SA v HMRC

In an appeal against an in-year termination of tax-credit awards, the tribunal must determine whether HMRC had reasonable grounds for its decision and, where entitlement depends on remunerative work, whether the claimant was working the required hours. HMRC bears the legal burden of establishing that the claimant was not working those hours on the balance of probabilities.

A tribunal does not reverse that burden by requiring a claimant to answer a prima facie case arising from discrepancies and anomalies in the evidence. An appellate tribunal may not replace sustainable factual findings merely because it would have assessed the evidence differently. Intervention is justified only where the findings were outside the range reasonably open to the fact-finding tribunal.

The appellant had received working tax credit and child tax credit for several years. Following an HMRC review, her 2012–2013 award was terminated. The Birmingham First-tier Tribunal dismissed her appeal by a decision dated 17 September 2014, under number SC 024/14/02493.

On appeal, HMRC supported the appellant’s case on the asserted basis that the First-tier Tribunal had wrongly placed the burden of proving remunerative work on her. The central issues were whether the statutory review process had been validly used, whether the First-tier Tribunal had reversed the burden of proof, and whether its finding that the asserted employment was a sham disclosed an error of law.

1. Appeal dismissed. The First-tier Tribunal had made no error of law. Its decision dismissing the appeal therefore stood.
2. The in-year review power required HMRC first to have a belief, founded on something more than a random doubt, that the award might be wrong. It also required HMRC to consider whether a notified change of circumstances called instead for the change-of-circumstances procedure. Having investigated, HMRC could amend or terminate an award only if reasonable grounds then existed. The intelligence concerning unusually high childcare charges and the subsequent discrepancies in the information supplied were sufficient to justify the investigation and, prima facie, the termination decision.
3. The First-tier Tribunal’s task was to decide whether the appellant was working at least 16 hours weekly. HMRC bore the legal burden of showing, on the balance of probabilities, that she was not. However, once HMRC had established a prima facie case from the discrepancies and anomalies, the appellant had the opportunity to provide persuasive evidence answering it. The tribunal’s careful assessment and rejection of that evidence did not transfer either the legal or evidential burden to her.
4. The finding that the asserted employment was a sham was open to the First-tier Tribunal on the evidence. The Upper Tribunal could not substitute its own factual assessment unless the finding crossed the high threshold of legal irrationality. It did not.
5. The present process was also materially different from the defective HMRC procedure discussed in ZB v HMRC [2015] UKUT 198 (AAC). Here, HMRC sought information before deciding, disclosed its case and evidence on appeal, and participated in the hearing. The earlier criticisms of HMRC decision-making therefore did not apply.

• Upper Tribunal (Administrative Appeals Chamber): Appeal dismissed. The Birmingham First-tier Tribunal’s decision of 17 September 2014, SC 024/14/02493, was not in error of law and stood.
• First-tier Tribunal (Birmingham): Dismissed the appellant’s appeal against HMRC’s termination of her 2012–2013 tax-credit award.