Northern Ireland - Social Security and Child Support Commissioners' Decisions

DB-v-HM Revenue & Customs (TC) [2016] NICom 44

 

Decision No: C3/15-16(TC)

 

 

 

 

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

 

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

 

 

TAX CREDIT

 

 

Appeal to a Social Security Commissioner

on a question of law from a Tribunal's decision

dated 17 December 2014

 

 

DECISION OF THE SOCIAL SECURITY COMMISSIONER

 

 

1.     The decision of the appeal tribunal dated 17 December 2014 is in error of law.

 

2.     In the proceedings before the Social Security Commissioners, HM Revenue and Customs (HMRC) have been represented by Ms Whaley. Ms Whaley has provided comprehensive and supportive submissions and made constructive suggestions for the disposal of the appeal.  I am grateful for those observations.  In her observations, Ms Whaley has noted that:

 

‘… HMRC’s response was wholly deficient and appears to have misled the tribunal into considering the wrong applicable test in this case.’ 

 

3.     I would ask the Legally Qualified Panel Member (LQPM) of the appeal tribunal to note these remarks.

 

4.     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.  I am able to exercise the power conferred on me by Article 15(8)(a)(i) of the Social Security (Northern Ireland) Order 1998 to give the decision which I consider the appeal tribunal should have given having accepted a concession from HMRC to that effect.  My revised decision is that:

 

(i)       The appellant is entitled to tax credits for the period 2011-12 in respect of the single claim that was made; and

 

(ii)      The issue of the appellant’s entitlement to tax credits for the period from 12 April 2012 is referred back to HMRC for a decision in the first instance. 

 

         Background

 

5.     In her written observations on the application for leave to appeal, Ms Whaley has set out the following background to the decision-making process giving rise to the appeal before the appeal tribunal: 

 

      ‘In the 2011-2012 tax year, the claimant received tax credits on the basis that she was a single person responsible for four children.

 

On 09 May 2012 HMRC wrote to the claimant and explained her award had been selected for checking because she had claimed as single person and information held showed there may be another adult, Mr B, living at her address.  The letter asked the claimant to write to or telephone HMRC to explain why she had not made a joint claim with Mr B.

 

The claimant responded by letter, explaining that Mr B is her estranged husband, from whom she separated in 2009.  She stated that her husband remained in the marital home until 2011 when he began employment requiring him to spend four nights a week in the Republic of Ireland and at that point she moved back into the address with her children.  The claimant added that she understands Mr B has no permanent address in Northern Ireland and as he is a joint mortgage holder of her address he remains on the electoral roll for the address and appears financially linked to her on her credit file.  She stated he has in the past used the address for credit applications and she occasionally receives mail for him at the address.  And while she has asked him not to use the address for his correspondence, she has been advised he is within his rights to do so.

 

After apparently attempting, unsuccessfully, to contact the claimant by telephone, HMRC issued a letter to her on 03 July 2012, requesting she contact the author by telephone.

 

While there is no record of a telephone call from the claimant, HMRC’s response explained that she telephoned on 11 July 2012 and “agreed to send in evidence to support she was living alone.”

 

On 07 August 2012 HMRC received a letter from the claimant, in which she refers to accompanying documents, which HMRC did not include in the appeal bundle.

 

HMRC’s response stated further documents were received from the claimant on 09 August 2012 but that copies have not been kept.

 

On 14 September 2012 HMRC wrote to the claimant advising her “I have considered the information that you let me have. I am sorry, but I cannot accept the information.  This is because the evidence we hold does not support entitlement to a single claim.”

 

HMRC decided the claimant was not entitled to tax credits, in the single capacity, for the 2011-12 tax year.

 

On 17 September 2012 HMRC issued an automated decision notice to the claimant.

 

On 18 October 2012 HMRC received the claimant’s appeal.

