YK v HMRC

Mandatory reconsideration requirements introduced for tax-credit appeals apply only to HMRC decisions made on or after their commencement. They do not restrict an appeal against an earlier decision.

For a post-commencement decision, an appeal ordinarily requires a review and notice of its conclusion. The 30-day appeal period runs from the review notice, not from notice of the original decision.

Where HMRC revises the disputed decisions in the claimant’s favour for official error, the Upper Tribunal may identify legal errors in refusal-to-admit decisions but decline to set them aside because no useful purpose would be served.

Ms K attempted to appeal two HMRC child tax credit decisions concerning whether she was responsible for a child or qualifying young person in the 2013/14 tax year. One decision was made on 29 April 2013 and the other in August 2014.

The First-tier Tribunal refused to admit both appeals. It treated the first as requiring a mandatory reconsideration notice and the second as late because it was brought more than 30 days after the underlying decision notice.

On Ms K’s appeals, the Upper Tribunal considered the transitional effect of the review-and-appeal amendments made by the Tax Credits, Child Benefit and Guardian’s Allowance Reviews and Appeals Order 2014, and the correct appeal time limit. During the proceedings HMRC revised both underlying decisions in Ms K’s favour on the basis of official error.

1. The Upper Tribunal held that both First-tier Tribunal decisions contained errors of law, but did not set them aside under section 12(2)(a) of the Tribunals, Courts and Enforcement Act 2007. HMRC had revised the underlying decisions in Ms K’s favour, so any valid appeals had lapsed or setting aside the refusal decisions would serve no useful purpose.

2. The first HMRC decision, made before 6 April 2014, attracted a right of appeal under section 38(1) of the Tax Credits Act 2002. Article 1(5) of the 2014 Order confined its amendments to HMRC decisions made on or after commencement. The newly inserted section 38(1A), requiring a review and review notice before an appeal, therefore did not apply. The First-tier Tribunal wrongly refused admission for want of a mandatory reconsideration notice.

3. The second decision was made after commencement. The mandatory-reconsideration provisions therefore applied. As there was no evidence of a review under section 21A or a notice under section 21A(3), the First-tier Tribunal should either have refused admission on that ground or adjourned to establish whether the notice had been issued.

4. It also erred by measuring lateness from notice of the underlying decision. Under section 39(1), as amended, the 30-day period runs from notice of the conclusion of the section 21A review.

5. HMRC had power under section 21 and regulation 3(1) of the Tax Credits (Official Error) Regulations 2002 to revise the earlier decisions where they were incorrect through official error. Its replacement decisions accepted that Ms K was responsible for a child or qualifying young person during the relevant tax year.

• Upper Tribunal (Administrative Appeals Chamber): Permission to appeal was granted. The tribunal found legal errors in both First-tier Tribunal refusals to admit the appeals, but did not set those decisions aside because HMRC had revised the underlying decisions in Ms K’s favour.
• First-tier Tribunal: On 1 August 2014 and 27 January 2015, it refused to admit Ms K’s child tax credit appeals.