Tax Credits: Appealable decisions

Not all tax credit decisions carry a right to mandatory reconsideration or appeal. If a decision isn’t appealable you may want to consider the dispute process, official error or a complaint.

Statutory Rights of Appeal

Rights of appeal are granted by statute against (TCA 2002, s 38(1)):

An initial decision on a claim for tax credit (s 14(1));
A revised decision on reporting a change of circumstances (s 15(1));
Any other revised in-year decision altering or terminating an award (s 16(1));
An end-of-year decision leading to a final award (s 18(1) for reply-required cases or (6) for auto-renewal cases);
A decision following an enquiry (s 19(3));
The continuation of an enquiry (appellant may ask for a direction that HMRC must give a closure notice – s 19(9), (10);
A decision on a discovery (s 20(1) – revision of income tax liability, or s 20(4) – fraud or neglect of claimant or representative);
A decision under regulations made under s 21;
The determination of a penalty by HMRC (Sch 2, para 1);
A decision under section 36A or 36C that working tax credit is not payable (or is not payable for a particular period); and
A decision to charge interest on an overpayment (s 37(1)).

There is no right of appeal against an administrative decision in relation to the recovery of an overpayment, nor against the issue of a notice under s 14(2), 15(2) or 16(3).

Note also procedure for settling an appeal under Taxes Management Act 1970 s 54 applies to tax credit appeals.

One noticeable absence from the list above is a right of appeal against a decision by HMRC to recover an overpayment. Using the appeal rights above, a claimant can challenge a decision by HMRC that led to an overpayment and, if successful, that decision can be reversed establishing that there is in fact no overpayment (or it is less than the original amount).

However, if there is in fact an overpayment (the claimant has received more than their entitlement), there is no right of appeal against HMRC’s decision to recover this overpayment.

Impact of Section 18 decisions on earlier appeals

An interesting question arises about the interaction between an in initial decision on a claim (under s14) and other in-year decisions (under s15 or s16) and the effect of a s18 entitlement decision made after the end of the tax year as the award is finalised, because its common for an appeal against an initial or in-year decision to be still outstanding by the end of the tax year when HMRC are ready to make a s18 decision on the award, and certainly the legislation doesn’t prevent this scenario. This has been explored in several Upper Tribunal cases over the years culminating in a 3 Judge panel handed down their ruling (CTC 3228/2015 and CTC 1938/2016), which states:

'As soon as the Commissioners for Her Majesty’s Revenue and Customs have made a decision under section 18 of the Tax Credits Act 2002 for a tax year, any decision made under section 16 for that tax year ceases retrospectively to have any operative effect, any appeal that has been brought against that section 16 decision therefore lapses, the First-tier Tribunal ceases to have jurisdiction in relation to that appeal and that tribunal must strike out the proceedings..’

In practice, HMRC aim to delay making their s18 decision where an appeal against an earlier decision is still outstanding. HMRC confirmed that where an appeal on an earlier s14, s15 or s16 decision is still outstanding, it is HMRC’s current policy to apply an appeal marker to the tax credit system. This should have the effect of preventing the s18 entitlement decision being taken, allowing the appeal to proceed through to conclusion.

The decision taken by the three judge panel made clear the effect of taking the s18 decision where an earlier appeal on a s16 decision (or s14/s15 for that matter) is outstanding. The decision did not direct how HMRC manages its policy in these matters, so whether HMRC takes the s18 decision as soon as is practicable regardless of whether an earlier appeal is still ongoing, or indeed it delays taking that s18 entitlement decision, and the judges pointed out merits in applying either principle.

They also confirmed that there may be occasions where the s18 entitlement decision is taken before the appeal is concluded and, where this occurs, HMRC will advise the First Tier tribunal that they have no jurisdiction to hear the appeal and it would be obliged to strike out the proceedings. HMRC will advise the customer that the s18 decision has now been made and this lapses the outstanding appeal and means that if the customer is still dissatisfied with the s18 entitlement decision, they would then have the relevant Mandatory Reconsideration rights against that s18 decision. It is, therefore, dependent upon two things 1) how soon the claimant appeals 2) where we are in the lifecycle of the tax credits award.

