PM-v-Department for Social Development (TC) [2012] NICom 255

Decision No:  C1/11-12(TC)

 

 

 

 

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

 

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

 

 

TAX CREDIT

 

 

Application by the claimant for leave to appeal

and appeal to a Social Security Commissioner

on a question of law from a Tribunal’s decision

dated 19 November 2010

 

 

DECISION OF THE SOCIAL SECURITY COMMISSIONER

 

 

1.    I grant leave to appeal and proceed to determine all questions arising thereon as though they arose on appeal.  The decision of the appeal tribunal dated 19 November 2010 is in error of law.  The error of law identified will be explained in more detail below.  Pursuant to the powers conferred on me by Article 15(8) of the Social Security (Northern Ireland) Order 1998, I set aside the decision appealed against.

 

2.    For further reasons set out below, I am unable to exercise the power conferred on me by Article 15(8)(a) of the Social Security (Northern Ireland) Order 1998 to give the decision which the appeal tribunal should have given.  This is because there may be further findings of fact which require to be made and I do not consider it expedient to make such findings, at this stage of the proceedings.  Accordingly, I refer the case to a differently constituted appeal tribunal for re-determination.  In referring the case to a differently constituted appeal tribunal for re-determination, I direct that the appeal tribunal takes into account the guidance set out below.

 

       Background

 

3.    The background to this appeal before the Social Security Commissioners is set out in some detail in the helpful and thorough observations prepared by Ms D on behalf of the Commissioners of HM Revenue and Customs (HMRC), as follows:

 

‘(The claimant and his wife) were awarded Child Tax Credit (CTC) of £6609.44 for the period 06/04/2009 to 05/04/2010.  An award notice to this effect was issued to (the claimant and his wife) on 18/09/2009.

 

On 05/01/2010 (the claimant) telephoned the Tax Credit (TC) Helpline to advise that he had started self employment on 25/08/2008.  (The claimant) also stated, during the call, that he had previously notified the Tax Credit Office (TCO) of the change to his employment status when it occurred.

 

On 07/01/2010 (the claimant’s) tax credit claim was amended to reflect the change and the Working Tax Credit (WTC) element that they were now entitled to, was backdated the prescribed 3 month from when the change was notified to the tax credit office.  A notice to this effect was issued to (the claimant and his wife) on 07/01/2010.  The new award showed CTC of £6609.44 and WTC of £1881.24 for the period 06/04/2009 to 05/04/2010.

 

On 27/01/2010 TCO received an application of appeal from “M K” & Co Chartered Accountants on behalf of (the claimant).  (The claimant’s) grounds of appeal where that he had notified TCO of his self employed status on or around 25/08/2008 and therefore he requested that TCO backdate his award of WTC to this date.

 

(The claimant’s) appeal was heard on 19/11/2010.  The First Tier Tribunal in Belfast upheld the decision of HMRC.’

 

4.    On 27 April 2011 an application for leave to appeal to the Social Security Commissioner was received in the Appeals Service.  On 5 May 2011 the application for leave to appeal was refused by the legally qualified panel member.

 

       Proceedings before the Social Security Commissioner

 

5.    On 14 June 2011 a further application for leave to appeal was received in the Office of the Social Security Commissioners.  On 31 August 2011 written observations on the application for leave to appeal were sought from HMRC and these were received on 22 September 2011.  Written observations were shared with the appellant on 1 November 2011.

 

6.    On 1 November 2011 I accepted the late application for leave to appeal for special reasons.  On 9 November 2011 the Office of the Social Security Commissioners received a form of consent from the appellant indicating that he agreed to the Social Security Commissioner treating the application as an appeal and determining any question arising on the application as though it were a question arising on an appeal.  On 13 December 2011 the appellant was given the opportunity to make any additional points in connection with the application for leave to appeal.  On 19 December 2011 the appellant’s accountant indicated that there were no further additional points which the appellant wished to make.

 

       Errors of law

 

7.    A decision of an appeal tribunal may only be set aside by a Social Security Commissioner on the basis that it is in error of law.

