Tax Credits: Starting a formal challenge - an appeal
This section provides information about formally challenging a tax credits decision using the appeals process. As well as the full appeal considered by the independent tribunal and higher courts, this process covers mandatory reconsideration and formal decision reviews in respect of longer backdating provisions that apply to the disability elements in tax credits.
Not all decisions are appealable. You can find a full list of appealable decisions here.
The appeals process changed significantly for decisions made on or after 6 April 2014. The process in place is explained below and we also show information about what to do for appeals against decisions made before 6 April 2014.
Where a claimant has appealed to the Tribunal Service, any correspondence about the appeal from HMRC is likely to show that it is from HMRC’s Solicitor’s Office and Legal Services (SOLS). This may alarm some claimants but they should be reassured that it does not mean HMRC are undertaking legal proceedings beyond dealing with the appeal and it is simply a matter of HMRC re-naming the teams dealing with their case.
- The appeals process
- Appeals vs. Disputes
- Changes from 6 April 2014
- Decisions made on or after 6 April 2014
- Decisions made before 6 April 2014
- Settling an appeal with HMRC
- More information
A tax credit appeal is a formal process that allows a claimant to challenge an incorrect tax credit 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 first been carried out by HMRC. This review is called mandatory reconsideration or MR and HMRC must issue a mandatory reconsideration (MR) notice showing the outcome of that review. The MR notice must also explain to the claimant how to appeal following the outcome of the MR.
This also applies to reviews under s21C of the Tax Credits Act, introduced from 15 January 2021 to allow HMRC to review earlier tax credit decisions in relation to longer backdating for disability elements where conditions are met. The time limit to notify HMRC of a qualifying disability benefit entitling the claimant to longer backdating is 1 month from the date of the benefit decision, unlike the 30 day time limit for usual MR request under s21A. Such reviews are, in effect, mandatory reconsiderations but may not obviously appear to be so. Reviews under s21C for longer backdating of disability elements have been introduced from 15 January 2021. We understand claimants do not need to request the review using the usual MR forms (WTC/AP) but rather they must notify HMRC of their qualifying benefit award within a month of the benefit decision.
Appeal to independent tribunal
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. In Northern Ireland, appeals are dealt with by The Appeals Service (TAS). These agencies are independent of HMRC and there is a specific set of rules governing the First-Tier Tribunal’s procedures.
The higher Courts
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 appeal route is used where there the claimant thinks that HMRC have calculated their award or 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) – they may agree that the entitlement decision is correct but they don’t think the overpaid tax credits 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. Under the old appeal process (for decisions made before 6 April 2014), if HMRC refused a late appeal it would be up to the Tribunal to decide whether it could be accepted. For some time, HMRC have taken the view that under the new rules, there is no right of appeal against HMRC’s refusal to allow a late mandatory reconsideration request. Recent case law suggests that if HMRC refuse to allow a late mandatory reconsideration, the claimant can appeal to the independent tribunal to consider whether to accept the late request.
- 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 no longer attract suspension of recovery and so recovery of the debt will continue.
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 . Requests can be submitted on-line or by post. HMRC have indicated that they are often able to process MR requests which are submitted on-line quicker than those sent in by post. 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 clear 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.
Late requests for mandatory reconsideration
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 HMRC’s position is that there is no right of appeal against their decision to deny a request for a late MR.
However, in August 2017, a three panel Upper Tribunal decided that for DWP mandatory reconsiderations, claimants did have a right of appeal to a First-tier Tribunal where DWP refused to allow a late mandatory reconsideration request. This case was brought by Child Poverty Action Group (CPAG) as a test case. Although the case involved DWP benefits (ESA specifically) and not tax credits, it is open to advisers to lodge an appeal with the First-tier Tribunal (see below for how to do this) and refer to the CPAG test case and grounds in order to try and appeal HMRC’s refusal to accept a late MR request. The Upper Tribunal decision in R(CJ) and SG v Secretary of State for Work and Pensions (ESA) can be found on GOV.UK.
If this argument fails, then it appears the only other way to challenge the decision is using Judicial Review.
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
Claimants must thenselves appeal directly to the Tribunal service if they are not happy with HMRC’s mandatory reconsideration decision. This is called ‘direct lodgement’.
This appeal must be made within one calendar month from the date of the mandatory reconsideration notice if you are in England, Wales or Scotland and within 30 days of the mandatory reconsideration notice in Northern Ireland.
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 made on form NOA1 (HMRC).
Claimants must include one copy of the mandatory reconsideration notice with their appeal. The form and notice should be sent to:
- If you live in England and Wales:
HMCTS SSCS Appeals centre
PO Box 1203
- If you live in Scotland:
HMCTS SSCS Appeals Centre
PO Box 27080
- If you live in Northern Ireland:
The Appeals Service NI
PO Box 2202
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 or TAS 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.
Both HMCTS and TAS will consider late appeals up to 13 months from the date of mandatory reconsideration. The claimant will need to state reasons as to why the appeal is late.
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:
HMRC - 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.
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.
The Settlement procedure originates in tax law and allows HMRC to settle an appeal by agreement with the claimant before Tribunal, which means the appeal is treated as withdrawn. If a compromise is reached, a notice is sent to the claimant who then has 30 days to reject the terms of the settlement in writing. This power remains following the introduction of mandatory reconsideration although it is not clear how widely HMRC use this process now.
Last reviewed/updated 5 May 2023