JW v Revenue and Customs (TC) (Tax credits and family credit : other) [2015] UKUT 369 (AAC)

UKUT-AAC
JW v Revenue and Customs (TC) (Tax credits and family credit : other)
[2015] UKUT 369 (AAC) · 2015-06-26
JW v Revenue and Customs (TC) (Tax credits and family credit : other) [2015] UKUT 369 (AAC) (26 June 2015)   IN THE UPPER TRIBUNAL Appeal No: CTC/4867/2014   ADMINISTRATIVE APPEALS CHAMBER   Before: Upper Tribunal Judge Wright     DECISION     The Upper Tribunal allows the appeal of the appellant.   The decision of the First-tier Tribunal sitting at Peterborough  on 15 August 2014 under reference SC143/13/02318 involved an error on a material point of law and is set aside.   I give the decision the First-tier Tribunal ought to have given, namely that, as the respondent now agrees, the decision of HMRC dated 20 January 2013 is set aside and replaced with a decision that the appellant is entitled to an award of working tax credit as a single person on the basis of the claim made by her on 20 January 2013.   This decision is made under section 12(1), 12(2)(a) and 12(2)(b)(ii) of the Tribunals, Courts and Enforcement Act 2007.       REASONS FOR DECISION[1]This is yet another case that falls into the litany of cases in which the dreadful quality of HMRC’s appeal response to the First-tier Tribunal is a central issue. There is, however, hopefully a silver lining.[2]Taking the very essentials, and as I commented in SB –v- HRMC (TC) [2014] UKUT 543 (AAC), the woeful appeal response of HMRC to the First-tier Tribunal admits of nothing else, the case concerns a claim for working tax credit made by the appellant to HMRC for the tax credits year 2012/2013.  When she made that claim is not clear because the claim form is not in the papers, though there is a reference in HMRC’s appeal response to the First-tier Tribunal to her claiming for a period 20 January 2013 to 5 April 2013.  The general rule is that a claim for either tax credit runs from the date it is received by the Tax Credits Office to the end of the tax year in which it is made: see section 5(2) Tax Credits Act 2002. However the above dates would then give the puzzling result that the claim was refused on the very day it was made, despite HMRC’s central claim in its appeal response to the First-tier Tribunal that the claim was refused on “adverse inferences” because the appellant had not replied to a letter sent to her on 6  February 2013. This confusion is just one of the deficits in that response.   (It may be that the correct date is 20 March 2013 – see below.)[3]The decision according to Section 3 of the appeal response was that:   “On 20 January 2013 [the appellant’s] Tax Credit’s application for the tax year 2012/13 was rejected at the pre-award stage. To assist the tribunal we have enclosed a screen print of the reason for rejection, please see page 1.”    `The “screen print” said:   “We cannot confirm that you are entitled to claim as a single person therefore we’ve not awarded tax credits”.[4]Taking stock at this early stage in the narrative, it is not at all clear from the appeal response what the legal basis for the decision was.  I made similar criticism of the appeal response in SB.  Section 14(1) of the Tax Credits Act 2002 provides that:
“14.-(1)On a claim for a tax credit [HMRC] must decide (a)  whether to make an award of the tax credit, and (b)  if so, the rate at which to award it.”
