Tax Credits: Starting an appeal
This section provides information about appealing a tax credits decision. Not all decisions are appealable. The appeals process changed significantly for decisions made on or after 6 April 2014. The new process is explained below as well as what to do for appeals against decisions made before 6 April 2014. You can find a full list of appealable decisions here. The information below was written by the Low Incomes Tax Reform Group.
- The appeals process
- Appeals vs. Disputes
- Changes from 6 April 2014
- Decisions made on or after 6 April 2014
- How to request a mandatory reconsideration
- Late requests
- The mandatory reconsideration decision
- Appealing the mandatory reconsideration decision
- Decisions made before 6 April 2014
- How to appeal
- Late Appeals
- Settling an appeal with HMRC
- More information
A tax credit appeal is a formal process that allows a claimant to challenge an incorrect entitlement decision. The appeals process is set out in Section 38 Tax Credits Act 2002. For decisions made on or after 6 April 2014, an appeal cannot be brought under Section 38 unless a review of the decision has been carried out (called mandatory reconsideration) and a mandatory reconsideration (MR) notice issued showing the outcome.
Following the mandatory reconsideration process, onward appeals are dealt with by an independent tribunal which is completely separate from HMRC. This is the Social Entitlement Chamber of the First-tier Tribunal to which most welfare benefit appeals go in the first instance. It is administered by HM Courts and Tribunals Service which is an agency of the Ministry of Justice. This agency is legally independent of HMRC and there is a specific set of rules governing the First-Tier Tribunal’s procedures. The Tribunals service was previously a separate agency of the Ministry of Justice but merged with HM Courts Service from 1st April 2011.
If the claimant is dissatisfied with the decision of the First-tier Tribunal, they can appeal further, but only on a point of law and with permission, to the Administrative Appeals Chamber of the Upper Tribunal which replaced the former Social Security and Child Support Commissioners on 11 November 2008. On matters of fact, as opposed to law, the decision of the First-tier Tribunal is nearly always final.
From the Upper Tribunal, a right of further appeal lies, again with permission and on a point of law, to the Court of Appeal, Court of Session in Scotland, or Court of Appeal in Northern Ireland.
The distinction between MR/appeals and disputes is one even HMRC staff find hard to understand. The appeal route is used where there the claimant thinks that HMRC have calculated their entitlement incorrectly, it can therefore be used to challenge an overpayment if the underlying calculation that led to the overpayment is wrong. A dispute is used where there claimant has been overpaid (they have in fact received more than their entitlement for the year) but they don’t think it should be paid back. Generally this is because they believe HMRC have made a mistake and that they met their responsibilities as set out in COP 26. More information can be found in our disputes section.
There are some important differences between the two processes:
- the appeals is a statutory process. Disputes are governed by COP26 published by HMRC that sets out how their statutory discretion is exercised.
- the appeals process starts in HMRC with the mandatory reconsideration stage but proceeds to an independent Tribunal outside of HMRC. Onward appeals go through the court system. This is in contrast to disputes that are decided within HMRC and further challenge is limited through the Adjudicator and Parliamentary Ombudsman.
- MR requests and any onward appeals have a strict time limit and should be made within 30 days of the date on the decision notice. In certain circumstances a late MR request or appeal can be lodged. Previously disputes had no time limit, however from 6 April 2013 HMRC have introduced a 3 month time limit for disputes. How the 3 month time limit applies depends on the decision that is in dispute. We have produced some detailed information for advisers on the new time limit in our dispute section. The introduction of the time limit for disputes makes understanding the statutory official error route increasingly important.
- MR requests are dealt with by the appeals team in the Tax Credit Office. Disputes are handled by the Customer Service and Support Group in the Tax Credit Office.
- MR requests are filed either by letter or using form WTC/AP. Disputes can be sent either by letter or using form TC846
- When a MR request is lodged, recovery of the overpayment is suspended. From 15 July 2013, disputes will no longer attract suspension of recovery and so recovery of the debt will continue.
On 3 July 2012, HMRC published a consultation document called ‘Tax Credits: mandatory revision before appeal’. HMRC sought views on the impacts of changing the tax credits appeals process to mirror the Department for Work and Pensions planned changes to their appeals process which was announced in the Welfare Reform Act 2012 and subject to a consultation between February and May 2012.
