Tax credits, appeals and ‘SLANs’

Issue 256 (February 2017)

Mark Willis reviews recent caselaw about attempted appeals against tax credit ‘notices’ referred to by HMRC as ‘Statements Like an Award Notice’ or SLANs.

Introduction

HMRC says that a SLAN (reference TC602(J)) may be issued during the annual review period to adjust a provisional award before an initial decision is made on the new tax year or a final decision has been made on the previous year.1 A SLAN must eventually be followed by an actual award notice containing a formal decision under the Tax Credits Act 2002. For claimants, the distinction is unlikely to be apparent as the SLAN may have already informed them that their payments are being stopped or reduced, and they may have clearly registered their disagreement. HMRC states that there is no right of appeal against a SLAN. Two recent Upper Tribunal decisions reveal exasperation with HMRC conduct and injustice for claimants, but take different approaches to appeal rights.

DG v HMRC [2016] UKUT 505 (AAC)

Judge Wright finds that there is no right of appeal against a SLAN. This case concerned the main responsibility test for a child. The father had received a SLAN dated 12 April 2012, apparently informing him that he did not have main responsibility for the child in question and adjusting his ongoing payments for his other child (although no copy of the SLAN was ever produced). The father had appealed against the SLAN on 27 April 2012. The final decision for 2011/12, which removed entitlement for the child in question, was not made until 7 February 2013. HMRC’s solicitor suggested that the case before the Upper Tribunal could be treated as an appeal against this decision.

Judge Wright finds difficulty with this suggestion, as the appeal submitted on 27 April 2012 could not have been an appeal against a decision some nine months off being made. However, the situation had resolved itself by the time of the decision, with HMRC making an ex gratia payment and writing off the alleged overpayment. Given this, Judge Wright did not need to address whether a subsequent letter from the claimant dated 13 February 2013 ought to have been, or could still be, treated as an appeal against the final decision.

Judge Wright criticises HMRC’s ‘defective procedures’, finding it ‘frankly disgraceful’ that it took until proceedings reached the Upper Tribunal to identify the issue. He claimed that HMRC’s inability to produce a copy of the decision said to be under appeal is ‘unjustifiable’. Judge Wright highlights that, although in this case there was no substantive injustice, other claimants might not be so fortunate and could find thatby time the true state of affairs is revealed, it might be too late to appeal against the actual decision.

 

TM v HMRC [2016] UKUT 512 (AAC)

Judge Wikeley finds thata SLAN is to be treated as a decision, so there is a right of appeal. This case concerned a Hungarian single claimant in receipt of working tax credit. At some point, HMRC appears to have formed the view that he was living with a partner (the judge comments that ‘the basis for this hunch/view/decision is still even today wholly unclear’).

On 13 September 2013, HMRC sent the claimant a letter (reference TC607 ‘Statement of Account’), which stated his tax credits would stop and that he had been overpaid £189.71 in the current (2013/14) tax year. On 23 October 2013, he received a letter (reference TC610, ‘Notice to Pay’).2 The claimant repaid the sum in question as he did not want to get into trouble. On 25 October 2013, HMRC sent yet another letter (reference TC602(J), SLAN), which went on to state he had to repay £2,150.16 for the previous tax year, with no explanation. The claimant rang HMRC on 8 November 2013 and was told that he was thought to be living with a partner. He sent an appeal dated 22 November 2013. It appears that a final decision was made on 12 December 2013, but there is no trace of any such decision. On 22 January 2014, the claimant sent another notice stating he was appealing against the decision dated 25 October 2013. On 12 February 2014, HMRC acknowledged the appeal. However, in July 2014, in a submission to the First-tier Tribunal, HMRC said that the appeal was late and was not accepted.

There followed various directions over 12 months, involving three separate First-tier Tribunal Judges, and inadequate responses from HMRC. By the time of the hearing in July 2015, the First-tier Tribunal Judge dismissed the appeal.

The claimant applied for permission to appeal to the Upper Tribunal. Judge Wikeley ultimately finds that in this case, ‘whatever the terminology, it is important to focus here in substance over form, and the SLAN notice was reasonably understood to be a notification of a decision and the claimant appealed in time against that decision.’ He goes on to allow the appeal and decides that the claimant was entitled to tax credits as a single person at all material times.

Comment

While both decisions referred to Kafka, advisers may find themselves having to use Orwellian doublethink to reconcile the apparent findings of the Upper Tribunal that the answer to the question ‘Is there a right of appeal against a SLAN?’ is simultaneously both yes and no. On closer analysis, it seems the answer is: ‘it depends on the circumstances of the case’.

In DG, the SLAN was followed by a final decision, and there was another party to the appeal (a competing claimant) who would have had an interest in arguing whether the appeal was correctly made, but the matter had been resolved by the time of the Upper Tribunal decision.

In TM, there was no trace of a final decision, the SLAN was reasonably understood to be a decision, and this was the only way the tribunal could address the claimant’s grievance, who was facing an unfounded overpayment of thousands of pounds.

To add a final touch of red tape, both these cases began before mandatory reconsideration was introduced for tax credits (decisions made on or after 6 April 2014).3 If HMRC rejects a mandatory reconsideration because it has been made against a SLAN, the first course of action is to establish if and when a formal decision has been made, and request a mandatory reconsideration of that decision. If this is not possible, TM provides some scope to make the appeal, and bring this decision to the attention of the First-tier Tribunal. Pending further clarification, it is important for advisers to be extra careful when dealing with HMRC correspondence.

 


 

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