The language of “rejected at the pre-award stage” suggests rejecting the claim as made as invalid for some reason.  If a claim has been made, however, section 14 requires HMRC to decide whether to make an award or not. That, I imagine, would be in a form of “We have decided not to make an award to you because…”, or some such form of words. The combination of the language used and the absence of any reference to the legislation under which the decision was made leaves it to the reader of the appeal response to construct the basis upon which the decision was founded. It should not need saying that that should not be the case.[5]Given HMRC’s submission on this appeal to the Upper Tribunal to the effect that whatever the decision was that was under appeal to the First-tier Tribunal it has now been shown to be wrong, and given that no one is disputing that I have jurisdiction to determine this appeal, I will assume that the decision made on 20 January 2013 (if that is the correct date) was made under section 14(1) of the Tax Credits Act[2002]Accordingly, I will not trouble to examine the nature of the decision under appeal any further, save to note that if the claim had been “rejected at the pre-award stage” serious issues might have arisen as to whether there was an appealable decision at all: see CTC/31/2006 and ZM and AB –v- HMRC (TC) [2013] UKUT 547 (AAC); [2014] AACR 17. I will also not address whether if a person makes a claim as a single person but he or she is in fact a member of a couple, the effect of such a finding is to invalidate the claim from the start such that section 14 does not apply or whether its effect is that a decision is made under section 14 making no award of tax credit: see sections 3(3) and 4(1)(g) of the Tax Credits Act 2002,  regulation 5(4) of the Tax Credits (Claims and Notifications) Regulations 2002 and CSTC/724/2006 (on the mutual exclusivity of section 3(3)(a) and 3(3)(b). The learning and Article 6 ECHR reading down in ZB and AB might well suggest the latter result should hold.[6]Reverting to HMRC’s appeal response to the First-tier Tribunal, no information is shown about what the pre-award checks were or, more importantly, what they had revealed to raise a question as to the appellant’s being a person able to claim as a single person.  As I have said, the claim form is not in the papers.  It is doubtful, however, that information on that form would have given rise to doubts about the appellant’s single person status as it is likely that all the appellant relevantly said on the form was that she was single and did not have a partner.  From the appeal response it also seems unlikely that her claim had been the subject of a random, unevidenced request for further information: the phrase “pre-award checks” is indicative of HMRC having separate information of some sort that the appellant may not have been single and was a member of a couple.[7]The appeal response asserts that because of the pre-award checks the appellant was asked to provide evidence to show, amongst other things, that she was eligible to claim as a single person. What that evidence might have been is not stated in the appeal response.  An enquiry letter was sent to her on 6 February 2013. What that that letter said is unknown as it, too, was not provided with the appeal response.  The appellant replied to this letter and, according to the appeal response, “provided some of the information that was requested”. HMRC, however, found that information to be insufficient to verify that she was a single person.[8]This then led to HMRC issuing a letter to the appellant dated 20 March 2013. This was with the appeal response. It referred to letters written to the appellant by HMRC on 6 February 2013 and 6 March 2013.  It said that HMRC had made a decision not to accept the appellant’s claim because “from the information you have given me I cannot confirm that you are entitled to claim as a single person” (my underlining).  Ignoring the odd, Kafkaesque formulation of the onus of proof, this letter seems to have proceeded on the basis not of the evidence (whatever that may have been) arising at the pre-award checking stage but from what the appellant had provided. The letter lists the documents the appellant had sent HMRC.  This list includes, inter alia, diary, council tax bill, statement of account regarding tenancy and prenatal screening letter[1]. No explanation is given as to why these, or other documents, showed the appellant not to be single: or to put it another way, given the mutually exclusive terms of section 3(3)(a) and 3(3)(b) of the Tax Credits Act 2012, that she was in fact a member of a couple. Nor does anything else in or with the appeal response provide such an explanation.[9]I had thought that this letter may be the decision letter, but it contains the sentence “We will send you a letter which explains this decision and your right of appeal separately”. That at least suggests the decision date is 20 March 2013 and not 20 January 2013. This other, ‘appeal rights’ letter was also not with the appeal response.[10]The appellant then lodged an appeal against HMRC’s decision. That at least is in the paper with the appeal response. In that letter she said, relevantly:
“I do not agree that I need to make a joint application. Since I came to the UK I was lone person however due to the fact that I could not afford to rent the whole house on my own I found someone so I could divide all expenses for two people. On what grounds Compliance Officer stated that I live with a partner?”
