In this section we consider what you can do if you wish to challenge HMRC on tax credits. We concentrate on appeals, and also discuss what you can do in cases where there is no right of appeal.

Appeals and official error revisions

The right to appeal

• If you are dissatisfied with a decision by HMRC on your tax credit entitlement, or on any penalty, you have a right of appeal to an independent tribunal.



• The First-tier Tribunal is divided into a number of 'chambers', one of which hears appeals involving social security benefits as well as tax credits. This is known as the Social Entitlement Chamber.



• The First-tier Tribunal is administered by the Tribunals Service, which is an agency of the Ministry of Justice. It came into being on 11 November 2008, replacing the former Social Security and Child Support appeal tribunal



• If you are dissatisfied with the decision of the First-tier Tribunal, you can appeal further, but only on a point of law and with permission, to 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.

How to appeal

• An appeal must be made in writing within 30 days of the decision appealed against. Normally this will be your tax credit award notice. Although the appeal is to the First-tier Tribunal, and not to HMRC, you are nevertheless required to send your notice of appeal to the Tax Credit Office (TCO).



• There is no prescribed form for the notice. However, you must appeal in writing, you must give enough information to identify yourself and the decision you are appealing against, and you or someone on your behalf must sign it. Also, the grounds on which you appeal should be clearly set out. You can either send a letter or use form WTC/AP



• The TCO should acknowledge receipt of your letter of appeal, but it is currently taking several weeks, sometimes months before an acknowledgement is received. There have been reports of the TCO declining to accept an appeal even though it is validly made. This is sometimes due to confusion within the TCO as to what constitutes a valid appeal in respect of an overpayment – it is sometimes not understood that there is a right of appeal against a decision on an award that results in an overpayment, even though there is no statutory right of appeal against the collection of the overpayment. It is worth remembering that HMRC do not have power to decline to entertain a valid appeal, and jurisdiction over what is a valid appeal lies with the appeal tribunal, not with HMRC. If you do not receive any acknowledgement from HMRC within a reasonable time, you should contact the Tribunals Service and ask them if you can list your appeal directly.

Settling your appeal with the TCO

• Once the appeal letter is processed, someone at the TCO will contact you, usually by letter, to discuss your appeal. HMRC may agree a settlement of an appeal with a claimant, and that is what they generally aim to do in the first instance. That does not prevent you from applying yourself to the First-tier Tribunal to have your appeal listed, and you may wish to do so if, for example, the TCO delay unreasonably in progressing your appeal. If such a delay occurs you may also want to initiate the complaints procedure as described below.



• If agreement is reached, the TCO will confirm it in writing, and amend your award there and then. If not, a date will be set for a hearing before the First-tier Tribunal. You do have the right to back out of any agreement you make with the TCO under this procedure, provided you tell them within 30 days.



• The Tribunal Service's venue finder will give you some idea of where it is likely to be heard. You can also ring them on one of these numbers.

Late appeals

• If the 30 day time limit for appealing has passed, it is not necessarily fatal. 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.



• An application for a late appeal may be granted if a judge or member of the First-tier Tribunal is satisfied that there are reasonable prospects that the appeal will be successful, or they or HMRC are satisfied that it is in the interests of justice for the application to be granted.



• If HMRC do not consider a late appeal to be in the interests of justice, they are not entitled to refuse to admit it on those grounds without first consulting the First-tier Tribunal.




• In deciding whether an application to lodge a late appeal is in the interests of justice, HMRC or the First-tier Tribunal must be satisfied that one of the following circumstances applies:

  • the appellant, or the appellant's partner or a dependant, has died or suffered a serious illness;
  • the appellant is not resident in the UK;
  • normal postal services were disrupted; or
  • some other special circumstances exist which are 'wholly exceptional and relevant to the application'.


• The later the application, the more compelling should the special circumstances be.



• In deciding whether it would be in the interests of justice to allow a late appeal, HMRC and the First-tier Tribunal must ignore the fact that the applicant, or their adviser, may have been ignorant of the law; or that a tribunal or court may have previously taken a different view of the law.



• Late appeals can arise where, for instance, an appeal against an award concerns the detail of a calculation. Claimants are not given calculations with their award notices but have to ask for them separately.



• This could be later than the 30 days allowed for appealing against the award notice. It is understood that in such cases HMRC will not oppose an application to lodge a late appeal.

Penalty appeals

• If a penalty has been imposed on you for fraudulent or negligent mis-statement or delay in reporting a change in circumstances, or if you are facing a daily penalty, you can appeal to the First-tier Tribunal, which can do one of four things:

  • set the penalty aside if it does not consider it was merited;
  • confirm the penalty charged;
  • if it considers the penalty is excessive, reduce it to an amount it considers appropriate, even to nil;
  • if it considers it inadequate, increase it under the maximum permitted.
  
