UK Social Security and Child Support Commissioners' Decisions

[2006] UKSSCSC CTC_1594_2006 (27 October 2006)


Decision

1. This appeal does not succeed. The decision of the Southampton Appeal tribunal given on 8 December 2005 contains no material error of law. Therefore that decision stands.

Introduction

2. This is an appeal by one of two joint claimants for working tax credit ("WTC") and child tax credits ("CTC"). The respondent is HM Revenue and Customs ("HMRC"). Leave to appeal was given by a District Chairman of appeal tribunals.
3. The tribunal's decision confirmed an earlier decision by the Revenue that the appellant and his wife were entitled to WTC at a nil rate and CTC of £3,849.11 for the tax year from 6 April 2003 to 5 April 2004.
4. The issue in the appeal to the Commissioner is whether or not the tribunal was legally correct to refuse to increase the award of child tax credit so as to include the severe disability element for the couple's youngest son from 28 June 2003.

The facts

5. As the tribunal correctly noted, the facts of this appeal are not in dispute. I cannot improve upon the findings of fact in the statement of reasons prepared by the tribunal chairman, which are in the following terms:

'1. [The appellant and his wife] are both aged 44 and their children are [N] aged 8, [C] 6 and [T] 4. T was diagnosed with leukaemia at the end of June 2003 after their claim for child tax credit had been completed – although the claim is actually dated 1/7/03. Mr White had been employed by [L] as stated on the application, but was by then job hunting. T was having treatment and tests and his parents naturally concentrated on his needs. They made a claim for disability living allowance for T on 21/8/03 and he was awarded care component at the highest rate from 2/10/03, his parents being notified of this on 24/9/03.

2. On 12 and 13/8/04 [the appellant and his wife] signed the tax credits annual declaration for the year ended 5/4/04; they placed a cross against box 3.2 which says "we cannot put 'X' in box 3.1 [confirmation of personal circumstances] and we have reported, or will report a change in our personal circumstances to the Inland Revenue". This was followed by a letter from their accountants dated 23 August notifying two changes of circumstances, first that [the appellant's] earnings were such that tax credits would not be due from 6/4/04 and secondly that the 'enhanced disabled child additional element' was applicable for 2003/2004 although not entered on the claim form.

3. The decision of 21/9/04 [i.e. the decision under appeal] took into account changes in income which had been notified but did not apply the severely disabled child element. On 5/10/04 the accountants wrote asking for a reconsideration of the decision for 2003/2004 only on grounds of extenuating circumstances because of the parents' distress during the time when notification should have been made. The decision was not revised and an appeal form was submitted in December 2004. The Revenue contacted the accountants and made some enquiries establishing the dates relating to the disability living allowance application and decision. They appeared to have mislaid the original appeal form as on 1/7/05 they asked for another one which was lodged on 5/7/05; however the date of appeal has been accepted as 15/10/04 when the letter seeking a reconsideration was received, and it is, therefore, made in time.'

6. The tribunal's reasons for dismissing the appeal the appeal were as follows:

'1. By section 9(5)(b) of the Tax Credits Act 2002 the manner of determination of child tax credit may include provision for the amount of the individual element to vary according to such factors as may be prescribed, and by regulation 8(1)(b) and (3) of the Child Tax Credit Regulations 2002 this includes a severe disability element for a child in receipt of the care component of disability living allowance at the highest rate.

2. By section 6(1) of the Act regulations may prescribe that any change of circumstances of a prescribed description which may increase the maximum rate at which a person may be entitled to a tax credit is to do so only if notification of it has been given and section 6(2) provides for a notification being treated as having been given on an earlier date.

3. By regulation 20 of the Tax Credits (Claims and Notifications) Regulations 2002, any change of circumstances, other than those arising during the period of an award, which may increase the maximum rate at which a person may be entitled to a tax credit is to do so only if notification of it has been given in accordance with that part of the Regulations. By regulation 26(1) and (2) of those Regulations there are special provisions for allowing the severe disability element to be paid on the date when disability living allowance is first payable, but these apply only where the notification has been given within three months of the date when the claim for that benefit was determined, which was not the case here. Regulation 25 of those Regulations provides that where a notification of change of circumstances which may increase the maximum rate at which a person may be entitled to a tax credit is given in circumstances other than those in regulation 26(2) the notification is to be treated as having been given on the date falling three months before the notification date or, if later, the date of the change of circumstances.

4. There is no provision in the Act or Regulations for backdating a notification of change of circumstances to an earlier date or for a discretion to be exercised where there were understandable reasons for delay in notification. In the current case, [the appellant and his wife] notified the Inland Revenue Board that their personal circumstances had changed in their annual declaration and that they wished to claim the severe disability element in their accountants' letter of 23/8/04. These documents were received at the earliest on 27/8/04 … The Inland Revenue have taken the date of notification as 14/9/04 (it is not clear on what basis) and they say they have backdated it to 14/6/04; even if it were backdated to 27/5/04 – three months before the earliest date shown at the top of [the annual declaration] – it would still be too late to affect the decision for entitlement in respect of the tax year ended on 5/4/04.'