The appeal letter in this one sentence provides more detail as to the basis for the decision under appeal than anything said in the appeal response.  Regrettably, the question the appellant asked was not answered by the appeal response.[11]HMRC then sent a further letter, dated 17 June 2013, to the appellant in response to her appeal.  It asked her to provide further evidence in the form of her rental agreement, council tax bill and utility bills.  It also advised the appellant that she could withdraw her appeal.  The letter referred to the fact that the First-tier Tribunal on the appeal could dismiss or allow the appeal “and will consider all the information and evidence that is provided”.  The latter statement, although strictly speaking correct, is close to disingenuous given HMRC’s then stance of providing the tribunal with none of the evidence provided.  Equally close to sharp practice given their subsequent conduct is HMRC’s later statement in the same letter that if it did not change the decision “we will make sure that anything you provide is included with the appeal when we send it to the tribunal”.[12]There was seemingly no reply to this letter by the appellant. Despite the terms of its letter of 17 June 2013, HMRC then used the appellant’s lack of response as a basis for applying to have the appeal struck out on the basis that HMRC (not the First-tier Tribunal) was unable to proceed further with it; and as is evident from what I have already set out it did not provide the tribunal with any of the relevant evidence on the appeal.[13]A strike out request does not, however, absolve or water down the decision makers’ obligations to the First-tier under the Tribunal Procedure (First-tier Tribunal) (Social Entitlement Chamber) Rules 2008 (“the TPR”).  Although incompetently articulated, the strike out request was not being made on the basis of lack of jurisdiction and can only sensibly have been on the basis that the appeal had no reasonable prospects of success: per rule 8(3)(c)of the TPR. But in order for the First–tier Tribunal to judge whether there is no reasonable prospect of success patently it must in all cases have the key, relevant evidence before it, otherwise it is making what will most often be a factual judgment in a factual vacuum: see to like effect the further analysis of Upper Tribunal Judge Rowland at paragraph [22] of JT –v- HMRC (TC) [2015] UKUT 81 (AAC).[14]The First-tier Tribunal at least had the good sense not to accede to the strike out request.  As I commented in paragraph [17] of SB:
“Quite why HMRC having reached the end of the road, so to speak, was a ground for the tribunal striking out the appeal rather than simply deciding it is not clear to me.”
I shall assume in this tribunal’s favour, as I did for the First-tier Tribunal in SB, that it decided to ignore HMRC’s request based on its view that it could decide the appeal on the merits and to do otherwise and strike it out for the reasons given by HMRC would have been irrational: per DTM –v- Kettering BC (CTB) [2013] UKUT 625 (AAC).[15]However, I regret that this is about all I can find to say positively about the tribunal. Faced with neither party attending the hearing before it and the gaping hole in the evidence which at the very least HMRC ought to have provided (see rule 24(2)(e) and 24(4) of the TPR), I find it astonishing that the tribunal felt it was in the “interests of justice” (per rule 31 of the TPR) to proceed and decide the appeal on the manifestly deficient papers before it. In effect, the tribunal simply rubber-stamped HMRC’s decision. It relied on the appellant’s statement about finding another person to rent the house with and her lack of response to the 17 June 2013 letter as amounting to good evidence (by way of adverse inference) that she was part of a couple, and quoted (without irony) Commissioner Henty’s dicta in CIS/5321/1998 that “a claimant must do the best of his or her ability to give such information to the decision maker as he or she reasonably can in default of which contrary inferences can always be drawn”, which ignores the fact that the appellant had provided information to HMRC which it had then failed to provide to the tribunal.[16]The tribunal’s analysis also leaves out of account, and it failed to enquire into, what it was evidentially that the “pre-award checks” had revealed. This is important because the tribunal rested its decision on the information provided by the appellant having been insufficient to verify that she was a single person.  Verify against what, however? Furthermore, I simply, do not understand how the tribunal could make that judgment without sight of the information the appellant had supplied. The tribunal seemingly proceeded on the basis that the information the appellant had supplied to HMRC had all been concerned with whether she was self-employed and working for at least 30 hours a week.  That may have been the case but is far from being self-evident.  Indeed it is difficult to see what the pre-natal screening letter, tenancy agreement and council tax bill said about the appellant’s hours of work. Those documents seem more likely to be related to whether the appellant was one of a couple.