 

8.    In R(I) 2/06 and CSDLA/500/2007, Tribunals of Commissioners in Great Britain have referred to the judgment of the Court of Appeal for England and Wales in R(Iran) v Secretary of State for the Home Department ([2005] EWCA Civ 982), outlining examples of commonly encountered errors of law in terms that can apply equally to appellate legal tribunals.  As set out at paragraph 30 of R(I) 2/06 these are:

 

“(i)      making perverse or irrational findings on a matter or matters that were material to the outcome (‘material matters’);

(ii)      failing to give reasons or any adequate reasons for findings on material matters;

(iii)      failing to take into account and/or resolve conflicts of fact or opinion on material matters;

(iv)      giving weight to immaterial matters;

(v)      making a material misdirection of law on any material matter;

(vi)      committing or permitting a procedural or other irregularity capable of making a material difference to the outcome or the fairness of proceedings; …

 

Each of these grounds for detecting any error of law contains the word ‘material’ (or ‘immaterial’).  Errors of law of which it can be said that they would have made no difference to the outcome do not matter.”

 

       Why was the decision of the appeal tribunal in the instant case in error of law?

 

9.    In the written observations on the application for leave to appeal, Ms D, for HMRC, submitted the following:

 

‘Submission

 

Firstly, I support the application on the basis that an erroneous decision has been made in the form of the inadequacy and omission of reasoning forwarded in the Statement of Reason dated 15/03/2011.  I therefore recommend that the decision be set aside and a new decision be taken.  Part 4 regulation 36(a)(b) The Tribunal Procedure (First-tier Tribunal) Rules 2008.

 

Should the Tribunal agree to this I would also ask that the following be considered as a new fact in the making of a new decision.

 

Firstly it may help if I explain that tax credits run in line with the tax year, from 6 April through to 5 April of the following year.  All tax credit awards end on 5 April.  Tax Credits Act 2002 (“TCA”) section 5(1).

 

A valid claim for tax credit will result in a decision under section 14(1) TCA.  If that decision is to award tax credits, the award will be subject to amendment during the course of the year under sections 15 and 16.

 

However, after the end of the tax year – after the 5 April date - HMRC is required to issue a notice to every claimant detailing the circumstances on which the award for the previous tax year was made and, in the majority of cases, requiring them to make and return a declaration as to their circumstances and income.  This document is issued in accordance with section 17 of the TCA and is often described as a “section 17 notice”.  On receipt of such a notice, the claimant is asked to confirm or correct their circumstances, and declare any income, for the tax credit award year just ended.  Section 17 and regulation 33 of the Tax Credits (Claims and Notifications) Regulations 2003 (“the Claims Regulations”).

 

It is important to note that the act of returning a declaration on the section 17 notice serves two distinct and separate purposes.

 

Purpose 1 – “finalisation” under section 18 TCA

 

The information on the section 17 notice forms the basis of the section 18 decision by which entitlement for the tax year just ended will be determined.  Note that the section 18 decision determines entitlement whereas all preceding decisions in respect of that year will have been concerned with the award.  HMRC can only take a section 18 decision after the end of the period of the award (after the 5 April date referred to above) and then only on receipt of a completed and returned section 17 notice.  Section 18 (2) Tax Credit Act 2002

 

Purpose 2 – the new claim

 

Provided the declaration on the section 17 notice is made and returned (or deemed to have been made and returned) by the date specified in that notice, it can be accepted as a claim for the new tax year; Regulation 11 of the Claims Regulations.

 

This is often described as “the renewal” but in actuality, the returned section 17 notice is simply treated as a claim for the new tax year.  That claim will result in a decision under section 14(1) TCA, thus beginning again the cycle of decisions and awards.  Section 18 Ss(2) Tax Credit Act 2002.

 

With all this in mind, the section 17 notice, requiring a response, was sent to (the claimant) in respect of his tax credit award for 2008 – 2009 on 14/04/2009.  (The claimant and his wife) were asked to complete and return the notice confirming their circumstances for tax year 2008/2009 as set out in the notice.  HMRC noted at bullet 7, facts of the case, in the original submission, extracts from the TC603 Tax Credit renewal pack are in the bundle at pages 11 – 13.  These notes tell the claimant that TCO need to know of any changes which have occurred during the award period, or if they have had any changes since the end of the award.  At this point HMRC believed that (the claimant) did not notify TCO that he had not received any tax credit payment in respect of his self employment, nor did he notify TCO that the information in respect of his self employment was missing from the information provided in the notice.

