Tax credits and living together: ‘here we go again’

Issue 251 (April 2016)

Ros White considers the ‘extensive catalogue’ of Upper Tribunal decisions highlighting failures by HMRC and the First-tier Tribunal in tax credits ‘living together’ cases

Introduction

Introducing NI V HMRC [2015] UKUT 490 (AAC), Judge Wikeley says: ‘Well, here we go again.

'This is another case in which HMRC has stopped a female claimant’s tax credits award on the basis that she was not, as she said, a lone parent, but rather was living with the father of her children.

This is also another case where, regrettably, the First-tier Tribunal has failed to interrogate the case put by HMRC with sufficient rigour.’

Judge Wikeley goes on to cite examples from the ‘extensive catalogue of such cases’ before observing that: ‘I doubt it will be any consolation to the Appellant in the present case to know thatshe has not been alone in her experience.’

This article summarises the key points arising from the growing number of Upper Tribunal decisions concerning a decision by HMRC that a single claimant was, in fact, living as part of a couple.1

Burden of proof

There have been a number of cases which have found that both HMRC and the First-tier Tribunal were wrong to place the burden of proof on the claimant to show that she was not part of a couple.

In NI v HMRC, Judge Wikeley agrees with HMRC’s submission to the Upper Tribunal that the burden of proof is on HMRC to establish that there are grounds for revising a decision2 that a claimant is entitled to tax credits as a single person, and that the same burden of proof applies to the First-tier Tribunal.

This is also confirmed by Judge Ovey in TS v HMRC [2015] UKUT 507 (AAC) and Judge Wright in SB v HMRC [2014] UKUT 543 (AAC).

In SB v HMRC, Judge Wright also says that he fails to see how grounds for revising a decision can arise from a negative (ie, a failure to provide evidence on the part of the claimant) without any positive evidence as to the claimant not being single.

The need for evidence

In AK v HMRC [2016] UKUT 98 (AAC), Judge Rowland considers a case where the decision that a claimant was living with someone was based largely on the ‘financial footprint’ of the other person, as provided by Equifax, a credit reference agency.

Judge Rowland comments that, while the evidence raised a number of questions for the claimant to answer:

‘… what is striking about this case is the complete failure of HMRC to ask the necessary questions before making its decision. Realistically, that probably required HMRC to interview the claimant and put to her the inferences it drew from the Equifax reports, rather than ask questions in writing, but it scarcely attempted even the latter, seemingly expecting all the material answers to emerge from documentary evidence. As is now conceded, HMRC had an obligation to ask the material questions. This is clear from what Baroness Hale of Richmond, with whom the other members of the House of Lords agreed, said in Kerr v Department for Social Development [2004] UKHL 23…’ (paragraph 6).

In addition, in TS v HMRC, Judge Ovey says that caution should be exercised as to reliance on the ‘financial footprint’ where the question concerns separation between a husband and wife. This is because it is very likely that there will have been joint financial arrangements – relating to, for example, banking, mortgages and payment of bills – and there may be a number of reasons why names may not have been changed apart from lack of separation.

Failure to consider evidence

In SW v HMRC [2015] UKUT 394 (AAC), Judge Wikeley says that the claimant had been ‘badly let down’ by HMRC when it revised her entitlement to tax credits as a single person and comments that ‘this is yet another case where neither HMRC nor the Tribunal has adequately considered the evidence before it.’ Judge Wikeley goes on to find that the claimant had provided ample evidence of her status as a single person at the relevant time, the most compelling of which was a child protection plan under which the person she was alleged to be living with was not allowed to enter her home while her children (who were staying elsewhere for a maximum oftwonights a week) were present. As a result, Judge Wikeley sets aside the decision of the tribunal and remakes it to the effect that the claimant was entitled to tax credits as a single person at the relevant time.

Inadequate HMRC submissions

In CS v HMRC [2015] UKUT 407 (AAC), Judge Hemingway highlights a number of inadequacies in HMRC’s submission to the First-tier Tribunal, including that it did not set out the decision making powers it had relied on, did not provide any of the documentation it had relied on and erroneously stated thatthe claimanthad not replied to a request for further information.

Judge Hemingway goes on to hold that the tribunal erred in law by proceeding on the basis of ‘woefully inadequate documentation and a woefully inadequate submission’ and that, as a minimum, it should have adjourned to obtain further submission from HMRC and to hold an oral hearing of the case, despite the fact that the claimant had said she was happy for the appeal to be heard on the papers.

Similarly, introducing JW v HMRC [2016] UKUT 369 (AAC), Judge Wright says that it was ‘yet another case that falls into the litany of cases in which the dreadful quality of HMRC’s appeal response to the First-tier Tribunal is a central issue’, before concluding that the First-tier Tribunal had erred in law in failing to explain why it considered itwas fair and just to determine the appeal on the papers notwithstanding the serious omissions in HMRC’s appeal response.

Ros White is the Advice and Rights Manager at Child Poverty Action Group.


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  • 1. For the purposes of s3(5A) Tax Credits Act 2002 2 Under s16(1) Tax Credits Act 2002
  • 2. Under s16(1) Tax Credits Act 2002