Tax credits and appeal rights | CPAG

Tax credits and appeal rights

25 September 2017

Update - 25 September 2017 - on 14 June 2017 a three-judge panel of the Upper Tribunal decided that -

'As soon as the Commissioners for Her Majesty’s Revenue and Customs have made a decision under section 18 of the Tax Credits Act 2002 for a tax year, any decision made under section 16 for that tax year ceases retrospectively to have any operative effect, any appeal that has been brought against that section 16 decision therefore lapses, the First-tier Tribunal ceases to have jurisdiction in relation to that appeal and that tribunal must strike out the proceedings.' (paragraph 1)

Sheikh v HMRC CTC/3228/2015 and Saleh v HMRC CTC/1938/2016

Saleh and Sheikh are appeals in the Upper Tribunal concerning the relationship between s16 and s18 of the Tax Credits Act 2002 and what the powers of the First-tier Tribunal (FtT) are where a s16 decision, which is the subject of an appeal to it, has subsequently been replaced by an end of year s18 decision on a tax credits award. HMRC can amend or terminate an initial award for tax credits under s16 if there is evidence that the amount awarded is incorrect or if there is no entitlement. A s16 decision must be made within the respective tax year. A s18 decision is the final decision on a tax credits award and is conclusive as to a person’s entitlement for the relevant tax year. In practice, HMRC do not make a s18 decision while a s16 decision is under appeal.

CPAG submits that a s18 decision does not prevent an existing s16 decision appeal from being heard by a FtT. Claimants should still be able to continue with the appeal against a s16 decision regardless of a s18 decision being made; it does not terminate the appeal. However, there is no guidance in the law on how the FtT should deal with such cases. The Upper Tribunal selected these two particular cases as test cases to determine how existing s16 appeals should be dealt with where the underlying s16 decision has been overtaken by a s18 decision. CPAG was requested by the Upper Tribunal to act for the two Appellants.


Ms Sheikh received a s16 decision on 2 October 2013 amending her tax credits award for the tax year 2013/14. HMRC decided that she was entitled to child tax credit (excluding the childcare element) for the year but not entitled to working tax credit. HMRC made this amendment to her award as they held that she was not in genuine and paid employment nor that any childcare costs had been incurred. Ms Sheikh appealed the s16 decision. While the s16 decision was still under appeal, a s18 decision was made.


Ms Saleh received a s16 decision on 13 April 2015 stopping her tax credits as of 6 April 2014. This decision was made as HMRC states they could not verify her work and childcare arrangements. She requested a revision of this decision on 7 May 2015 and this resulted in the reinstatement of her child tax credits, but not her working tax credits. She appealed the s16 decision, as she considered that it did not reflect her tax credit entitlement. The s16 decision was still under appeal when a s18 decision was made on 25 April 2016.

The appeals were heard before a three-judge panel at the Upper Tribunal on 20 April 2017.