NA v HMRC

A later decision under Tax Credits Act 2002 section 18, determining entitlement for the same tax year, causes an outstanding appeal against the earlier section 16 decision to lapse. The Upper Tribunal should therefore set aside an erroneous First-tier Tribunal decision and substitute a decision that the appeal had lapsed.

A section 18 decision which does not notify the claimant of the right of appeal does not start time running for an appeal against that decision. The claimant may still challenge it.

The claimant appealed against a First-tier Tribunal decision of 27 October 2014, which had dismissed her challenge to HMRC's refusal of the childcare element of working tax credit from 6 April 2012. HMRC had alleged that the childcare arrangement was collusive. The First-tier Tribunal made adverse findings about the provider, the claimed payments and whether relevant childcare had been received.

On appeal, HMRC accepted that both its decision-maker and the First-tier Tribunal had misunderstood material evidence concerning the provider's registration and had drawn unwarranted factual conclusions. It nevertheless contended that a later section 18 decision of 17 June 2013 had caused the appeal against the earlier section 16 decision to lapse.

1. Appeal allowed to a limited extent. The First-tier Tribunal's decision was set aside. A decision was substituted that the appeal to that tribunal against HMRC's decision of 24 December 2012 had lapsed.

2. The earlier decision had been made under section 16 of the Tax Credits Act 2002. HMRC subsequently made a section 18 decision concerning the claimant's entitlement for the same tax year. Applying the approach in CTC/3981/2005, the later decision caused the appeal against the section 16 decision to lapse. The claimant did not oppose that conclusion, and the Upper Tribunal accepted it as correct.

3. The Upper Tribunal declined simply to dismiss the present appeal as being of no effect. It followed the procedural example in CSTC/840/2014 and set aside the First-tier Tribunal's decision, substituting a decision that the earlier appeal had lapsed.

4. The section 18 decision did not inform the claimant of her right of appeal. Time for an appeal against that decision had therefore not begun to run. The claimant could appeal against it and so obtain a determination equivalent in practical effect to a remittal of this case.

Observations: HMRC's conceded errors concerning the provider's registration meant that its earlier factual case could not stand on the evidence then available. The judge also observed that an allegation of collusion requires consideration of whether any lying was involved; a contrived arrangement without lying might nevertheless be genuine and lawful. HMRC should not rely on alleged discrepancies with providers' tax returns without disclosing them, and an undisclosed regional average of childcare assistance was of doubtful relevance.

• Upper Tribunal (Administrative Appeals Chamber): Allowed the claimant's appeal to the extent of setting aside the First-tier Tribunal decision and substituting a decision that the appeal against HMRC's section 16 decision had lapsed.
• First-tier Tribunal: On 27 October 2014, dismissed the claimant's appeal against HMRC's decision of 24 December 2012 refusing the childcare element of working tax credit.