[17]In terms of material errors of law, I need only highlight two. First, the tribunal had to decide the appeal applying the relevant law to the facts but I can find in nothing in the statement of reasons to show that it did so. Section 14 of the Tax Credits Act 2002 is not set out in the tribunal’s reasons nor are the terms of section 3(5A) of the Tax Credits Act 2002 (defining “couple”). Even though HMRC had failed to set out these relevant statutory provisions, as the tribunal said it was satisfied it was able to decide the appeal on the papers alone it ought to have been satisfied of all the relevant law it had to apply. It made no findings of fact or reasoned out why on the evidence the appellant was a member of a couple for tax credit purposes, beyond the tribunal saying it was drawing an adverse inference from the appellant’s failure to respond. But adverse inference is simply a tool for making the findings of fact necessary to decide the issue before the First-tier Tribunal.  It does not absolve the tribunal from making such findings. Here the tribunal in effect had no relevant evidence.[18]Second, the tribunal erred in law in failing to provide any proper explanation as to why it considered it was fair and just to determine the appeal on the papers available to it on 15 August 2014 notwithstanding the serious omissions in HMRC’s appeal response. Indeed this is one of those rare cases where in my judgment it can be said that the tribunal’s decision to proceed and decide the appeal in the absence of the evidence HMRC held (or ought to have retained) was irrational in the Wednesbury perversity sense.[19]The appeal to the Upper Tribunal, as already noted, is supported by HMRC, in a helpful submission by Mr Eland.  I have not considered it necessary for appellant to be called on to make any reply to that submission given that it wholly supports her. I merely comment that I imagine that Sir Andrew Leggatt – whose Review of Tribunals led to the Tribunals, Courts and Enforcement Act 2007 - would despair that it took until the level of the Upper Tribunal for a proper substantive decision to be made and that it was only at this point that there was any proper or sensible input from HMRC.[20]Mr Eland submitted that HMRC’s appeal response to the tribunal was materially inadequate and failed to comply with rule 24(2)(e) and (4)(b) of the TPR in that:(i) it was not accompanied by all documents relevant to the case, and(ii) the written response on the appeal failed to state HMRC’s grounds for opposing the appeal. I agree. Mr Eland further argued that there had also been a breach of natural justice in HMRC not having provided the tribunal with any of the relevant evidence it held (despite, I might add, having told the appellant it would do so).  I also agree, insofar as this identifies an error in approach separate to the failure to comply with rule 24 of the TPR. Mr Eland also helpfully draws attention to the tribunal’s statement in its reasoning that “There is no information before the Tribunal as to who [the appellant] was living with, how expenses for 2 people were met and this could have been information that the Tribunal would have established had she attended”.  This, in a nutshell, in my view makes good the perversity conclusion in paragraph 18 above.[21]Mr Eland goes on in that submission to state that the appellant made a fresh claim for tax credits in August 2013 and was awarded tax credit as a singe person with effect from 22 July 2013[2].  On the basis that HMRC was satisfied that the appellant was single in July 2013, Mr Eland invited me to decide that on the balance of probabilities, and absent any direct evidence to the contrary, that she was also single on and from 20 April 2013.  I so find and give the decision to that effect above.[22]For these reasons, I set aside the tribunal’s decision of 15 August 2014 and give the decision I consider it ought to have given, as set out above.[23]I need to address two other matters. The first concerns Mr Eland’s view that this case differs from SB because in this case the appellant “could not win her appeal by “default”. Instead she needed to persuade the tribunal that the conditions [and, in particular, those relevant to her being able to claim as a singe person] were satisfied”. This was because, so Mr Eland argued, the appellant had failed to dispel HMRC’s doubts about the correctness of her claim as a singe person and, in principle, this was an approach which HMRC was entitled to take: the appellant hadn’t played her part as claimant.[24]I accept this, but only up to a point. Mr Eland cites Baroness Hale in Kerr –v- DSD [2004] UKHL 23; R 1/04(SF) under The nature of the process (at paragraphs [56]-[65]). The difficulty I have, however, is in knowing whether the appellant had not played her part in the context of not knowing what the pre-award checks had revealed and not having sight of the information she had supplied to HMRC in February or March 2013 (and, I may add, not having sight of the information that led HMRC to award the single person’s tax credit claim from 22 July 2013). For the purposes of this appeal I merely emphasise what Baroness Hale said in paragraphs [62] and [63] of Kerr. “What emerges from all this is a co-operative process of investigation in which both the claimant and the department play their part. The department is the one which knows what questions it needs to ask and what information it needs to have in order to determine whether the conditions of entitlement have been met. The claimant is the one who generally speaking can and must supply that information. But where the information is available to the department rather than the claimant, then the department must take the necessary steps to enable it to be traced. If that sensible approach is taken, it will rarely be necessary to resort to concepts taken from adversarial litigation such as the burden of proof. The first question will be whether each partner in the process has played their part. If there is still ignorance about a relevant matter then generally speaking it should be determined against the one who has not done all they reasonably could to discover it. As Mr Commissioner Henty put it in decision CIS/5321/1998, "a claimant must to the best of his or her ability give such information to the AO as he reasonably can, in default of which a contrary inference can always be drawn." The same should apply to information which the department can reasonably be expected to discover for itself.”