 

I disagree with this statement for the following reason.  When interrogating the tax credit system, specifically the section 17 Declaration Details screen.  It became apparent on making a comparison for two different years, that (the claimant) must have told HMRC on his annual declaration for tax year 2008-2009, that his income from his self employment was zero. … To note the previous declaration for 2007-2008, (the claimant) left the self employed income questions blank on the declaration as this produced a blank space at income from self employment for that year. …

 

This can only mean that (the claimant) tried to tell HMRC, at that point, that he was trading as self employed through that year.  The fact that the information returned on the document was actually scanned onto the tax credit system, no human intervention took place, means that any further information contained on the form would not have been picked up and (the claimant) should not be penalised for this.

 

All that said this does not detract from the fact that, as stated in the original submission from HMRC, it should be noted that (the claimant and his wife) received 3 decision notices replaying [sic] the circumstances on which their award was based, prior to notifying TCO in the call of 5/1/2010 that he had started self employment from 25/08/2008.  19/06/09, 22/06/09 and 08/09/09.  It should also be noted that all notices were accompanied with the booklet TC602 – check your tax credit award notice.

 

For completeness, Tax Credits (Claims and Notifications) Regulations 2002, Reg 25 requires changes which may result in an increase in tax credits, to be notified within 3 month of the change occurring as, except in certain circumstances of which none apply in this case, any increase in tax credits can only be backdated for up to 3 months.  The Tax Credits (Claims and Notifications) regulations 2002, Reg 7.’

 

10.   There is one error in the submission which has been made by Ms D.  In the second paragraph cited above, and in connection with the possible disposal of the proceedings, she makes reference to the possibility of the decision of the appeal tribunal being set aside and a new decision being taken.  In support of this submission Ms D cites ‘Part 4 regulation 36(a)(b) The Tribunal Procedure (First-tier Tribunal) Rules 2008’.  Firstly, I think that the correct reference should be to the Tribunal Procedure (First-tier Tribunal) (Social Entitlement Chamber) Rules 2008.  Secondly, I am of the view that the reference to ‘Regulation 36(a)(b)’ of those regulations is incorrect.  Regulation 36 permits the First-tier Tribunal to ‘… correct any clerical mistake or other accidental slip or omission in a decision, direction or any document produced by it’.  That would not be the case here where the submission is that the decision of the appeal tribunal is in error of law.  Thirdly, and most importantly, the Tribunal Procedure (First-tier Tribunal) (Social Entitlement Chamber) Rules 2008 do not extend, in any event, to Northern Ireland.  The procedural rules for appeal tribunals hearing and determining appeals in connection with tax credits in Northern Ireland are the Tax Credits (Appeals) Regulations 2002, the Tax Credits (Appeals) Regulations (Northern Ireland) 2002 and the Tax Credits (Notice of Appeal) Regulations 2002, all as amended.  In any event, this error may not be material because if I find that the decision of the appeal tribunal is in error of law then Article 15(8) of the Social Security (Northern Ireland) Order 1998, permits me to set aside that decision and refer the case to a differently constituted appeal tribunal for re-determination.

 

11.   Is the decision of the appeal tribunal in error of law?  For the reasons which are so succinctly and coherently set out by Ms D in the written observations, I agree that the decision of the appeal tribunal must be set aside as being in error of law.

 

       Disposal

 

12.   The decision of the appeal tribunal dated 19 November 2010 is in error of law.  Pursuant to the powers conferred on me by Article 15(8) of the Social Security (Northern Ireland) Order 1998, I set aside the decision appealed against.

 

13.   I direct that the parties to the proceedings and the newly constituted appeal tribunal take into account the following:

 

(i)          the decision under appeal is a decision dated 7 January 2010, which decided that the appellant and his wife were entitled to an award of CTC of £6609.44 and WTC of £1881.24 for the period from 6 April 2009 to 5 April 2010;

 

(ii)         HMRC is directed to prepare a new submission for the further oral hearing of the appeal which should address the issues raised by Ms D in her written observations on this appeal to the Social Security Commissioner;

 

(iii)       it will be for both parties to the proceedings to make submissions, and adduce evidence in support of those submissions, on all of the issues relevant to the appeal; and

 

(iv)       it will be for the appeal tribunal to consider the submissions made by the parties to the proceedings on these issues, and any evidence adduced in support of them, and then to make its determination, in light of all that is before it.

 

 

(signed):  K Mullan

 

Chief Commissioner

 

 

 

6 February 2012