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

On an appeal concerning termination of tax credits after a universal credit claim, the tribunal’s jurisdiction is limited. It must determine whether a universal credit claim was made and whether the Secretary of State was in fact satisfied that the statutory basic conditions were met. It must not review whether the Secretary of State was entitled to be satisfied or determine entitlement to universal credit.

A stop notice may evidence both matters. The relevant basic conditions are those specified in section 4(1)(a) to (d) of the Welfare Reform Act 2012. They do not include additional deeming provisions or financial conditions. A same-day withdrawal of the universal credit claim does not prevent the transitional termination provisions from operating.

The claimant and his partner received working tax credits. They made a universal credit claim on 7 July 2020 and sought to withdraw it that day. The Secretary of State issued a stop notice, received by HMRC on 10 July 2020, stating that the basic conditions in section 4(1)(a) to (d) of the Welfare Reform Act 2012 were satisfied.

HMRC terminated the tax-credit award from 7 July 2020 under regulation 8 of the Universal Credit (Transitional Provisions) Regulations 2014. The First-tier Tribunal allowed the claimant’s appeal, reasoning that withdrawal and the timing of the stop notice created doubt about the basic conditions. HMRC appealed. The central issues were the First-tier Tribunal’s jurisdiction, the meaning of regulation 8, and the effect of withdrawal.

1. Appeal allowed. The First-tier Tribunal’s decision involved an error of law and was set aside. The decision was remade by dismissing the claimant’s appeal against HMRC’s decision.
2. On an appeal under section 38(1)(b) of the Tax Credits Act 2002, the tribunal stands in the shoes of HMRC. Its task under regulation 8 of the Universal Credit (Transitional Provisions) Regulations 2014 is limited to determining factual questions: 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 cannot decide whether the Secretary of State was properly or lawfully satisfied, or determine entitlement to universal credit.
3. Regulation 8(1)(b) refers to the basic conditions specified in section 4(1)(a) to (d) of the Welfare Reform Act 2012. It does not incorporate secondary legislation which deems a person to be or not to be in Great Britain, identity verification requirements, or the financial conditions for universal credit. The stop notice evidenced the Secretary of State’s satisfaction.
4. The claim had been submitted when the relevant information became available to the Department for Work and Pensions. Its withdrawal on the same day did not prevent regulation 8 from operating. The Upper Tribunal followed JL v Calderdale MBC and the Secretary of State for Work and Pensions [2022] UKUT 9 (AAC) in preference to HMRC v AB [2021] UKUT 209 (AAC).
5. The claimant and his partner were not entitled to tax credits from 7 July 2020. HMRC had lawfully terminated the award under regulation 8(1)(a) and (b).

• Upper Tribunal: allowed HMRC’s appeal and set aside the First-tier Tribunal’s decision.
• First-tier Tribunal (Social Entitlement Chamber): allowed the claimant’s appeal against HMRC’s decision on 2 December 2020 under file reference SC946/20/01217.