AM v HM Revenue and Customs (TC) (Tax credits and family credit : other) [2015] UKUT 345 (AAC)

UKUT-AAC
AM v HM Revenue and Customs (TC) (Tax credits and family credit : other)
[2015] UKUT 345 (AAC) · 2015-06-17
[1]This is an appeal against a decision of the First-tier Tribunal confirming the decision of the Secretary of State refusing to include provision for her disabled child in her award of Child Tax Credit from 11 December 2009 to 12 April 2013 inclusive.[2]The First-tier Tribunal gave the appellant permission to appeal. In the light of the written submissions and documentary evidence, I directed an oral hearing which took place at Field House in London on 3 June 2015. The appellant appeared in person. The respondent was represented by Ms Galina Ward, counsel.[3]Before I turn to the facts and consider the issues in this appeal, it is helpful to summarise the relevant statutory provisions. Statutory framework[4]Adjudication of tax credit claims is governed by the Tax Credits Act 2002 (“TCA”) and the Tax Credits (Claims and Notifications) Regulations 2002 (“the Claims and Notifications Regulations”). A claim for tax credit is made under section 3(1) TCA. Section 5 limits an award to a maximum of one tax year, a new claim must be made for each subsequent tax year. HMRC makes an initial decision under section 14 TCA whether or not to award tax credit and, if so, the rate. Payment is made on that basis: section 24. At or around the end of the tax year, HMRC sends the claimant notice under section 17. The notice specifies the relevant circumstances held by HMRC and a claimant is required to make a declaration confirming that the circumstances are correctly recorded or notifying the respects in which they are not. Following the end of the tax year in question HMRC makes a final decision under section 18 as to whether the claimant was entitled to tax credit for that year and the amount.[5]By regulation 11 of the Claims and Notification Regulations the section 17 declaration also serves as a new claim for the next tax year. This then leads to a further decision as to an award under section 14 and the process set out above starts again.[6]Thus the scheme is that an initial section 14 decision awarding tax credit is made in response to a claim and payment is made accordingly; at the end of the tax year the section 17 procedure is used to check that the details held by HMRC are correct; and a final decision as to entitlement is made under section 18.[7]The Tax Credits (Official Error) Regulations 2003 (“the Official Error Regulations”) are made pursuant to section 21 TCA. Regulation 2(1) defines “official error”:
‘“official error” means an error relating to a tax credit made by— (a) an officer of the Board, (b) an officer of the Department for Work and Pensions, (c) an officer of the Department for Social Development in Northern Ireland, or (d) a person providing services to the Board or to an authority mentioned in paragraph (b) or (c) of this definition, in connection with a tax credit or credits, to which the claimant, or any of the claimants, or any person acting for him, or any of them, did not materially contribute, excluding any error of law which is shown to have been an error by virtue of a subsequent decision by a Social Security Commissioner or by a court;’
[8]Regulation 3 provides:
‘(1) A decision under section 14(1), 15(1), 16(1), 18(1), (5), (6) or (9), 19(3) or 20(1) or (4) may be revised in favour of the person or persons to whom it relates if it is incorrect by reason of official error, subject to the following paragraphs. (2) In revising a decision, the officer or person in question need not consider any issue that is not raised by the application for revision by the claimant or claimants or, as the case may be, did not cause him to act on his own initiative. (3) A decision mentioned in paragraph (1) may be revised at any time not later than five years after the date of the decision.’
[9]The amount of child tax credit includes an amount for a child who is disabled, and an additional amount for a child who is severely disabled: section 9(5)(c) TCA. Those conditions are satisfied if circumstances specified in regulation 8 of the Child Tax Credit Regulations 2002 apply, including that the care component of disability living allowance (DLA) is payable in respect of the child and, in respect of severe disability, the highest rate of the care component of DLA is payable in respect of him. In this decision I refer to this amount as “the disabled child element”. Background facts[10]The appellant had made a joint claim, with her husband, for working tax credit and child tax credit. The award of child tax credit included the disabled child element for one of her children, D. Upon the death of the appellant’s husband the joint award ended on 10 December 2009 and on 12 January 2010 the appellant made a new claim as a single parent which was treated as made on 11 December 2009. On her claim form the appellant indicated that D was in receipt of the highest rate of the care component of DLA. HMRC’s computer did not pick up this information from the claim form.[11]On 21 January 2010 the appellant was sent a notice of an award of tax credit (Form TC602) from 12 December 2009, made under section 14 TCA. This did not include the disabled child element of child tax credit. HMRC has not been able to provide a copy of the notice as such notices are generated automatically from information held by HMRC and sent to claimants. However, HMRC provided redacted copies of award notices sent to other claimants (which had been put before the First-tier Tribunal in other appeals) to show what such a notice looks like. These copies included a notice where there was no disabled child and a notice where there was such a child. In the former the notice contained no information about children who qualified for the disabled child element and in the latter the notice set out the number of children who so qualified. The appellant recognised these notices and agreed that she had been provided with a similar notice. As a result of the incorrect information held by HMRC, the notice sent to the appellant would have been of the former type. The front page of the notice included the instruction “Please check the details on this form and tell us if anything is wrong, missing or incomplete.” The instruction was repeated on the next page.[12]Along with the section 14 award notice, the appellant was sent a check list on form TC602(SN). Samples have been provided by HMRC and the appellant agrees that she received these. The checklist was headed “Check your tax credits award notice”. The notes at the top of the form included:
“This checklist is for you to use to help make sure that the information on your award notice about your personal circumstances is correct and complete… If anything is wrong, missing or incomplete you must tell us within one 1 month of receiving your award notice or you could be asked to repay an overpayment.”