The aim of the consultation was to look at simplifying the tax credits appeals process by introducing a mandatory consideration of revision before appeal. HMRC anticipated that this would significantly reduce the number of appeals to be heard by the Courts and Tribunal Service and ensure continued alignment and consistency of treatment with the revised DWP appeals legislation and processes which DWP will be introducing.
The consultation closed in October 2012. HMRC confirmed at the November 2012 Benefits and Credits Consultation Group meeting that although the proposals in the consultation document would go ahead to mirror DWP changes, given the current delays in the tax credits appeals system they would not be implemented from April 2013 as originally planned. Instead they have been introduced from 6 April 2014.
The main change is that claimants must ask for a review of the decision before they can appeal. This review is called ‘mandatory reconsideration. Some other differences between the old system and the new are:
- Under the old system, late appeal requests that were not accepted by HMRC would be sent to the Tribunal to decide whether a late appeal could be accepted. Under the new process HMRC will decide whether a late MR request can be accepted and if they decide it cannot there will be no right of appeal against that decision.
- Under the old system, if settlement could not be reached with HMRC then the appeal would automatically be sent to the Tribunal. Under the new process, claimants must appeal directly to the Tribunal within 30 days following receipt of their MR decision.
These changes were brought in by new regulations – the Tax Credits, Child Benefit and Guardian’s Allowance Reviews and Appeals Order 2014 - which amended the Tax Credits Act 2002 and inserted some new sections covering mandatory reconsideration.
Decisions made on or after 6 April 2014
How to request a mandatory reconsideration (MR)
MR requests need to be made in writing or using form WTC/AP . There is no requirement for the request to be signed, as long as HMRC are satisfied that the claimant has sent in the request they can continue. Intermediaries and agents can ask for a MR if they have written authority to act.
The request should be made within 30 days of the date on the decision notice. See ‘late requests’ below if the claimant has missed this 30 day time limit. Recovery of any overpayment will be suspended upon receipt of the MR.
The case will then be sent to the relevant part of HMRC. If the decision was made in the course of a compliance investigation then the case will be sent to compliance to consider the MR request.
According to HMRC guidance, upon receipt of a MR request HMRC staff will decide whether the decision carries MR rights or not. If it is decided that the decision does not carry MR rights then staff are instructed to contact the claimant by phone and explain why this is the case and make a note on the claimant’s records. Only if they are not contactable by phone will a letter be sent. Historically, HMRC have been known to refuse appeals where they believe there is no appeal right and this is either incorrect or can potentially be challenged at Tribunal. With the introduction of MR, it appears that challenges over the validity of a MR request are being dealt with by HMRC and there is no recourse to a Tribunal on an issue of validity. This would leave Judicial Review as the only potential option. We are confirming this position and will provide an update once more information is obtained.
HMRC have published guidance in their manual outlining the mandatory reconsideration process which covers what attempts HMRC will make to get further information and what notices will be issued to claimants.
You should always try to ensure that you, or the claimant, lodge the appeal within the 30 day time limit for appealing. However if this time limit has passed, it is not necessarily fatal as MR requests can be accepted providing the following conditions are met:
- The claimant has applied for an extension of time
- The claimant explains why the extension is sought and the request for late MR is made within 13 months of the notification of the original decision.
- HMRC are satisfied that due to special circumstances it was not practicable that the application for MR be made within the 30 day time limit
- HMRC are satisfied that it is reasonable in all of the circumstances to grant the extension. In determining whether it is reasonable to grant an extension, HMRC must have regard to the principle that the greater the amount of time that has elapsed between the end of the 30 day time limit and the date of application, the more compelling the special circumstances should be.
An application to extend the time limit which has been refused may not be renewed.
One important point is that under the old appeals system, if HMRC refused a late appeal request then it was ultimately up to the Tribunal to decide whether to allow the appeal or not. Under the MR process, HMRC are effectively judge and jury on late requests and other than possibly using Judicial Review there appears to be no process to challenge HMRC’s refusal to accept the late MR.
The mandatory reconsideration decision
Upon receipt of a MR request, HMRC will first decide whether the decision has a right to request MR attached to it (see above) and then decide whether any further information is required to make their decision.
If HMRC need more information they will make 3 attempts to contact the claimant by telephone to obtain the additional information. If contact cannot be made, a ‘mandatory reconsideration triage letter’ will be sent asking for further information.