[25]The second matter is the (possible) silver lining to the cloud of this case. This arises from what Mr Eland had said in his original submission about HMRC’s approach in this case, and others like it, not reflecting the current HMRC approach “which is that full details of the case are always included in the written response, and the response itself is accompanied by all relevant documents, in compliance with the [TPR].  The current and compliant approach has been in place since May 2014”.  Given the evident and serious problems the non-compliant approach had caused, I asked Mr Eland to provide me with further information about the compliant approach, which he duly did. I set out his reply below with the relevant internet link.   “1. In the note issued by the Upper Tribunal on 6 May 2015, I was asked to provide:(i) a copy of the instructions/guidance which were in place before May 2014 telling or advising HMRC response writers what to include in FtT appeal responses, or whatever else such responses would have been based on, and(ii) a copy of the replacement instructions/guidance in place from May 2014 which are "compliant" with HMRC's responsibilities under the Tribunal Procedure Rules in terms of appeal responses.[2]I therefore refer to the guidance for response writers which is published online http://www.hmrc.gov.uk/manuals/tcmanual/TCM0014000.htm (last checked on 8 June 2015) in the Tax Credit Manual (from TCM0014000 onwards). The guidance that specifically deals with preparing the appeal response appears at page TCM0014200.[3]For the guidance as it was before May 2014, Steps 5 and 6 on that page set out what is required when the case reaches response stage. A copy of the code as it was in March 2014 is attached at Appendix (i)[4]For the guidance as it currently stands, the same information appears at Steps 6 and 7 of that page. An extract from the current online publication is attached at Appendix (ii).[5]Based on the official guidance, I submit that HMRC’s intention clearly is, and has always been, that its appeal responses comply with the requirements in the Tribunal Rules.[6]It is therefore a matter of regret that, outside the official guidance, an approach to appeal responses was developed by individuals within the Tax Credit Office. This took the form of a short response, prepared on a template, which either invited the tribunal to strike the appeal out, or simply stated that in the absence of contact from the claimant, HMRC was unable to proceed with the appeal. The response which appears at pages 1A and 1B of the bundle in the present case is a typical example.[7]Although the template appears to have fallen into general use, it was not used in every case. Rather, it was used in those cases where the perception was that the claimant’s appeal was hopeless.[8]Unfortunately, despite the legal shortcomings in the approach, it is clear that a number of First-tier tribunals were content to proceed in cases where it had been used (and the present case is one such case). This appears to have been taken as tacit judicial approval of the approach. In other cases, HMRC was directed to provide a full response to the appeal.[9]It is clear that a response based on the template does not comply with the official guidance for response writers and so, in turn, does not comply with the Tribunal Rules. Once this office became aware of the template, the Tax Credit Office was advised of its unsuitability with the result that the template was withdrawn from use on 19 May 2014. This did not necessitate a change in the official guidance.”[26]Whether HMRC’s officials charged with writing appeal responses for the First-tier Tribunal now adhere to these instructions, and have done so since 19 May 2014, will no doubt be revealed. The guidance referred to above will, however, hopefully provide a useful benchmark for appellants and the First-tier Tribunal to measure actual appeal responses against.       Signed (on the original) Stewart Wright Judge of the Upper Tribunal Dated 26th June 2015   [1] I have not referred to other items on the list which seem more related to whether the appellant was in self-employment for at least 30 hours a week. (The appeal response wrongly refers to the test being over 30 hours a week.) These are items such as business cards, receipts and invoice books. I have not referred to them because the sole basis of the decision under appeal was that the appellant was not single/was a member of a couple, and not on hours of work. [2] Quite why HRMC did not consider that that was relevant evidence that ought to have been put before the tribunal on over a year later on 15 August 2014 is not answered.  Rule 24(4)(b) of the TPR arguably ought be read as imposing a continuing obligation on respondents to supply the First-tier Tribunal with all relevant documents which come into their possession before the appeal to that tribunal is determined.

Cited in 1 later judgment