DF v HMRC & Anor

A final entitlement decision under Tax Credits Act 2002 section 18 may raise an issue about the continued utility or validity of an appeal against an in-year award decision under section 16. HMRC must keep the First-tier Tribunal informed of relevant section 18 decisions, both through its response obligations and its duty to co-operate with the Tribunal.

Where setting aside a First-tier Tribunal decision would serve no useful purpose, the Upper Tribunal may decline to do so even if the decision arguably involved an error of law. That may be so where the factual issue is finely balanced, the decision creates no factual precedent for later tax years, and no consequential recovery action will follow.

HMRC amended the mother’s child tax credit award for 2012/13 on the basis that she did not have main responsibility for her child during a period in which the father made a competing claim. The First-tier Tribunal allowed the mother’s appeal, finding by a narrow margin that she had main responsibility.

The father appealed to the Upper Tribunal, alleging inadequate reasons, failure to obtain further evidence, irrational findings and failure to consider relevant evidence. HMRC then disclosed that it had already made final entitlement decisions under section 18 for both parents for that tax year, including a decision reflecting the First-tier Tribunal’s conclusion concerning the mother.

The central issue was whether the First-tier Tribunal’s decision should be set aside, or whether the later section 18 decision meant that the earlier appeal had lapsed or had become hypothetical.

1. Appeal dismissed. Judge Mitchell declined to set aside the First-tier Tribunal’s decision, assuming that it remained a valid decision on the mother’s section 16 appeal.
2. The statutory scheme distinguishes an in-year award of tax credit from final entitlement for the tax year. An award may be amended or terminated under section 16 during its currency. Once the award period has ended, HMRC determines final entitlement under section 18 following the section 17 process.
3. HMRC should notify the First-tier Tribunal of any section 18 decision relevant to a pending appeal against a section 16 decision. Section 18 material is relevant to that appeal and must be supplied with HMRC’s response under rule 24(4) of the First-tier Tribunal (Social Entitlement Chamber) Rules 2008. If the section 18 decision is later, HMRC’s duty to co-operate under rule 2(4) requires a supplementary submission explaining its implications.
4. The Tribunal did not decide whether the mother’s section 16 appeal had automatically lapsed on the making of the section 18 decision. If it had lapsed, there was no First-tier Tribunal decision on which the Upper Tribunal proceedings could operate. The practical result was nevertheless the same.
5. Setting aside the First-tier Tribunal decision would serve no useful purpose. The evidence about main responsibility was very finely balanced; the decision was not a factual precedent for another tax year; and HMRC confirmed that neither parent would face recovery action for 2012/13 based on main responsibility for the child.

• Upper Tribunal (Administrative Appeals Chamber): Father’s appeal dismissed: [2016] UKUT 47 (AAC).
• First-tier Tribunal (Social Entitlement Chamber): On 3 February 2015, allowed the mother’s appeal against HMRC’s in-year decision and found that she had main responsibility for the child (file reference SC 200/14/00187).