HMRC is set to issue thousands of pounds of refunds to taxpayers who were unfairly penalised for failing to notify HMRC that they were liable to the Higher Income Child Benefit tax charge.

Accountants and tax advisers Blick Rothenberg say that many higher income taxpayers receiving Child Benefit may have wrongfully received a HMRC penalty because of the oversight.

Nimesh Shah, a partner at the firm said: “HMRC will be reviewing cases going back to 2013 and will issue refunds where they find the individual had 'reasonable excuse' for not notifying HMRC.  This is good news for those taxpayers who were not aware of the rules and received a penalty.”

The High Income Child Benefit charge was introduced by the Coalition and affects individuals who have income over £50,000. 

For every £100 of extra income over £50,000, 1% of Child Benefit payments is taken back until income reaches £60,000 when the Child Benefit payments are completely clawed back.

Mr Shah added: “HMRC says that they will be looking at cases where the penalties that were issued at the time were not appropriate – this is likely to be where the individual did not receive any relevant communication from HMRC that they could be affected by the rule change.”

The High Income Child Benefit charge came into effect during the 2012/13 tax year, from 7 January 2013, and many taxpayers were unaware of it. 

Affected individuals should have notified HMRC by 5 October 2013 that they needed to pay the charge and complete a tax return by 31 January 2014 but thousands did not know or did not receive notice. Despite this HMRC issued penalties and demands to thousands of taxpayers.

Mr Shah has encouraged taxpayers who might be affected to follow-up with HMRC to ask if they will receive a refund despite HMRC saying it will make refunds automatically.

Becky O’Connor, personal finance specialist at Royal London, added: “The Revenue did not communicate the charge properly at the time it was introduced in 2013.  As a result, many parents found they not only had to pay back thousands of pounds in tax through self-assessment returns they didn’t know they had to produce, they were also whacked with late payment fines.”

“It’s right and proper that HMRC has changed its mind and will be refunding unfair penalty fines.  These were paid by parents who were unknowingly dragged into a liability for a charge they were never properly told about.”