Retrospective child tax credits for newly recognised refugees

R (on the application of) DK v The Commissioners for her Majesty’s Revenue and Customs and (Secretary of State for Work and Pensions (Interested Party) [2021] EWHC 1845 (Admin); [2022] EWCA Civ 120
CPAG successfully challenged HMRC’s refusal to award retrospective child tax credits (“CTC”) for the period between a refugee’s claim for and award of refugee status. The High Court heard the case on 16 June 2021 and handed down judgment in favour of the claimant on 5 July 2021. The Court of Appeal confirmed the High Court's decision on 8 February 2022.

Current status: The High Court heard the case on 16 June 2021 and handed down judgment in favour of the claimant on 5 July 2021. HMRC appealed to the Court of Appeal and a hearing took place on 25 January 2022. The Court of Appeal dismissed HMRC's appeal and judgment was handed down on 8 February 2022 ([2022] EWCA Civ 120).

Read the High Court judgment

Read the Court of Appeal judgment

Overview

CPAG successfully challenged HMRC’s refusal to award retrospective child tax credits (“CTC”) for the period between a refugee’s claim for and award of refugee status. Mr Justice Bourne ruled in favour of the claimant on the statutory interpretation ground in his judgment of 5 July 2021 and granted HMRC permission to appeal. The Court of Appeal dismissed HMRC's appeal on 8 February 2022. 

Background facts

The claimant is a father and a newly recognised refugee. In January 2020 he claimed CTC, within one month of being notified of his refugee status and was refused by HMRC on the basis that they were no longer accepting new claims for CTC since Universal Credit (“UC”) was rolled out in his area, subject to some specified exceptions which did not apply to the claimant.

DK's claim for CTC covers the period from his original claim for asylum on arrival to the UK in 2009, up until the date his son left education in 2016, and his entitlement is estimated to be somewhere in the region of £11,500.

Procedural background

CPAG brought the judicial review claim on behalf of the claimant in July 2020 and the claimant was granted permission to proceed in November 2020. CPAG applied for the judicial review proceedings to be transferred to the Upper Tribunal to be heard alongside the statutory appeals (including the claimant’s stayed appeal) which are pending, but this application was refused on 26 February 2021.

On 15 June 2021, the day before the substantive hearing in the Administrative Court, the Outer House of the Court of Session in Scotland handed down judgment in favour of the petitioner (claimant) in a case concerning the same statutory interpretation issue (In the Petition of Ali Adnan and Mrs Saima Adnan for judicial review [2021] CSOH 63). 

CPAG immediately sought a stay of the DK High Court proceedings in light of the likelihood of parallel appeal proceedings arising in England & Wales and Scotland, but the application was refused by Mr Justice Bourne, in part because the Scottish case did not consider the human rights or Public Sector Equality Duty grounds (outlined below). At the hearing on 16 June 2021, Mr Justice Bourne heard argument on all three grounds. On 5 July 2021, Mr Justice Bourne gave judgment in favour of the claimant in DK and granted permission to appeal to the Court of Appeal. 

In the parallel Scottish proceedings (Adnan), HMRC submitted a reclaiming motion to the Inner House of the Court of Session which was refused on 18 January 2022 ([2022] CSIH 2). 

On 25 January 2022 the Court of Appeal heard HMRC's appeal in DK, and the appeal was dismissed in a judgment handed down remotely on 8 February 2022.

Legal issues

1) Error of Law

CPAG's primary argument on behalf of the claimant was that HMRC was wrong to prevent him from claiming his entitlement to backdated CTC and that HMRC’s, and SSWP’s (as Interested Party), interpretation of the relevant legislation is flawed. The case was ultimately decided in the claimant's favour on this basis, at both the High Court and Court of Appeal stages.

Ground 1: Interpretation of Art 7 of No.23 Order

High Court
i) Tax credits not abolished for the claimant

Section 33 and Part 1 of Schedule 14 of the Welfare Reform Act 2012 (“WRA 2012”) abolish tax credits and repeal Part 1 of the Tax Credits Act 2002 (“TCA 2002”). Article 2(1) of the WRA 2012 (Commencement No. 32 and Savings and Transitional Provisions) Order 2019 (the “2019 Order”) brought s.33 and Part 1 of Schedule 14 into force. However, Article 3 of the 2019 Order contains savings provisions, so that the WRA 2012 provisions are to be treated as not in force in respect to certain cases, including in relation to “an award of a tax credit that had effect for a period that ended on or before 30th January 2019” (Article 3(9) 2019 Order).

