Correct approach to quantifying potential lost revenue

In 2012-13 2013-14 and 2014-15 Mrs Robertson received child benefit. Her husband who was the higher earner had income of more than £50 000. Both were taxed under PAYE and were not registered for self assessment. They did not elect to stop receiving the benefit and did not notify chargeability to tax. HMRC decided the high income child benefit charge applied. It issued assessments for the relevant years and also penalties for failure to notify chargeability. 

Mr Robertson appealed against the penalties. The First-tier Tribunal allowed this so HMRC appealed to the Upper Tribunal.

At the hearing HMRC said it accepted the penalties should be charged at 10% of the potential lost revenue rather than 20%. 

The Upper Tribunal said FA 2008 Sch 41 para 7 defined potential lost revenue as: ‘So much of any income tax … to which P is liable in respect of...