HMRC guidance appears to state that if no further information is required, HMRC staff should still telephone the claimant to either tell them the original decision is correct or to tell them the original decision was wrong. There is guidance on what staff should do if, during this telephone call, the claimant then agrees the original decision was correct. Outbound calls from HMRC are normally not recorded and so staff are directed to make a note of this on TC648. Advisers may need to request a copy of this if the claimant then seeks advice and you find the decision is wrong and an appeal needs to be lodged with the Tribunal.
Once HMRC make their decision they should send the claimant two copies of the mandatory reconsideration notice. According to HMRC guidance this notice should in most cases contain the following information:
- full details of the decision under dispute (also include all elements of the decision not under dispute)
- the regulations used in the decision making process
- details of previous instances of non compliance (if applicable)
- the reason(s) the claimant is disputing the outcome
- whether the decision has changed following Mandatory Reconsideration
- a summary of the evidence used to make the Mandatory Reconsideration decision
- the weight placed on the various pieces of evidence
- details of any contact or attempts to contact the customer at the Mandatory Reconsideration stage
- any other information that may be useful to Her Majesty’s Courts and Tribunals Service.
WTC/AP form confirms that ‘we will put any recovery action on hold while we carry out the reconsideration or while your appeal is being considered’. However the staff guidance states that at the point of issuing the MR notice, the suspension of recovery is to be lifted. It is not clear at what point this gets suspended again if the claimant continues their appeal and we are seeking clarification from HMRC on this point.
Appealing the mandatory reconsideration decision
Under the old appeal system, if HMRC did not agree that the original decision was wrong, the case was automatically sent to the Tribunal service. The claimant did not need to take any action. Under the new process, claimants must appeal directly to the Tribunal service if they are not happy with HMRC’s mandatory reconsideration decision. This is called ‘direct lodgement’. The process is currently different in Northern Ireland although it is expected that direct lodgement will comment there in late 2014.
For people who live in Great Britain (England, Scotland and Wales), form SSCS5 should be used to appeal against the mandatory reconsideration decision. HM Courts and Tribunals Service also publish a booklet on how to complete the form. You must include a copy of the mandatory reconsideration notice with the appeal. You must include a copy of the mandatory reconsideration notice with the appeal.
For claimants in Northern Ireland, appeals should be sent to the Tax Credits Office, Preston, PR1OSB and if you cannot reach agreement with HMRC or do not agree with their decision, it will be forwarded to the Tribunal Service by HMRC.
Claimants have 30 days from the date of the mandatory reconsideration notice to lodge their appeal. If an appeal is received by HMRC against a MR decision, they will write to the claimant and tell them to lodge it directly with the Tribunal service. If an appeal is sent to HMCTS they will check whether a MR has been carried out and if not, it will be forwarded to HMRC and treated as a MR request.
Decisions made before 6 April 2014
If the decision was made before 6 April 2014, then the old appeals process explained below should be followed.
An appeal must be made in writing within 30 days of the date of the decision that is being challenged. This will normally be the date on the tax credits award notice. Although the appeal will eventually be heard by an independent tribunal, the notice of appeal must be sent to the Tax Credit Office (TCO).
The appeal must state what the customer thinks is wrong and must also state which decision they are appealing against.
The appeal does not have to be on a special form. You can use form WTC/AP but a letter will also be sufficient. You must give the name and contact details of the claimant, confirm the decision that you are appealing against and sign the letter. If you have authority to act for the claimant, the appeal can be signed by the adviser, otherwise the claimant should sign it. It is generally useful to include a copy of the authority form.
Appeals should be sent to:
Tax Credits Office
Additionally, the letter should explain the grounds for appeal. It will generally not be sufficient simply to state that you are appealing because you, or the claimant, think the decision is wrong.
Prior to July 2013, the TCO should acknowledge receipt of the appeal in around 5 working days from when they logged it on their system. This provided useful evidence that an appeal had been sent. However from 15 July 2013, HMRC have stopped these acknowledgement letters as they are now undertaking to deal with all appeals within 6 weeks. We advise that all appeals are sent recorded delivery or with some proof of posting.
There have been reports of the TCO declining to accept an appeal even though it is validly made. This is sometimes due to confusion within the TCO as to what constitutes a valid appeal in respect of an overpayment – it is sometimes not understood that there is a right of appeal against a decision on an award that results in an overpayment, even though there is no statutory right of appeal against the collection of the overpayment.
It is worth remembering that HMRC do not have power to decline to entertain a valid appeal, and jurisdiction over what is a valid appeal lies with the appeal tribunal, not with HMRC.