[13]There was then a sub-heading, “If shown on your award notice, are the following details correct?” under which was a list of questions beside each of which was a box for the claimant to mark “yes” or “no”. The questions included “The number of children who are disabled?” and “The number of children you receive the Highest Rate Care Component of Disability Living Allowance for?” Underneath the list was printed, in bold:
“Contact us now if you have answered NO to any of the above questions.”
On the reverse of the form was printed the contact details for HMRC.[14]On 28 April 2010 HMRC sent to the appellant a “renewal pack” containing a notice and declaration under section 17 (called, respectively, the “Annual Review” and the “Annual Declaration”) and guidance notes. I have been provided with copies of an Annual Review and guidance notes similar to those provided to the appellant and the actual Annual Declaration signed by her.[15]The Annual Review instructed the appellant to complete three steps. It started with “Step A. Check your personal circumstances at the start of your award period were correct and complete” and referred the appellant to the notes for guidance. The form then set out the details held including as to qualifying children. Next was Step B which was a check of any changes in circumstances. Finally Step C was the completion of the Declaration form. There was the following instruction:
“If any of the details at Steps A and B are wrong…put an “X” at box 3.2 at Part 3 of your TC603D2 Tax Credits Declaration and phone us now.”
[16]The accompanying notes, form TC603RD, set out clearly the three steps required to check the details provided and complete the declaration and notify anything that was wrong. They repeated the need to let HMRC know straight away if the personal circumstances were wrong. A specimen example showed how to identify the relevant details including showing where the disabled child element should be, within the “personal circumstances” section of the Annual Review.[17]A copy of the Annual Declaration completed by the appellant is in the bundle (page 5-7). At the beginning of the Declaration a claimant is instructed to “Check your Annual Review (enclosed) for the award period shown. Make sure that your personal circumstances for this period are correct and complete. If you have not yet told us about any changes or if you need to correct any of the information, tell us now.”. Amongst other things, under the heading “Personal circumstances” the form states “You need to check that your personal circumstances are correct and complete for the whole period shown above. Check the information shown on the Annual Review and then answer the question opposite”. The question referred to is “Do you need to report a change in your circumstances?” There is no equivalent question asking whether the claimant needs to report any incorrect or missing information. The declaration which a claimant signs is that “the information given on this form is correct and complete to the best of my knowledge and belief, and I have reported any changes that I must tell you about.” The notes give guidance in relation to the Declaration. They tell a claimant to check that all the entries on the Annual Declaration are correct.[18]The appellant completed and signed the Annual Declaration for the year 2009-2010 on 14 May 2010. She ticked box 3.2 that there was a change in her personal circumstances. The appellant cannot now remember why she did so. She was sent a further form to complete as to her personal circumstances and on 15 June 2010 she signed a declaration to the effect that there were no changes in circumstances and that the information given on Declaration was correct and complete.[19]The appellant accepts that the award notice and Annual Review did not include any reference to any matters relevant to the disabled child element.[20]On 16 July 2010 the appellant was notified of the entitlement decision (under section 18 TCA) for 2009-2010 and the section 14 award decision for 2010-2011. On 5 May 2011 HMRC sent the appellant the Annual Review and Declaration for the previous tax year (2010-2011). The appellant returned the signed Declaration. She was sent notice of the section 18 entitlement decision for that tax year on 1 July 2011. The same process was adopted for the tax year 2011-2012 and 2012-2013. None of the notices sent to the appellant included reference to any matters relevant to the disabled child element.[21]On 13 May 2013 the appellant telephoned the tax credits helpline to report that D was in receipt of DLA. The initial (section 14) decision for the year 2013-2014 was sent to the appellant on 24 May 2013 and included the disabled child element with effect from 13 April 2013.[22]The appellant appealed against the decision of 24 May 2013 not to include the disabled child element from the start of her award of tax credit as a single parent in 2009. Her representative (Brentwood CAB) submitted that HMRC should have revised the earlier decisions on grounds of official error.[23]On 14 April 2014 the First-tier Tribunal refused the appeal. The tribunal noted that HMRC accepted that the initial error not to include D as being in receipt of DLA was that of HMRC. It referred to the Upper Tribunal decision in CTC/3978/2012 (which I consider below) and decided that there was no official error in relation to the final section 18 decisions for each relevant year because the claimant had contributed materially to the errors. The tribunal also decided that the information provided by appellant on 13 th May 2013 was a notification of a change in circumstances so that an award could be backdated by only one month.