KI v HM Revenue and Customs

Under the tax-credit scheme, a claimant’s duty to notify HMRC of a change relevant to entitlement is not confined to the tax year in which the change occurred. A failure by HMRC and the Department for Work and Pensions to share information does not constitute “official error” where there was no legal duty to share it. The claimant’s failure to notify may also be the cause of an underpayment, preventing revision of a final decision on the ground of official error. A First-tier Tribunal rehearing an appeal after setting aside its earlier decision is not required to adopt the earlier findings or reasoning, although the earlier record of proceedings remains evidence which it may assess.

The claimant received tax credits but did not receive the child disability element after her child was awarded disability living allowance. HMRC later added the element for the 2016–2017 tax year and agreed to backdate it for 2015–2016, but refused further backdating. The First-tier Tribunal initially allowed the appeal, then reviewed and set aside that decision after identifying an error of law, and a differently constituted tribunal reheard and dismissed the appeal. The claimant appealed to the Upper Tribunal, challenging the treatment of the earlier hearing, the scope of the notification duty, the alleged official error arising from non-sharing of data, and causation.

1. Appeal dismissed. The First-tier Tribunal had not erred in law.
2. After a decision has been set aside under section 9 of the Tribunals, Courts and Enforcement Act 2007, the rehearing tribunal is not required to adopt the earlier tribunal’s findings or reasoning, or to give reasons for departing from them. The earlier record of proceedings does not disappear, but the tribunal may give primacy to evidence it hears and evaluates itself, particularly where that evidence is more reliable than an earlier handwritten note.
3. The duty under section 6 of the Tax Credits Act 2002 and regulation 20 of the Tax Credits (Claims and Notifications) Regulations 2002 to notify a relevant change increasing the maximum rate is not limited to the tax year in which the change occurred. The legislation places responsibility on the claimant to notify HMRC of circumstances relevant to entitlement.
4. The absence of an automatic data-sharing arrangement between HMRC and the DWP was not “official error” under regulation 2 of the Tax Credits (Official Error) Regulations 2003. There was a power, but no legal duty or particular obligation, to share the information. The reasoning in AG v HMRC [2013] UKUT 530 (AAC) was directly applicable and persuasive, whereas R (Sier) v HBRB Cambridge CC [2021] EWCA Civ 1523 concerned a different statutory definition of official error and was distinguishable.
5. Following AM v HMRC (TC) [2015] UKUT 345 (AAC) and JP v HMRC (TC) [2013] UKUT 519 (AAC), the claimant’s failure to notify the change was capable of causing the underpayment. The Upper Tribunal followed those decisions and declined to depart from their straightforward reasoning.
6. The finding that the claimant had not made the alleged telephone notifications was open to the First-tier Tribunal. The appeal was therefore dismissed.

• Upper Tribunal (Administrative Appeals Chamber) dismissed the appeal from the First-tier Tribunal.
• First-tier Tribunal (Social Entitlement Chamber) initially allowed the appeal on 9 October 2017, but that decision was reviewed and set aside on 11 January 2018. A differently constituted tribunal reheard the matter on 16 February 2018 and dismissed the appeal, upholding HMRC’s decision of 12 January 2017.