 

On 06 November 2012 HMRC received a letter from the claimant in which she requested a copy of the information held by HMRC refuting her single status and requested her case be reviewed under appeal as the information HMRC holds is incorrect.  She further stated that the facts of her claim are:

 

·                   She separated from her husband in 2009 and left the family home with three of her children.

·                   Her husband left the family home in June 2011 and she returned with her children.

·                   She and her husband have a verbal agreement regarding joint bill payments and child maintenance.

·                   As far as she is aware her husband has no fixed address in Northern Ireland and he is still financially linked to her through mortgage and loans secured against the address.

·                   The family home where she lives with her children is in negative equity and she cannot sell it to remove any financial links.

The letter was received by the team within the Tax Credit Office that deals with Subject Access Requests (requests from claimants for information held about them by the Tax Credit Office).  They sent a copy of the letter to the appeal team.

 

On 24 November 2012 HMRC issued a letter to the claimant acknowledging her appeal, advising her they aimed to contact her by 28 April 2013 and asking her not to contact them regarding the appeal before 28 April 2013.

 

On 30 January 2013 HMRC issued a letter to the claimant advising her that they would need to see factual documentary evidence for the period 2011-12 to change their decision and provided examples of information she may wish to provide:

 

·                   A legal separation order, a CSA maintenance agreement or legal documents from a solicitor showing the commencement of such proceedings.

 

·                   Rental/tenancy agreement, utility/council tax bills showing Mr B residing at an address other than hers.

 

·                   Mr B’s car insurance documents for tax year 2011-12.

 

·                   Bank statements for tax year 2011-12 to prove financial independence.

 

On 31 January 2013 HMRC received a letter from the claimant (seemingly in response to a reply she had received from the Subject Access Request team) in which she explained that due to her tax credits payments having stopped she had been unable to maintain her portion of the mortgage payments and as a result had to leave her previous address on 30 November 2012 to let her estranged husband move back in.  She did not notify HMRC at the time as their letter dated 24 November 2012 instructed her not to contact them before 28 April 2013.

On 02 March 2013 HMRC issued a duplicate of their letter dated 30 January 2013, to the claimant’s new address.

On 08 March 2013 the claimant’s reply was received in which she stated:

·                    There is no legal separation in place and the CSA were not involved as a mutual agreement was in place.

·                    She has no access to Mr B’s documents and cannot provide his rental/tenancy agreement.

·                    She has no access to any of Mr B’s documents and cannot provide his car insurance documents.

·                    She has already provided her bank statements. She has no access to Mr B’s documents and cannot provide his bank statements.

         Proceedings before the appeal tribunal

 

6.     The appeal was listed for hearing on 17 December 2014. On 30 September 2014 Form REG2(i)d(TC), completed and signed by the appellant on 28 September 2014, was received in the Appeals Service (TAS).  In this form the appellant had ticked a box to indicate that she was content for the appeal to proceed without an oral hearing.  Accordingly, the appeal on 17 December 2014 proceeded by way of a ‘paper’ hearing.  The appeal tribunal disallowed the appeal and confirmed the decision dated 17 September 2012.

 

7.     On 27 April 2015 an application for leave to appeal to the Social Security Commissioner was received in TAS.  On 22 May 2015 the application for leave to appeal was refused by the LQPM.

 

         Proceedings before the Social Security Commissioner

 

8.     On 3 July 2015 a further application for leave to appeal was received in the Office of the Social Security Commissioners.  On 11 August 2015 observations on the application for leave to appeal were sought from the Department.  In written observations received on 3 September 2015, Ms Whaley, for HMRC, supported the application for leave to appeal.  Written observations were shared with the appellant on 3 September 2015.

 

9.     On 26 January 2016 I granted leave to appeal.  In granting leave to appeal I gave as a reason, that:

 

‘… an arguable issue arises as to whether the appeal tribunal erred in law by confirming, albeit unwittingly, a decision that had no legal basis and there is scope that it made perverse or irrational findings on a matter or matters that were material to the outcome and failed to give reasons or any adequate reasons  for findings on material matters.’

