC v Hok [2012] UKUT 363 has made it clear that this tribunal cannot consider whether the law is fair or not.

24.         In support of this assertion, Mr Zzaman's statement  relied on James Robertson v HMRC [2019] UKFTT 158 (TC)  which did not appear to us to be relevant to the issue.  Mr Zzaman's statement also cited Stewart v Secretary of State for Work and Pensions [2003] EWCA Civ 635 as authority for this assertion.  We were unable to locate a case with that name and citation.  The nearest match we could find to this citation was Faith Stewart v Secretary of State for Work and Pensions [2011] EWCA Civ 907, a case in which human rights issues were considered in the context of the secretary of state's refusal to provide a funeral payment to a prisoner because she was not in receipt of a qualifying benefit; while this was held to be indirectly discriminatory, the secretary of state was found to have established a rational justification for the discriminatory treatment.  In any event this case did not seem to us to bear on the issue at hand in this appeal.

Ground six

25.         Mr Zzaman asserted that the penalties imposed by HMRC were excessive and disproportionate, particularly given that his failure to notify was due to a genuine misunderstanding. Since HMRC had dropped their penalty charges before the hearing, this ground was not relevant to the appeal we were considering.

Ground seven

26.         Mr Zzaman asserted that the HICBC violated his family's right to family life  under  Article 8 of the European Convention on Human Rights (ECHR) on the grounds that the charge discriminates against families where one partner stays at home to care for children, undermining Mr Zzaman's financial stability and family life.  In support of this assertion Mr Zzaman cited National & Provincial Building Society v United Kingdom.  As noted above, although this case is relevant to whether retrospective legislation may be lawful, it did not seem to us that it was authority for the assertion in Mr Zzaman's statement that the HICBC violated his family's right to family life  .

27.         In contrast we were referred by HMRC to Brian Lynch v HMRC [2025] UKFTT 300 (TC), a recent First Tier Tax Tribunal case.  Lynch considered, among other things, a Human Rights challenge to the HICBC. Mr Zzaman's assertions relating to Human Rights aspects of this appeal were not entirely clear to us.  However, we observed that in Lynch between [103] and [130] the tribunal went through a detailed examination of whether the imposition of the HICBC breached Mr Lynch's human rights; and if so whether there is a human rights compatible interpretation of the HICBC legislation pursuant to s3 Human Rights Act 1998.  The tribunal in Lynch found that HICBC did not breach Mr Lynch's human rights.  We could see nothing in Mr Zzaman's assertions that would lead us to any other conclusion in relation to his human rights.

Conclusion on Mr Zzaman's statement of case

28.         We accepted that Mr Zzaman was honest and straightforward.  The points he made about the unfairness of HICBC and his view on the arbitrariness of the retrospective aspects of s97 Finance Act 2022 were rational and heartfelt.  He readily accepted he had used AI to assist him to find cases to support his arguments because he did not have the skills to look for them.  It was logical and reasonable to use AI to assist with his case preparation.

29.         However, our conclusion was that Mr Zzaman's statement of case, written with the assistance of AI, did not provide grounds for allowing his appeal.  Although some of the case citations in Mr Zzaman's statement were inaccurate, the use of AI did not appear to have led to the citing of fictitious cases (in contrast to what had happened in Felicity Harber v HMRC [2023] UKFTT 1007 (TC)).  But our conclusion was that the cases cited did not provide authority for the propositions that were advanced.  This highlights the dangers of reliance on AI tools without human checks to confirm that assertions the tool is generating are accurate. Litigants using AI tools for legal research would be well advised to check carefully what it produces and any authorities that are referenced.  These tools may not have access to the authorities required to produce an accurate answer, may not fully "understand" what is being asked or may miss relevant materials.  When this happens, AI tools may produce an answer that seems plausible, but which is not accurate.  These tools may create fake authorities (as seemed to be the case in Harber) or use the names of cases to which it does have access but which are not relevant to the answer being sought (as was the case in this appeal).  There is no reliable way to stop this, but the dangers can be reduced by the use of clear prompts, asking the tool to cite specific paragraphs of authorities (so that it is easy to check if the paragraphs support the argument advanced), checking to see the tool has access to live internet data, asking the tool not to provide an answer if it is not sure and asking the tool for information on the shortcomings of the case being advanced. Otherwise there is a significant danger that the use of an AI tool may lead to material being put before the court that serves no one well, since it raises the expectations of litigants and wastes the court's time and that of opposing parties. 

Points made in oral argument.

30.         In oral argument, Mr Zzaman made various points concerning the basis upon which taxpayers are chosen for investigation in relation to HICBC matters. We did not consider that the points made were relevant to the validity of the Assessment.

Reasons for the Decision

31.         Having considered Mr Zzaman's arguments, we went on to consider if the Assessment was validly made within the applicable time limits in the light of the facts we had found.

32.         The Assessment was made by HMRC Officer Tavener in respect of tax year 2018-19 on 24 January 2023, that being within 4 years of the end of that tax year (and therefore within the period set out in s34 TMA).

33.         The Assessment was based on a discovery made on 23 April 2021 by HMRC Officer Cain.  Since the Assessment was not made by the same HMRC officer, we considered whether that affected the validity of the Assessment. We were referred to two cases concerning HICBC discovery assessments in relation to this issue: Paul Brown v HMRC [2024] UKFTT 245 (TC) and David Thompson v HMRC [2024] UKFTT 375.  In Brown, the tribunal considered circumstances similar to those of this appeal where it was clear that the officer who made the discovery had not made the assessment.  In that case, the tribunal decided, on the basis of the Supreme Court decision in HMRC v Tooth [2021] UKSC 17, that the assessment was invalid. The tribunal took the view that Tooth required that either the discovering officer must also make the assessment or HMRC must rely upon s2(4) Commissioners of Revenue and Customs Act 2005.  Section 2(4) states that "Anything (including anything in relation to legal proceedings) begun by or in relation to one officer of Revenue and Customs may be continued by or in relation to another".  The tribunal found that s29(1) could not apply because there was no evidence as to which officer within HMRC made the s29(1) assessment, and whether they made the assessment following their own "refreshed" discovery of Mr Brown's liability to HICBC.

34.         The facts in Thompson were similar but in contrast to Brown, it was clear in Thompson both which officer made the discovery and which officer made the assessment, and it was therefore found that the assessments were validly raised and issued following the discovery.

35.         In the present appeal, it is clear that Officer Cain made the discovery and Officer Tavener issued the Assessment.  We concluded that that the process of discovery and assessment was part of a continuum of activity, that s2(4) applied and that the Assessment was validly issued.

36.         We considered whether the discovery made by Officer Cain met the subjective and objective tests set by Jerome Anderson v HMRC.  We concluded that on the basis of the information available to him, Officer Cain subjectively considered that there was an insufficiency of tax and that objectively that was a belief a reasonable officer could form. Accordingly we concluded that the discovery was properly made.

37.         It was not disputed that Mr Zzaman had received ANI and child benefit in the amounts used to calculate the Assessment, that Mr Zzaman's ANI exceeded that of his spouse and that Mr Zzaman had not filed a self-assessment tax return.

38.         We therefore concluded that the Assessment was validly issued in the correct amount.

conclusion

39.         Accordingly we concluded that we should dismiss the appeal.

Right to apply for permission to appeal

40.         This document contains full findings of fact and reasons for the decision.  Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.  The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to "Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)" which accompanies and forms part of this decision notice.

 

 

Release date: 03rd APRIL 2025


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