Late is better than never | CPAG

Late is better than never

01 August 2016
Issue 253 (August 2016)

A three-judge panel of the Upper Tribunal has overturned a previous ruling that tax credits claimants could not make a late appeal against decisions made between 2008 and 2014. Mike Spencer considers the implications of the decision and how claimants whose appeals were wrongly struck out can get their appeals reinstated.

In JI v HMRC (TC) [2013] UKUT 199 (AAC), Judge Rowland decided that the First-tier Tribunal’s power to extend time in tax credits cases had been accidentally abolished from November 2008. In VK v HMRC [2016] UKUT 331 (AAC), a test case brought by CPAG, a three-judge panel of the Upper Tribunal has re-considered the issue and found that JI was wrongly decided. The finding means that the First-tier Tribunal has always had a power to extend the time limit for tax credits appeals.

How did we get here?

Tax credit decision making is notoriously chaotic.1 Decision letters are often difficult to understand or are based on insufficient evidence or may fail to reach the claimant at all. The alignment of tax credits with the tax year means that a decision ending entitlement can create an overpayment of thousands of pounds. In this context, the ability to challenge tax credits decisions by appealing to the tribunal is crucial.

To make matters worse, the legislation governing tax credits appeals is extremely complex. As Judge Rowland noted in JI: ‘It would be hard to devise a method of legislating more calculated to obscure the law from the sight of claimants and judges.’

The current problem arose when tax credit appeals were transferred to the First-tier Tribunal in 2008. Extensive amendments were made to legislation in order to facilitate the transfer of functions, which included removing the power to extend the 30-day time limit in s39(1) of the Tax Credits Act 2002. It was clearly thought at the time that such powers were unnecessary, because the First-tier Tribunal could exercise its general power to extend any time limit in rule 5(3)(a) of the Tribunal Procedure (First-tier Tribunal) (Social Entitlement Chamber) Rules 2008 (the ‘Tribunal Procedure Rules’).

Judge Rowland’s central finding in JI was that, despite these intentions, the Tribunal Procedure Rules could not and did not provide for a power to extend time. Following the House of Lords decision in Mucelli v Albania [2009] UKHL 2, the procedure rules could not, in principle, provide for a power to extend an absolute time limit found in primary legislation. The wording of rule 5(3)(a) itself only permits the tribunal to extend a time limit set in a ‘direction, practice direction or rule’, but not one set in primary legislation.

What was wrong with JI?

In the articles ‘Better late than never’ (Bulletin 234) and ‘Still better late than never’ (Bulletin 244), we questioned whether the reasoning in JI was correct. Judge Rowland had given no consideration to the implications of his decision on the claimant’s right of access to an independent tribunal under Article 6 of the European Convention on Human Rights.2 Further, we argued, his reasoning on rule 5(3)(a) of the Tribunal Procedure Rules was misconceived. The House of Lords in Mucelli did not lay down a general principle that procedure rules can never extend time in any circumstances, but rather should be seen in the context of the legislation on extradition and the Civil Procedure Rules. In contrast, the Tribunals, Courts and Enforcement Act 2007 explicitly permits the Tribunal Procedure Rules to ‘make provision for time limits as respects… initiating proceedings in the First-tier Tribunal’.3 The 30-day time limit for tax credits is contained in a ‘rule’, because rule 23 and Schedule 1 of the Tribunal Procedure Rules cross-refer to the Tax Credits Act 2002. The result is that rule 5(3)(a) should allow the tribunal to extend the time limit beyond 30 days.

In VK, the three-judge panel accepted our argument that rule 5(3)(a) can and does permit the tribunal to extend time in tax credits cases and that JI was therefore wrongly decided. In the light of this finding, there was no need to consider whether Article 6 applied. The panel commented that it would have accepted that Article 6 allowed a narrow power to extend time in exceptional circumstances, but would have rejected our argument that Article 6 could create a broad power to extend time.

Getting a tax credit appeal reinstated

The effect of VK is that the First-tier Tribunal has had, since 2008, a power to extend the 30-day time limit in tax credits cases under rule 5(3)(a) of the Tribunal Procedure Rules, applying the overriding objective in rule 2, subject to the absolute 13-month time limit in rule 23(5).

The decision only affects late appeals against decisions made prior to April 2014,because after this date s39(1) of the Tax Credits Act 2002 was repealed and the time limit brought in line with social security appeals. Nevertheless, it is not merely of academic value, because many claimants are still paying back overpayments incurred as a result of appeals that have been struck out. We estimate that there are between 1,000 and 3,000 claimants affected.

It is to be hoped that HMRC and HM Courts and Tribunals Service will co-operate proactively to ensure claimants whose appeals were wrongly struck out applying JI have an opportunity to have their appeals reinstated. This can be achieved as follows.

1. Claimants can request permission to appeal to the Upper Tribunal against the decision striking out their appeal. The time limit for doing so is one month (rule 38), but there is no upper time limit. It would be in the interests of justice for time to be extended, because the tribunal’s error only becomes apparent in the light of the decision in VK

2. Although it is likely that original appeal bundle will have been destroyed, the tribunal can dispense with the requirement for a statement of reasons (rule 38(7)(c)) and could direct HMRC to provide copies of all relevant documents in its possession (rule 5(3)(d)).

3. The tribunal could then set aside its decision under rule 8(5) or on a review for error of law (rule 39) or on the basis that there has been a procedural irregularity (rule 37), or alternatively grant permission to appeal to the Upper Tribunal (rule 40).

4. Once proceedings have been reinstated, the tribunal can consider whether to extend the original appeal time limit under rule 5(3)(a) and proceed to consider the substantive appeal.

5. In the meantime, HMRC should suspend recovery of any overpayments.

For more information on CPAG’s test case work, see

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  • 1. See, for example, JR v HMRC [2015] UKUT 192 (AAC) and ZB v HMRC [2015] UKUT 198 (AAC)
  • 2. Though he did go on to do so in JT v HMRC [2015] UKUT 81 (AAC)
  • 3. Schedule 5 paragraph 4 TCEA 2007