 

10.   On the same date I determined that the appeal could be decided without an oral hearing.

 

         Errors of law

 

11.   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.  What is an error of law?

 

12.   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.”

 

         Analysis

 

13.   Ms Whaley, for HMRC, has provided written observations which are detailed, constructive and provide helpful suggestions for the disposal of the appeal.  I am setting out in full her submissions on the issues in the appeal which she has identified as substantive.  They are as follows:

 

‘The Decision making process

 

27.      In their submission to the tribunal HMRC did not clearly present the decision they had taken or what powers were used to make the decision. I will set out below the decisions HMRC may take, and when, and what HMRC did in this case.

 

28.      Section 14 of the Tax Credits Act 2002 (TCA) refers to the making of the initial decision upon a claim.  There can only be one s14(1) decision and there must be a s14(1) decision before any other decisions are taken.  This does not deal with entitlement to tax credits, it simply sets a rate at which HMRC will, for the time being, pay tax credits.  That rate may be varied at any point in the life of the award.

 

29.      Where a claimant has a change in circumstances that would increase the maximum rate of their award, HMRC can take account of that change under s15 of the TCA.  Like a s14(1) decision, a s15(1) decision does not determine entitlement; it merely sets a new rate at which HMRC will pay tax credits.

 

30.      All changes made during the life of the award that do not increase the maximum rate of award are dealt with under s16 of the TCA.  There is no notification requirement under s16, either the claimant may tell us of the change or HMRC may make a s16(1) decision of its own accord where it has reasonable grounds for believing the current rate of award is wrong.

 

31.      Section 17 of the TCA is not a decision making provision.  After the end of each tax year, HMRC is required to issue a notice to every claimant detailing the circumstances on which the award for the previous year was made.  In the majority of cases, the claimant is required to make a return by a specified date.  Certain claimants are not required to make a return but are deemed to have done so by a specified date.  The information on the declaration or deemed declaration serves two distinct and separate purposes.

 

32.      It forms the basis for a decision under s18(1) of the TCA, by which entitlement for the tax year just ended will be determined. It also is accepted as a claim for the new tax year, resulting in a s14(1) decision in respect of that year.3

33.      A s18(1) decision is conclusive as to the claimant’s tax credit entitlement in the year to which it relates, save for prescribed circumstances.

 

The decision under appeal in this case

 

34.      For the 2011-12 tax year, HMRC made its s14(1) decision on 29 June 2011, awarding the claimant both Working Tax Credit (WTC) and Child Tax Credit (CTC) on the basis that she was single, working for 30 hours per week and responsible for three children.

35.      On 05 September 2011 HMRC amended the award, under s15(1), to include an element in respect of a fourth child with effect from 11 June 2011, following notification from the claimant that she was now responsible for four children.

36.      HMRC issued the s17 notice on 12 April 2012. HMRC records do not record a reply having been received from the claimant.

37.      However, as explained above, the claimant did respond to HMRC’s subsequent enquiry, issued on 09 May 2012, in relation to her having made a single claim.

38.      On 17 September 2012 HMRC decided the claimant was not entitled to tax credits for 2011-12 tax year.

39.      At that point HMRC should have made a final decision on entitlement under s18.

40.      However, the decision HMRC notified on 17 September 2012 was not made under any of the provisions listed above.

41.      It could not have been a decision under s14 as that decision had already been made on 29 June 2011.

42.      It could not have been made under s15 as the claimant had not notified HMRC of a change in circumstances that would increase the maximum rate of her award.

43.      HMRC stated in their response that the decision was notified to the claimant on 17 September 2012 by the issue of a ‘statement of account’ (SOA) and went on to explain that while an SOA does not confer appeal rights it is the only notice issued when HMRC terminates an award under Section 16(1) of the TCA, implying the decision had been so made.