The grounds of appeal.

7. The appellant's grounds of appeal may be summarised as follows:

(a) He and his wife had been led to believe that they would be entitled to the additional child tax credit by the Tax Credit Annual Review Form. In particular, the form stated 'Please remember that you need to tell us about any changes that happened during the whole of the award period if you have not already done so' and that 'You could receive an extra amount of child tax credit … if you receive disability living allowance'. There was no mention of a three month maximum backdated period.

(b) The appellant and his wife had completed the tax credit annual declaration in a manner which clearly stated that they would report separately the changes in their circumstances. Their declaration for 2003/04 had not been finalised. Further that declaration had been completed so as to include a claim for 'any tax credits we are entitled to'. Again, the declaration did not mention the three month maximum period for backdating.

(c) The presenting officer had told the tribunal that it was possible to backdate entitlement on income but not on personal circumstances but had not explained why this was the case. The documents that he had produced in support of that contention did not, in fact, address the point.

HMRC's submissions

8. HMRC's position is that although the reasons given by the tribunal were wrong in law, its actual decision was correct and that the Commissioner should therefore set the tribunal's decision aside and substitute his own decision to the same effect.
9. HMRC do not take that view because they accept any of the grounds of appeal, but because they consider that the tribunal was wrong to refer to regulation 26 of the Tax Credit (Claims and Notifications) Regulations 2002 ("the Regulations") and should instead have referred to regulation 26A. The former regulation relates to WTC whereas the latter relates to CTC.
10. HMRC's representative responds to the appellant's grounds of appeal by stating that:

(a) The three month limit on backdating for advantageous changes in circumstances forms part of the law. HM Revenue and Customs, and the tribunal, were obliged to apply the law irrespective of whether the rule happened to be mentioned in any official leaflet or form.

(b) The declaration referred to by the appellant in the annual review did not read 'I claim any tax credits I am entitled to' but rather 'I claim any tax credits I am entitled to for 2004 2005'. It therefore had no relevance to the present appeal, which is concerned with the year 2003 2004.

(c) If documents produced by the presenting officer before the tribunal were irrelevant as alleged by the appellant then they were just that—irrelevant—and could not affect the tribunal's decision or its obligation to apply the law.

It was also submitted that the tribunal had no jurisdiction to interfere with the HMRC's decision that the annual declaration had been received on 14 September 2004. That declaration related to the 2004 2005 tax year which—it was submitted—was not before the tribunal.

Reasons for the Commissioner's decision.

11. HMRC are correct to say that the tribunal was wrong to refer to regulation 26 of the Regulations. That regulation only applies to working tax credit. As this appeal is concerned with a disabled child, it is the severe disability element of child tax credit that is in issue. The equivalent provision for CTC is regulation 26A.
12. However, regulation 26A is in very similar terms to regulation 26 and, in particular, contains the same three months' time limit for notification of the award of a qualifying benefit. The differences between the regulations merely reflect the fact that, for the purposes of WTC, the relevant claim for disability living allowance is made by the tax credit claimant (or one of the tax credit claimants) in his or her own right, whereas for CTC it is made by the tax credit claimant (or one of them) on behalf of a disabled child.
13. In those circumstances, the error in the tribunal's stated reasoning does not affect its decision and is therefore immaterial. No purpose would be served by my setting the tribunal's decision aside and substituting my own decision to the same effect.
14. The other points raised by the parties can be dealt with relatively briefly.

(a) I accept HMRC's submission that the tribunal has to apply the law itself irrespective of anything that may be said in official publications. The law on tax credits is voluminous. It takes up over 600 pages of the standard book of annotated legislation used by tribunals. It would be quite impractical to give notice of every rule that might possibly affect a claimant's entitlement in every form used to administer the tax credits system or every publication produced by HMRC about that system.

(b) The appellant complains that it has not been explained why it is possible for HMRC to backdate the change in his income by more than three months but not the application of the severe disability element. The answer is that the rules differ according to whether the change of circumstances is one which may have the effect of increasing the maximum rate of the tax credit concerned. Receipt of disability living allowance in respect of a child does potentially have that effect: an increase in the claimant's income does not.

(c) I do not accept the respondent's criticism of the tribunal in respect of its finding that the annual declaration was received on 27 August 2004. The law permitted the appellant's child tax credit to be increased from the date from which disability living allowance ("DLA") was awarded if that change in circumstances was notified to HMRC within three months of the date of the award. The tribunal therefore had to make findings of fact as to:

i) the date of entitlement to DLA;

ii) the date of the DLA award; and

iii) the date that award was notified to HMRC.

In finding, contrary to the view apparently taken by the Revenue, that the last of those dates was 27 August 2004, the tribunal was making a necessary finding on an issue that was properly before it, namely, the appellant's entitlement to child tax credit during the year 2003 2004. Nothing in the tribunal's decision can possibly be interpreted as in any way seeking to interfere with HMRC's decision in relation to the following tax year.

Conclusion

15. For those reasons, my decision is as set out in paragraph 1 above.

(Signed on the original)

Richard Poynter Deputy Commissioner 27 October 2006