[24]The appellant sought permission to appeal. On 2 July 2014 a First-tier Tribunal Judge gave permission to appeal on the grounds: a) the tribunal had not addressed the power to revise the award under section 16 TCA; b) that the appellant’s declaration that her circumstances were unchanged was correct, and so her case may be distinguishable from CTC/3978/2012 which the tribunal had relied upon. The parties’ submissions[25]I deal first with the submissions as to which there is now common ground between the parties.[26]First, HMRC support the appeal in part in that it is agreed that the appellant’s telephone call on 13 May 2013 was not a report of a change of circumstances but was a correction to the information held by HMRC. The decision of 24 May 2013 ought to have been revised under section 16 TCA from the beginning of the tax year, 6 April 2013. That was an initial decision taken under section 14 TCA. HMRC has explained that on 11 July 2014 it made a final decision under section 18 in respect of the appellant’s 2013-2014 entitlement which included the disabled child element from 14 April 2013. The section 18 decision replaced the previous section 14 decision ( JP v HMRC , referred to below, at paragraph 19) and has not been appealed. Nonetheless HMRC accept that the final decision was incorrect due to official error because it proceeded on the basis that the appellant had been reporting a change of circumstances on 13 May 2013. For the reasons set out above the final decision should have included the disabled child element from 6 April 2013.[27]Second, HMRC does not agree that it was open to it to revise the award for 2012-13 because the power to revise under section 16 TCA applied “during the period for which an award of a tax credit is made” and so the power had expired when that award ended on 5 April 2013. By the time the First-tier Tribunal heard the appeal, a final decision had been made as to the appellant’s entitlement in 2012-2013. That decision was made on 7 February 2014 and was not appealed, so it was not open to the First-tier Tribunal to make a decision on the appellant’s entitlement for that year. HMRC now agrees that the decision was incorrect because it failed to take into account the information provided by the appellant on 13 May 2013.[28]Prior to the hearing before me HMRC had agreed that both the above decisions would be revised so that, in addition to the entitlement to the disabled child element from 13 April 2013, the disabled child element would be included in the appellant’s entitlement from 6 April 2012 to 12 April 2013. At the hearing both parties confirmed that this had been done.[29]HMRC had also made written submissions as to jurisdiction but these were not pursued at the hearing and, for the avoidance of doubt, I do not consider that those submissions had merit.[30]The issue that remains for determination is whether the entitlement decisions from 12 December to 5 April 2012 should have included the disabled child element.[31]HMRC supports the decision of the First-tier Tribunal that the awards for those years were not incorrect by reason of official error, relying on JP v HMRC (referred to by the First-tier Tribunal by its Upper Tribunal number CTC/3978/2012 ). Prior to 13 May 2013 the appellant had failed to contact HMRC to tell them that there was no reference to her disabled child or payability of DLA. She had therefore materially contributed to HMRC’s error each year.[32]The appellant says that she did not pick up on the fact that the documentation did not include any reference to a disabled child. She thought the checklist meant that she should only report on errors in the information which appeared on the documentation rather than on missing information. She did not pick up on those parts of the Annual Review and guidance notes which instructed her to check if the details were correct and complete. Discussion The award from December 2009 - April 2012[33]The main issue in this appeal concerns the above period and I deal with it first.[34]The facts of JP v HMRC were very similar to those of the present case. The claimant had correctly provided information that she had a child who was in receipt of DLA but HMRC had failed to record that information in its system. The claimant was sent the same documentation as that provided to the appellant in the present case and she returned the Annual Declaration confirming the details recorded. It was not until after the time for appealing the section 18 decision had expired that the claimant informed HMRC that a child was in receipt of DLA.[35]In JP Judge Turnbull decided that, although HMRC made the initial error of incorrectly omitting to record that a child was in receipt of DLA, there was no “official error” as defined in the Official Error Regulations. He decided that it ought to have been apparent to the claimant that the award notification did not show either of her children as being disabled. He also decided that, even assuming that there was nothing on the face of the Annual Review or Annual Declaration which expressly indicated that the child disability element had not been included, in the light of the express provisions in the explanatory notes HMRC was entitled to expect that the claimant would check such matters. It was the claimant’s failure to check and correct the details provided rather than the initial error by HMRC which caused the section 18 entitlement decision to be wrong.