44.      However, it could not have been made under s16 as it was not made during the life of the award; the award period having ended on 05 April 2012.

45.      A s17 notice is not a decision making provision. Finally, the notice that was issued on 17 September 2012 did not specify whether the claimant was entitled, and if so, what her entitlement conclusively was for that tax year, so it could not have been made under s18.

46.      This means that, although a decision was made, it had no legal basis and is therefore a nullity.

47.      Moving forward, in order to place the decision on a proper legal footing, I submit that a s18 decision must be made in order to determine the claimant’s entitlement for the 2011-12 tax year.

48.      The starting point would be the decision made prior to the decision of 17 September 2012, which was the s15 decision, made on 05 September 2011.  That decision awarded the claimant WTC and CTC on the basis of her being single, working for 30 hours per week and being responsible for four children.

49.      To make a s18 TCA decision the legislation states that:

 

            18.-(1) After giving a notice under section 17, the Board must decide-

 

            (a) whether the person was entitled, or the persons were jointly entitled, to the tax credit, and

 

            (b) if so, the amount of the tax credit to which he was entitled, or they were jointly entitled, for the tax year.

 

50.      In deciding whether the claimant was entitled to tax credits for the year we look to the evidence in the appeal papers provided to the tribunal.

51.      HMRC’s submission focused on the fact that the credit reference agency reports indicated that Mr B lived at the same address as the claimant.  From that, they decided that the claimant and Mr B must therefore be living together; thus making the decision that the claimant was not entitled to claim tax credits as a single person.

52.      I submit that in this case HMRC’s obligation was to ask the necessary questions and request the relevant information in order to determine whether the conditions of entitlement are met. Documentation indicated that Mr B may be living at the claimant’s address and HMRC was perfectly entitled to enquire. And while the appeal bundle contains HMRC’s letter to the claimant requesting she telephone them, and HMRC’s response explains the claimant did telephone HMRC on 11 July 2012, there is no record of that conversation included in the appeal bundle.

53.      Furthermore, in her subsequent letter, dated 03 August 2012, the claimant stated that she had included a bank statement, an “EJO letter” and a document in relation to her contract with BT but none of these documents were included by HMRC in the appeal bundle. HMRC’s response acknowledged receipt of that letter on 07 August 2012 and stated that further documents were received from the claimant on 09 August 2012 but that “no copies have been kept in the case papers.”

54.      Not only does HMRC’s response make no reference to what documents were received, it provides no record of any reasoning from the decision maker as to why they were insufficient.  The only reference to information having been received is in HMRC’s letter to the claimant, dated 14 September 2012, which states, “I have considered the information that you let me have. I am sorry, but I cannot accept the information.  This is because the evidence we hold does not support entitlement to a single claim.”

 

55.      After the claimant made her appeal, in addition to documents in relation to herself, HMRC requested the claimant provide Mr B’s personal documents, including rent / tenancy agreement, utility bills, Council Tax bill and vehicle insurance to prove he was resident at an address other than hers.  The claimant stated in her reply that only Mr B can provide those documents, she has no access to any of his documents.

56.      HMRC appears to have issued standard enquiry letters to the claimant requesting documents rather than asking pertinent questions to ascertain whether she was separated under a court order, or separated in circumstances in which the separation is likely to be permanent.

57.      For her part, in response to HMRC’s initial enquiry the claimant, in her letter dated 18 May 2012, explained that she and Mr B separated in 2009 but are not divorced or legally separated for the sake of their children. HMRC’s response does not acknowledge this statement.

58.      It appears the tribunal also placed importance on the continuing financial links between Mr B and the claimant’s address and the fact that the claimant did not provide an alternative address for Mr B.

59.      I submit that while the tribunal may have approached the case with care, it was not assisted as well as it should have been by HMRC’s response, which stated that the claimant was not entitled to tax credits for tax year 2011-12 because “HMRC held information that showed Mrs B and Mr B were living together as husband and wife.”