For example:

HMRC upholds its decision on an MR against a s16 decision taken in the 2021/22 tax year and an MR Notice is issued to the claimant on 13/02/2022. The appeal marker is removed from the system. The claimant appeals to the First-tier Tribunal within 30 days and they receive it on 09/03/2022. HMRC receives notification of the appeal on 16/03/2022 and an appeal marker is applied to the system. Going forward if the appeal is still not decided when we enter the renewal period HMRC will not take the s18 entitlement decision for 2021/22 until the outcome of the appeal.
HMRC upholds its decision on an MR against a s16 decision taken in the 2021/22 tax year and an MR Notice is issued to the claimant on 13/02/2022. The appeal marker is removed from the system. The claimant doesn’t appeal to the First-tier Tribunal until 31/08/2022 and the Tribunal treat the appeal as “made in time”. HMRC are unaware of the appeal when the s18 decision is made on 04/09/2022 – this decision lapses the s16 decision under appeal and could not have been prevented.
HMRC upholds its decision on an MR against a s16 decision in the 2021/22 tax year and an MR Notice is issued to the claimant on 26/07/2022. The appeal marker is removed from the system. The claimant appeals to the First-tier Tribunal within 30 days and they receive it on 24/08/2022. HMRC are unaware of the appeal when the s18 decision is made on 30/08/2022 – this decision lapses the s16 decision under appeal and could not have been prevented.

Statements Like an Award Notice (SLANs)

There are some points in the annual cycle of a tax credit award where HMRC issue a letter to a claimant which looks like a decision notice but which is actually not about a formal decision.

These letters are often referred to as SLANs or a statement like an award notice.

They are issued in the following circumstances:

During the renewals period - that is, after the end of the tax year (ie after 5 April) but before HMRC have made a final decision on entitlement for that tax year and HMRC are amending the provisional payments.
Upon completion of renewal but there is an outstanding appeal - that is, where a claimant has appealed against an earlier decision and the appeal remains outstanding HMRC's IT system cannot issue a final decision on the award because it is inhibited until the appeal is resolved.
After the renewals period where the claimant has not renewed their appeal - that is, after 31 July (or individual first specified date, if a different date is used) and HMRC have paid provisional payments during the renewal period but the claimant was required to make a declaration to HMRC by the first specified date (standard first specified date being 31 July) and they have failed to do so. HMRC cannot issue a formal decision notice covering the provisional payments because there is no claim associated with the payments, therefore a SLAN is issued.

According to HMRC, SLANs do not carry formal appeal rights as they are not notices of any statutory decision (which do carry appeal rights). But they are used by HMRC to convey something that, from a claimant's perspective, looks like a decision about a tax credit award.

There are occasions where a claimant wants to challenge the 'decision' that HMRC have made which resulted in the SLAN. Although SLANs do not state that there is a right of appeal, it is not unusual for the appeal process to progress against a SLAN.

There is some case law which discusses whether or not a claimant can appeal a decision communicated via a SLAN.

In particular, CTC/993/2016 makes the case that there are occasions where a SLAN can be treated as if it were notification of a formal decision notice - in this particular case, HMRC's decision making was unclear and it could not be shown that a formal decision notice was ever correctly issued, therefore the appeal proceeded against the SLAN.

In CTC/1544/2015 it was determined that the SLAN could not be treated as if it were a formal decision notice because, in the circumstances of the case, there was no legal basis for a lawful decision to be made in the circumstances regardless of how it was notified.

The current position is that it is not possible to say with any certainty whether a particular SLAN can be appealed or not. It is advisable for a claimant to seek specialist welfare rights advice. In the interim, until advice can be obtained, claimants should submit an appeal through the normal appeal route, in order to ensure any appeal time limits are met.

There is some information in HMRC's manuals about SLANs:

Last reviewed/updated 27 April 2022