Initially, HMRC and SSWP resisted the argument that the claimant was subject to the savings provisions. However, prior to the High Court hearing, the parties accepted that the savings provisions read as a whole have the effect that the relevant provisions of the TCA 2002 have not been repealed in relation to the claimant. It therefore became common ground that tax credits have not been abolished with respect to the claimant.

ii) Claimant not prevented from making a claim for tax credits 

The Claimant’s case was that Article 7 of the WRA 2012 (Commencement No. 23 and Transitional and Transitory Provisions) Order 2015 (the “2015 Order”), properly construed, does not bar his backdated claim for CTC made following the success of his asylum claim.

The general rule in Article 7(1) provides that a person “may not make a claim” for legacy benefits (including tax credits) “on any date” where the UC regulations are in force in his area in relation to him (ie. when the area becomes a full service area).

However, under regulation 3(4) - (8) of the Tax Credits (Immigration) Regulations 2003 (the “TC Immigration Regulations”), which predate the 2015 Order and remain in full force, where a refugee or a person granted leave under s.67 of the Immigration Act 2016 claims CTC within one month of receiving notification of their status, their CTC claim will be treated as made on the date they first claimed asylum in the UK and each subsequent April.

For the purposes of assessing the date of a tax credits claim under Article 7(1) of the 2015 Order, the deeming provisions as to the date of the claim which are provided under the “relevant Regulations” are to be ignored (Article 7(8(b)). In support of the claimant’s position, the definition of “relevant Regulations” does not include the TC Immigration Regulations. As such, CPAG argued on behalf of the claimant that his CTC claim is to be treated as made on the date he first claimed asylum in the UK, by operation of regulation 3 of the TC Immigration Regulations, and he was therefore not precluded from making his past claims by the 2015 Order.   

In his decision of 5 July 2021, Mr Justice Bourne adopted the reasoning of Lord Tyre in the Outer House in Adnan under the principle of comity and found that Article 7(1) of the 2015 Order did not bar the claimant from claiming CTC under regulation 3(5)(b) of the TC Immigration Regulations, and that regulation 3(6) of those Regulations therefore entitled him to be treated as having made valid claims on the date of his asylum claim and on the first day of each of the subsequent tax years while his son was in full-time education. Bourne J found 'no compelling reasons' to depart from the judgment of the Outer House, but expressed some obiter doubts on the conclusion reached.  

The High Court quashed the refusal by HMRC to accept the claimant’s CTC claim and made a declaration on the application of Article 7(1) of the 2015 Order for those in the position of the claimant. View the Court’s Order here.

Court of Appeal

The unanimous Court of Appeal, again applying the principle of comity, found there were no compelling reasons to depart from the judgment of the Inner House of the Court of Session in Adnan. 

In giving the sole judgment of the Court, Lord Justice Singh noted that the TC Immigration Regulations had a "benevolent" purpose, in recognition of the fact that while a refugee's asylum claim was waiting to be determined, they did not receive payments of child tax credits to which they would otherwise have been entitled. Singh LJ further noted he understood the reasoning of Lord Woolman in the judgment of the Inner House which made reference to the TC immigration Regulations conferring a "contingent right" upon refugees, and understood Lord Woolman's reasoning that "if the intention of legislation is to remove that entitlement for the past and not merely to set out the legal position for the future, that could and should be made clear" [48]. 

The Court of Appeal refused permission to appeal (view the Order here).

2) Human Rights

Ground 2: Breach of Article 14 Read With A1P1 and Article 8 (High Court Only)

Before the Hight Court, the claimant argued in the alternative to the statutory interpretation ground, in the event the court had not agreed with the claimant’s reading of the legislation as set out above, Article 7 of the 2015 Order should be read down under s.3 of the Human Rights Act 1998 (“HRA 1998”), in order to avoid a breach of Article 14 of the European Convention on Human Rights (“ECHR”) read in conjunction with Article 1 Protocol 1 (“A1P1”) and/or Article 8 ECHR.

It was not strictly necessarily for the High Court to decide this point or ground 3 (below), having found in favour of the claimant on ground 1. However, given HMRC had indicated their intention to appeal the Scottish Outer House judgment and the likelihood of the cases proceeding to an appeal, Mr Justice Bourne nonetheless considered the further grounds.