60.      The response went on to acknowledge that the claimant and Mr B were married to each other and referred to section 3 (5A)(a) of the TCA, stating HMRC had seen no evidence to show the claimant and Mr B were separated under a court order but making no comment regarding whether they may be separated in circumstances in which the separation is likely to be permanent.

61.      The response then explained the Commissioners decision R(SB) 17/81, which sets out the criteria to be considered in deciding the question of living together as husband and wife; the six signposts, which are used as indicators to help form a sustainable view of whether two people are living together as husband and wife or as civil partners for the purposes of a tax credits claim, and commented on each of the six signposts in relation to the present case.  However, the signposts are not strictly relevant in this case as the claimant and Mr B are married to each other and therefore the consideration is whether the claimant was separated under a court order or in circumstances in which the separation was likely to be permanent.

62.      The tribunal’s reasons for decision states it also found “the appellant was not entitled to tax credits as a single claimant as she was living together as husband and wife with Mr B.”

63.      The reasons for decision also referred to the six signposts and commented on four of them in relation to the present case.

64.      I submit HMRC’s response was wholly deficient and appears to have misled the tribunal into considering the wrong applicable test in this case.  Notwithstanding the fact that HMRC failed to keep copies of, and provide to the tribunal, documents which the claimant provided in response to their enquiry; they failed to explain why the information and documents provided by the claimant were not sufficient, and indicated their decision had been made under s16, when clearly it could not have been.

 

65.      Arguably the tribunal erred in law by confirming, albeit unwittingly, a decision that had no legal basis and there is scope that it made perverse or irrational findings on a matter or matters that were material to the outcome and failed to give reasons or any adequate reasons for findings on material matters.

66.      I submit that, save for the administrative failings, HMRC’s decision made on 17 September 2012 was, and was intended to be, a decision under s18 of the TCA, which would have provided a final entitlement.’

 

14.   I agree with Ms Whaley’s comprehensive analysis and, for the reasons which have been set out by her, agree that the decision of the appeal tribunal is in error of law.

 

         Disposal

 

15.   In relation to the disposal of the appeal, Ms Whaley has made the following submission:

 

‘… a way of disposing of the appeal would be to remit it to a freshly constituted tribunal for determination afresh.

 

However, I would go further than this and submit that disposing of the case in such a way would be unnecessary use of HMCTS’s resources, as in my view there is only one possible outcome a freshly constituted tribunal could reach.

 

The claimant has contested consistently throughout her appeal that she and her estranged husband have been separated since 2009 and has explained her situation in some detail.  She has also stated that she and her estranged husband are not divorced or legally separated for the sake of their children.

 

In conjunction with this, the appeal bundle contains no evidence to the contrary, which suggests to me there is no reason for HMRC to believe the claimant’s single claim was incorrectly made.

 

Therefore I invite the Commissioner to give the decision the tribunal ought to have given.  That being the claimant’s appeal is allowed and the claimant is entitled to tax credits for the period 2011-12 in respect of the single claim that was made.

 

In these circumstances, there is also the matter of the position from and including 06 April 2012.  I submit this later award period is outside the ambit of the present appeal and would simply suggest that the reply HMRC received from the claimant in relation to their enquiry issued on 09 May 2012 should be treated as a reply to the s17 notice issued to her on 12 April 2012.  This would mean there is an as yet undecided (treated as made) claim which would be effective from that date and I invite the Commissioner to refer that matter back to HMRC for a decision in the first instance.’

 

16.   I accept and adopt that submission as the most appropriate disposal of the appeal and make a direction that:

 

(i)            the appellant is entitled to tax credits for the period 2011-12 in respect of the single claim that was made; and

 

(ii)          the issue of the appellant’s entitlement to tax credits for the period from 12 April 2012 is referred back to the HMRC for a decision in the first instance. 

 

 

(signed): 

 

Kenneth Mullan

 

Chief Commissioner

 

 

 

17 June 2016