[36]In the present case, the underlying facts are not in dispute. HMRC accepts that it was responsible for the initial error. But the award notices and the Annual Reviews would have shown that the disabled child element was not included. The appellant did not pick up on these. She did not contact HMRC to tell them that the information was incorrect or incomplete, until May 2013. The question which I have to decide is whether the tribunal erred in finding that the appellant contributed materially to the error by HMRC.[37]It is unfortunate that in some respects the documentation sent to the appellant was unclear. Although the introduction to the Annual Review forms and the guidance notes sent with them invited the appellant to inform HMRC if the personal circumstances (including relating to disabled children) were incorrect, the Annual Declaration did not provide a means for her to do so. It provided space for the appellant to report a change in circumstances, which was not applicable, but not corrections to them. The Declaration only confirmed that the information given “ on this form ” (ie the Declaration) was correct, but as it did not set out the appellant’s personal circumstances the scope of that confirmation was limited. The personal circumstances were set out on the Annual Review, which the Declaration did not mention. Moreover the instruction on the Annual Review to mark box 3.2 on the Annual Declaration if any of the details were wrong (see paragraph 15 above), was itself incorrect. Box 3.2 related only to change of circumstances, not incorrect information. In addition the further declaration that the appellant signed on 25 June 2010 (page 8 and 9 of the bundle) was also misleading because it stated that the information on the Declaration would be used to decide the final amount of the award but did not mention the Annual Review.[38]Had the appellant only been required to sign an Annual Declaration each year, I would therefore have held that in so doing she did not cause or contribute to the error. She accurately completed the Declarations that there was no change in circumstances. Had she not been asked to provide any other information, I do not think the appellant could realistically be said to have contributed to the error by correctly following the instructions given. However, HMRC does not rely on Part 3 of the Annual Declarations. HMRC relies on the clear instructions given in each of the documents that I have referred to, telling the appellant that she should contact HMRC if any details are incorrect or incomplete.[39]The Court of Appeal held in R (Sier) v Cambridge County Council Housing Benefit Review Board [2001] EWCA Civ 1523 that a common sense approach has to be taken to causation. The legislative purpose is relevant. The tax credits legislation places the onus on a claimant for ensuring that HMRC has the relevant information. That explains the central role of the Annual Review and Declaration, and the information which accompanied those documents made it clear that HMRC relied on a claimant to provide relevant information and to correct mistakes or omissions. The Checklist and the Notes explained what should be included on the notices sent to the appellant and where it would be found. The checklist specifically directed the appellant to look for information in relation to disabled children and payment of DLA, and to contact HMRC if it was not included. It was clear from the documentation provided to the appellant that she was required not only to complete the Annual Declaration each year but also to check the information provided and contact HMRC if it was incorrect or incomplete.[40]In making each final section 18 decision during the period in question, HMRC had relied on the appellant’s failure to correct the information sent to her. In failing to do so the appellant had caused or materially contributed to the erroneous decisions for the years in question. I agree with the approach of the Upper Tribunal in JP and I conclude that the First-tier Tribunal did not err in following that decision nor in the conclusion which it reached. The award for tax year 2012-2013[41]I agree with the Secretary of State’s submissions, summarised at paragraph 27 above, that there was no power to revise the award for that tax year once the final decision was made on 7 February 2014. The decision of 7 February was not appealed but in any event HMRC has since included the disabled child element for that tax year. The award for tax year 2013-2014[42]I agree with HMRC’s submission, summarised at paragraph 26 above, that the First-tier Tribunal erred in law in deciding that the phone call on 13 May 2013 was notification of a change of circumstances rather than a correction to the information held by HMRC. The award should have been revised under section 16 TCA with effect from the beginning of that tax year, 6 April 2013.[43]The decision which the First-tier Tribunal confirmed was that of 24 May 2013 and was an initial decision for 2013-14, taken under section 14(1) TCA. That decision is now otiose, it having been replaced by the final decision of 11 July 2014 taken under section 18. There is no purpose in my setting aside the decision of the First-tier Tribunal because HMRC has now awarded the disabled child element with effect from 6 April 2013. Conclusions[44]In the light of the above I allow the appeal on the limited ground that the tribunal erred in deciding that the disabled child element of the appellant’s award of CTC was payable from 13 April 2013 rather than 6 April 2013 but I dismiss it in all other respects.[45]I do not set the decision aside because HMRC has now made a correct final award of child tax credit for 2013-14. Signed on the original Kate Markus QC on 17 June 2015 Judge of the Upper Tribunal

Cited in 1 later judgment