The judge rejected the claimant’s human rights argument and considered that the Court of Appeal’s decision in Blakesley v Secretary of State [2015] EWCA Civ 141 [2015] is relevant, as the changes affected refugees’ entitlement to CTC (on HMRC’s reading of the legislation) and were not “merely procedural” ([66]). He further noted that the government’s stated aims of “introducing a new and streamlined system of UC, for it to be comprehensive once introduced and for a continued and consistent move away from the provision of backdated benefits” could not be said to be “manifestly without reasonable foundation” [67].

This ground was not pursued by the claimant on cross-appeal to the Court of Appeal.

3) Public Sector Equality Duty

Ground 3: Breach of s.149 EA 2010 (High Court Only)

Before the High Court, the claimant argued, again in the alternative to the statutory interpretation ground, if the court did not agree with the claimant’s reading of the legislation, that the SSWP should have at least considered the impact of preventing new claims on refugees with historic entitlement, in order to meet its duty under s.149(1) of the Equality Act 2010.

In response to the judicial review challenge, the SSWP carried out an equality impact assessment in December 2020 to consider the impact on refugees (predicated on the government’s reading of the legislation which the High Court has now found to have been wrong). Whilst the EIA recognised that (on HMRC’s interpretation of the legislation), “the impact will be more prevalent within minority ethnic groups”, it superficially concluded that “this is considered to be reasonable as the provision made by UC is considered to be sufficient and in line with the UK’s international obligations."

Mr Justice Bourne recognised that there was substance in the claimant’s complaint that the December 2020 EIA contained “a lack of statistical data about the numbers and amounts involved” but concluded that the assessment “would have been sufficient to fulfil the PSED if it had been carried out when Order 23 [2015 Order] was introduced in 2015”. He also considered that it “is simply too late to invite the Court to quash that Order, six years after its introduction”, not withstanding that the claimant was not affected by the provisions of the 2015 Order until his refugee status was recognised and his claim for CTC was refused in 2020.

This ground was not pursued by the claimant on cross-appeal to the Court of Appeal.

What can a claimant in a similar position do?

Those providing advice to newly recognised refugees will need to calculate their client's potential retrospective entitlement to CTC to assess if they can benefit from the Court of Appeal's judgment.

Under CTC/3692/2008, Asylum Support (previously National Asylum Support Service (NASS)) payments received by both parents and children are offset from any backdated CTC that is due. Whilst it may be possible to challenge this decision, it was not in issue in these proceedings, and therefore remains the position in absence of a challenge.

The maximum period your client should claim for is between the date of their first claim for asylum, and their subsequent claim for Universal Credit (if UC has now been claimed). As with the claimant in DK, entitlement might end earlier, for example if a qualifying young person left full time education before UC was claimed. 

Steps to take

If there is potential CTC entitlement which a newly recognised refugee wishes to protect, they should:

1. As soon as possible and well within 1 month following receipt of notification of their grant of asylum or s.67 leave, claim tax credits via a telephone call to HMRC stating “please treat this phone call as a claim”. Following the High Court's judgment, HMRC confirmed that the following process has been in place since August 2021:

  • call handlers should check whether the claimant has been granted refugee status and, if they have, ask the date when they received notification that they have been recorded as a refugee
  • where the call is being made within a month of them having being notified of their status, HMRC should record the details of the claimant and inform them that HMRC will contact them when the court proceedings have concluded. 

Please contact CPAG on [email protected] if this process is not followed. 

2. In addition to recording your details with HMRC, on the same day as making the call, send a completed claim form to HMRC and a cover letter requesting backdated CTC, including details of the Asylum Support payments received by the claimant and the date that they received notification of their grant of asylum. The letter should confirm that your client has claimed by telephone and you are supplying all the information needed to enable HMRC to calculate their entitlement. We recommend sending this by recorded delivery if possible.

Note: if it is not possible to obtain a current tax credits claim form, then provide the information on a claim form from a previous year.

***The written confirmation of the call and claim form must reach HMRC within 1 month of notification of the grant of asylum***

3.    Seek a mandatory reconsideration of the telephone decision, within one month of the telephone call. HMRC may also issue a written ‘decision’ which says ‘you are not able to claim tax credits’. MR requests should challenge both ‘decisions’.

4.    If no response is received, or a response is received confirming the decision, appeal to the First-tier tribunal. You may need to persuade the tribunal to accept the appeal without a MRN (contact CPAG using the details below if you need support with this).

If you are an advisor and need support with assisting your client to take the above steps, please contact: [email protected]. A template First-tier Tribunal appeal submission is also available on request.