HMRC v The Secretary of State for Work and Pensions & Anor

Where tax credits are terminated after a universal credit claim, the First-tier Tribunal’s jurisdiction is confined to the issues arising under the tax credits legislation and the transitional regulations. It must determine whether a universal credit claim was made and whether the Secretary of State was in fact satisfied that the specified basic conditions were met. It must not review whether that satisfaction was properly reached or determine entitlement to universal credit. The word “specified” in regulation 8(1)(b) limits the inquiry to the basic conditions stated in section 4(1)(a) to (d) of the Welfare Reform Act 2012, excluding secondary legislation deeming a person to be, or not to be, in Great Britain. Regulation 8(2) concerns the date from which entitlement arose, not the date of the universal credit decision.

The claimant and his wife had received tax credits and the claimant later claimed universal credit. The Secretary of State issued a stop notice stating that the basic conditions in section 4(1)(a) to (d) of the Welfare Reform Act 2012 were satisfied. HMRC then terminated the tax credit award under regulation 8 of the Universal Credit (Transitional Provisions) Regulations 2014.

The Secretary of State subsequently decided that the claimant was not entitled to universal credit because his right to reside was excluded under regulation 9 of the Universal Credit Regulations 2013. The First-tier Tribunal allowed the claimant’s appeal against HMRC, holding that he remained entitled to child tax credit. HMRC appealed. The central issues were the scope of the First-tier Tribunal’s jurisdiction and the construction of regulation 8(1)(b) and regulation 8(2).

1. Appeal allowed. The First-tier Tribunal’s decision involved an error of law, was set aside, and the decision was remade by dismissing the claimant’s appeal against HMRC’s decision.
2. The appeal was under section 38 of the Tax Credits Act 2002 against HMRC’s section 18 decision. The First-tier Tribunal stood in HMRC’s shoes and had no jurisdiction to determine whether the Secretary of State had been properly satisfied that the universal credit basic conditions were met, or to decide entitlement to universal credit. Its task was confined to the statutory decision HMRC was empowered to make.
3. Regulation 8 operated if two factual matters were established: a universal credit claim had been made and the Secretary of State was in fact satisfied that the claimant met the basic conditions specified in section 4(1)(a) to (d) of the Welfare Reform Act 2012. The stop notice was sufficient evidence of the Secretary of State’s factual satisfaction. Whether that satisfaction was legally or evidentially justified was outside the First-tier Tribunal’s jurisdiction.
4. The panel nevertheless considered the construction of regulation 8(1)(b), obiter. Following SK v Revenue and Customs Commissioner and another [2022] UKUT 10 (AAC), the reference to the conditions “specified” in section 4(1)(a) to (d) did not incorporate secondary legislation made under section 4(5)(a), including regulation 9 of the Universal Credit Regulations 2013. The Secretary of State therefore needed only to be satisfied that the claimant was in Great Britain, tested by the address supplied, and did not need to apply the deeming provisions.
5. Regulation 8(2) did not postpone termination until the universal credit claim had been decided. “The first date on which the claimant is entitled” meant the date on which entitlement arose in law, or would have arisen if the relevant conditions had been met, rather than the later date of the decision.
6. The panel disagreed with the reasoning in paragraph [39] of MR v HM Revenue and Customs (TC) CTC/923/2018. The observations concerning regulation 8(1)(b) in other Upper Tribunal cases dealing with non-universal-credit benefits, including SK, were treated as obiter in those cases insofar as they addressed an issue not necessary to the jurisdictional outcome here.

• Upper Tribunal (Administrative Appeals Chamber): allowed HMRC’s appeal against the First-tier Tribunal decision dated 22 March 2019. The decision was set aside and remade by dismissing the claimant’s appeal against HMRC’s decision.
• First-tier Tribunal (Social Entitlement Chamber): allowed the claimant’s appeal against HMRC’s termination of his child tax credit award.