HMRC v RS (No 2) (TC)

A claimant with a previous tax-credit award may rely on article 7(6) of the Welfare Reform Act 2012 (Commencement No. 23 and Transitional and Transitory Provisions) Order 2015 only when the new claim is for the next tax year. That phrase refers to the next tax year as a whole, rather than an application made during the year for its remaining part.

A saving from the abolition of tax credits does not itself preserve eligibility to make a fresh tax-credit claim. Where a claimant’s renewal award has terminated and the claimant later makes a fresh mid-year claim, the default prohibition in article 7(1) applies unless another exception is established.

The claimant had a tax-credit award for 2018/19. He was treated as making a renewal claim for 2019/20, but that award was terminated on 25 June 2019 after he applied for childcare payments. He later telephoned HMRC on 1 August 2019 seeking tax credits for the remainder of 2019/20.

The First-tier Tribunal allowed his appeal. It held that the telephone call fell within the exception in article 7(6) of the Welfare Reform Act 2012 (Commencement No. 23 and Transitional and Transitory Provisions) Order 2015. HMRC appealed. A previous Upper Tribunal decision in the same proceedings, HMRC v RS (TC) [2021] UKUT 310 (AAC), had largely been set aside, leaving the substantive issue to be decided afresh.

The central issue was whether a fresh claim made part way through 2019/20 was a claim “for the next tax year” within article 7(6).

1. Appeal allowed. The First-tier Tribunal erred in holding that the claimant’s August 2019 claim came within article 7(6). Its decision was set aside and remade under section 12(2)(b)(ii) of the Tribunals, Courts and Enforcement Act 2007. Tax credits were not awarded after 25 June 2019.

2. Article 7(1) of the Welfare Reform Act 2012 (Commencement No. 23 and Transitional and Transitory Provisions) Order 2015 generally prevents a person in a universal-credit area from making a tax-credit claim. Article 7(6) is an exception where a person has or had an award in respect of a tax year and makes a claim for that credit for the next tax year.

3. The expression “for the next tax year” means for that tax year as a whole, running from 6 April to 5 April. It does not encompass a fresh claim made during the year for only its remaining part. The drafting distinction between an earlier award “in respect of a tax year” and a new claim “for the next tax year” was deliberate and accorded with the policy of transition from tax credits to universal credit.

4. The claimant’s treated renewal claim from 6 April 2019 satisfied article 7(6), notwithstanding its nil amount and later termination. His fresh claim on 1 August 2019 did not: it could cover only the remainder of 2019/20. He was therefore barred by article 7(1).

5. The Tribunal did not decide whether article 7(6) is confined to renewal claims. Renewal cases may be the paradigm case, but other cases might fall within the provision. It also left unresolved the First-tier Tribunal’s jurisdiction over HMRC’s refusal to accept the telephone claim, as the substantive issue disposed of the appeal.

• Upper Tribunal (Administrative Appeals Chamber): HMRC’s appeal was allowed. The First-tier Tribunal’s decision of 27 April 2020 was set aside and remade so that no tax credits were awarded after 25 June 2019.

• First-tier Tribunal (Social Entitlement Chamber): Allowed the claimant’s appeal on 27 April 2020, holding that the proposed August 2019 claim fell within article 7(6) of the Welfare Reform Act 2012 (Commencement No. 23 and Transitional and Transitory Provisions) Order 2015.

• Earlier Upper Tribunal ruling in the same proceedings: HMRC v RS (TC) [2021] UKUT 310 (AAC) was largely set aside on procedural grounds. Its surviving reasoning concerned the section 9(5) reference issue only.