If you, or the claimant, do not receive any acknowledgement from HMRC within a reasonable time, you should contact the Tribunals Service and ask them if they can list the appeal directly.
HMRC do not have power to refuse to accept a valid appeal or to strike out an appeal. If there is any uncertainty or dispute in this regard it is for the independent tribunal to decide, not HMRC.
Although it is possible in some circumstances make a late appeal, you should wherever possible ensure that the appeal is sent to HMRC within the 30 day time limit and that you make allowance for any postal delays. If you are still awaiting information relevant to the appeal, it is advisable to include a request for that information with the appeal and make it clear that you will be sending further representations at a later date.
You should always try to ensure that you, or the claimant, lodge the appeal within the 30 day time limit for appealing. However if this time limit has passed, it is not necessarily fatal. Both HMRC and the First-tier Tribunal have discretion to accept a late appeal provided it is made within 13 months of the date of the original decision.
If the appeal is late, it should explain why.
A late appeal can be accepted provided: --
- there are reasonable prospects that the appeal will be successful; and
- one of the following circumstances applies:-
- the appellant or the appellant’s partner or a dependent, has died or suffered serious illness;
- the appellant is not resident in the UK;
- normal postal services were disrupted;
- some other special circumstances exist which are ‘wholly exceptional and relevant to the application’ – e.g. It may be that you needed some help with understanding the determination notice relating to your case and found it difficult to find someone to help you.
Ignorance of the law is not in itself a good reason for appealing late and generally the later the appeal is, the stronger the reasons should be.
It may be that HMRC will simply accept and process the late appeal. If they do not do so, the question of the late appeal will be referred to the tribunal for immediate consideration. This will be considered by a tribunal judge but without a hearing. It is advisable to ensure that the request is as detailed as possible.
Late appeals can arise where an appeal against an award concerns detail relating to the calculation of the claimant’s entitlement. Tax credit claimants are not given calculations with their award notices and will have to ask for them separately. This information could be outside the 30 days allowed for appealing against the award. It is our understanding in such cases that HMRC will generally not decline to accept a late appeal. Alternatively it could perhaps be argued that the 30 day time limit runs from the date on which the claimant receives the additional information. But the only safe course is to ensure that appeals are lodged within the 30 day time limit.
If HMRC do not consider a late appeal to be in the interests of justice, they are not entitled to refuse to admit it on those grounds without first consulting the First-tier Tribunal.
Once the appeal has been processed, someone at the TCO will contact you (if there is an authority in place, otherwise they will contact the claimant), usually by phone, to discuss the appeal. HMRC may agree a settlement of an appeal with you or the claimant, and that is what they generally aim to do in the first instance. Although the proposals should be considered, you do not have to settle and can choose to have the case listed with the First-tier Tribunal.
If agreement is reached, the TCO will confirm it in writing, and amend the award there and then. It is advisable to ask for the direct dial number of the appeal officer should there be any further queries and ensure that they agree to send confirmation of the outcome in writing in addition to a new award notice (on occasion TCO have been known to send only the new award notice).
If settlement is not reached, a date will be set for a hearing before the First-tier Tribunal. The claimant has the right to back out of any agreement made with the TCO under this procedure, provided TCO are told within 30 days.
More information about settlements can be found in the HMRC tax credits manual.
Due to the rapid rise in the number of compliance interventions being carried out by HMRC in trying to tackle error and fraud in the system, the number of appeals has also risen dramatically. This has caused a concerning backlog of appeals in the Tax Credit Office. It is not uncommon for compliance appeals to take several months before any contact is made with the claimant and even longer for the case to progress to the Tribunal.
HMRC do try and triage cases to ensure that people who are completely out of payment (such as those subject to undisclosed partner decisions) have their appeals dealt with quickly (within three months is the timescale). However, evidence suggests this doesn’t always happen.
For decisons made before April 2014, in theory it is possible to ask the First-tier Tribunal directly to list the case where HMRC are acting unreasonably and delaying the appeal and there is hardship. Child Poverty Action Group have written some guidance on dealing with delays that covers writing to the Tribunal directly. They note that such applications are unlikely to be entertained unless there are special reasons why the case should be dealt with urgently, or there has been a significant delay.
From 15 July 2013, HMRC have undertaken to deal with all appeal cases within 6 weeks.
Updated 23 April 2015