Appeal rights and tax credits | CPAG

Appeal rights and tax credits

01 February 2018
Issue 262 (February 2018)

We now know that in benefits an appeal right still exists even where the DWP refuses to carry out a mandatory reconsideration on grounds of lateness. But what about tax credits and HM Revenue and Customs (HMRC)? Mark Willis explains.

Benefits and DWP

In R (CJ) and SG v SSWP (ESA) [2017] UKUT 324 (AAC) (Bulletin 260, p8), a three-judge panel of the Upper Tribunal held that, for benefits administered by the DWP, there is a right of appeal to the First-tier Tribunal even where a request for a mandatory reconsideration is refused on the grounds of lateness. The DWP has accepted this judgment and issued guidance (DMG Memo 17/17 and ADM Memo 21/17) for decision makers which states that if a late mandatory reconsideration request is received and reasons for lateness are not accepted, a decision refusing to revise should be given and a mandatory reconsideration notification issued, which gives the claimant the right to appeal direct to the First-tier Tribunal.

Tax credits and HMRC

HMRC administers mandatory reconsiderations for tax credits and child benefit. This is essentially the same process although under different legislation, but has not issued similar guidance. CPAG wrote to HMRC at the end of last year to request that it bring its appeal regime for tax credits into line with that of DWP-administered benefits, following CJ. HMRC is still considering the judgment. However, CPAG has heard that late mandatory reconsiderations continue to be refused by HMRC without appeal rights. In one case now before the Upper Tribunal, HMRC has outlined its view that CJ does not apply to HMRC-administered benefits and tax credits.

There are subtle differences in the legislation. A right of appeal only exists if:

  • for DWP benefits, the decision maker has ‘considered whether to revise’ the decision;1
  • for child benefit and guardian’s allowance, the decision maker has decided not to revise the decision;2
  • for tax credits, a review has been ‘carried out’ and a conclusion on that review as to whether to uphold, vary or cancel the decision given.3

Regarding child benefit and guardian’s allowance, a decision not to revise a decision must surely involve considering whether to revise a decision. The Upper Tribunal held in CJ that the answer to the question, ‘does considering whether to revise include considering whether to extend time to apply for a revision?’, is ‘yes’ (para 59). It follows that there must be a right of appeal for child benefit and guardian’s allowance even where the mandatory reconsideration request is late.

For tax credits, the wording presents a further hurdle, as a review has not been ‘carried out’ in cases where HMRC has refused to do a mandatory reconsideration because the application was late.4HMRC’s current position is that a refusal to extend the time limit cannot equate to carrying out a review, as the disputed decision has not been considered at all. It submits that the amended Tax Credits Act 2002 contains no ambiguity and the clear language is that a claimant can only bring an appeal if a review of the decision has been carried out, and that the review will only have been carried out if HMRC upholds, varies or cancels the decision.

CPAG’s view

In our view, the reasoning in CJ applies equally to tax credits. In CJ, the judges noted that the statutory language must be considered against the backdrop of purpose, legality, fairness and access to justice, including the right to a fair hearing under Article 6 of the European Convention on Human Rights, and whether judicial review is an adequate remedy. The statutory purpose of mandatory reconsideration was to give the Secretary of State the first opportunity to change the decision, not to deprive the claimant of her/his right of appeal.

It is clear that the parliamentary purpose behind the introduction of the mandatory reconsideration process for HMRC benefits was to improve the decision-making process and to bring the HMRC appeals system into alignment with the DWP system. There was no suggestion in the information before parliament that appeal rights would be curtailed under the new system.5 It follows that, after CJ, HMRC’s regime must operate so as to allow an individual a right of appeal even if her/his request for mandatory reconsideration is late. The simplest way to do this would be for HMRC to exercise its power under section 21B of the Tax Credits Acttofindthatthe conditions for extending time for making an application for review are always met, and go on to carry out the review under section 21A.

In terms of fairness and access to justice, CJ held that the DWP’s stance would result in a significant number of vulnerable claimants not getting the benefits to which they are entitled because they miss the time limit for a mandatory reconsideration, and either they do not judicially review that decision or their review fails because the decision is within the parameters of the test for an extension of time. It held that appeal rights should promote the right decision on the entitlement to benefit being made as soon as possible, because the decision maker will be able to consider the underlying merits if an appeal is brought, and the First-tier Tribunal is much more user friendly and useful to a claimant because of its informality, the expertise of its members and its costs regime compared to judicial review (paragraph 81). Such reasoning applies equally to the tax credits regime.

What to do

Advisers who have a late mandatory reconsideration rejected by HMRC have two options: judicial review or attempt to get the appeal heard by the First-tier Tribunal. The grounds in either case should (as described above) state that the reasoning in CJ should apply to HMRC. An appeal may be stayed behind CSTC/450/2016, which is due to be heard before the Upper Tribunal in Scotland (UPDATE - this appeal was withdrawn). A pre-action letter for judicial review may be the quickest way to get a positive outcome, as it is unlikely that HMRC will want to litigate this matter in the High Court and will instead simply find that there are reasons for extending time under section 21B. We have produced a Filetemplate letter for advisers to use. CPAG’s London legal team may be able to intervene in existing cases in England and Wales – see for more information or ring our advice line.

Please be aware that welfare rights law and guidance change frequently. Older Bulletin articles may be out of date. Use keywords or the search function to find more recent material on this topic.

  • 1. s12(3A) and (3B) Social Security Act 1998; reg 3ZA Social Security and Child Support (Decisions and Appeals) Regulations 1999, SI No.991
  • 2. s12(3D) Social Security Act 1998, as amended by the Tax Credits, Child Benefit and Guardian’s Allowance Reviews and Appeals Order 2014, SI No.886
  • 3. ss21A, 21B and 38 Tax Credits Act 2002, as amended by the Tax Credits, Child Benefit and Guardian’s Allowance Reviews and Appeals Order 2014, SI No.886
  • 4. s21A(1) Tax Credits Act 2002 provides that a decision must be reviewed where an application to do so is received within 30 days of notification of the original decision or within such longer period as may be allowed under s21B. In other words, deciding whether to extend time under s21B is a necessary pre-condition as to whether there is a valid application to review and not part of the decision whether to review itself.
  • 5. See answers to the Delegated Legislation Committee on 26 March 2014 given by the then Secretary to the Treasury, David Gauke