  

• Appeal against the determination of the First-tier Tribunal lies to the Upper Tribunal who have the same powers in relation to the First-tier Tribunal's determination as the First-tier Tribunal has in relation to HMRC's determination. That is to say, they can set aside, confirm, reduce or increase the penalty.

  An initial penalty for failure to comply with a requirement by HMRC, such as a notice to provide information etc, can only be imposed by the First-tier Tribunal on application by HMRC, and appeal against such penalties therefore lies to the Upper Tribunal.

• For more on how penalties are charged, see Examinations and enquiries.

'Official error'

• This is not the 'official error' test as understood by those who have experienced tax credit overpayments due to HMRC error or delay. Official error in this context is defined as an error relating to tax credit made by:

  • an officer of the Board;
  • an officer of the DWP or Department for Social Development (in Northern Ireland); or
  • a person providing services to any of those departments (eg the IT contractor),
  
  to which neither the claimant nor any person acting for the claimant materially contributed.



• A decision may be revised by reason of official error at any time within five years of the date of decision. Prior to 6th April 2010, the time limit was five years from the end of the tax year to which the decision related.



• This is a useful alternative to an appeal where the only problem is a clear mistake in the award on which both sides can agree and which HMRC can simply correct retrospectively without the panoply of an appeal. There appears to be no right of appeal against a decision by HMRC not to revise the original decision under the official error rules. .

Where there is no right of appeal

• There is no right of appeal against:

  • a formal notice requiring the claimant to give HMRC information as part of an examination or enquiry; or
  
  
  • a decision by HMRC to recover an overpayment (but do not confuse this with a decision by HMRC on an award which shows that an overpayment has arisen – such a decision is appealable like any other decision on an award). In this case a dispute is necessary to challenge recovery of the overpayment.


• In such cases, if agreement cannot be reached with HMRC, it is possible to refer the matter to the Adjudicator or the Parliamentary Ombudsman.



• In an extreme case of an unjust decision it is sometimes possible to ask the High Court, or in certain circumstances the Upper Tribunal, to overturn it in an application for judicial review (for more details on this process see the website of the Public Law Project).

Complaints and compensation

• If HMRC has handled your case badly, there is a complaints procedure which also provides for payment of compensation if you have lost out financially, or suffered anxiety or distress, as a result of HMRC's error or delay.



• HMRC's complaints procedure was originally set out in a code of practice, COP1. There have been numerous revisions of COP1 over the past few years, each one giving less information than its predecessor. The current version, which is no longer designated a code of practice, is in the form of a factsheet but, like many publications bearing that title, it is largely devoid of facts. The current factsheet version is available here.




• Points to note about this procedure are:

  • To make a complaint, write or speak to the person or office you have been dealing with, putting 'complaint' at the top of your letter if you are writing. You can also complain by fax or in person but not by e-mail. You are asked to tell them as much as you can about your complaint, including what went wrong, when it happened, who you dealt with, how you would like it settled.

  • if the response of the local office is unsatisfactory, ask the office to look at your complaint again. It will be referred to a senior officer who has not been involved, who will take a fresh look at it and how HMRC have handled it, then give you a final decision. This second review is often called a 'Tier 2 complaint'.

  • if you are not happy with the response of the senior officer, you can ask the Adjudicator to look into your complaint.

• If you are unhappy with the Adjudicator?s decision, you can also ask your MP to refer the matter to the Parliamentary Ombudsman .

Compensation

• If you have suffered financial loss, or particular anxiety or distress, you should consider claiming compensation.



• On financial loss, the factsheet says that HMRC will consider refunding any reasonable costs you have had to pay as a direct result of HMRC's mistakes or unreasonable delay. It lists, as examples, postage, phone calls, and professional fees. The former COP1 also listed under this head travelling expenses and financial charges. You should keep evidence of all such costs (receipts etc) and show them to HMRC when asked.



• If the extra costs have arisen because HMRC mistakes or delays result in your receiving a late notification of a tax credit overpayment, the department may decide not to collect the full amount owed, but strict conditions apply.




• On payments for worry and distress, the factsheet has this to say:

  If you think our actions have affected you particularly badly, causing you worry or distress, tell us straight away. We may be able, in some cases, to make a payment to apologise.

  The former COP1 added:

  These payments, which are not intended to put a value on the distress you have suffered, will usually range from £25 to £500.

• Under the former COP1 there was a third head of compensation for poor complaints handling:

  'If we handle your complaint badly or take an unreasonable time to deal with it, we may pay you compensation, on top of any reasonable costs, to reflect this. These payments will usually range from £25 to £500.'

• That paragraph no longer appears in the factsheet but there is no reason why poor complaints handling cannot be one of the factors to be considered in determining the amount of compensation for worry and distress.

• If you are negotiating compensation for yourself, you do not have to accept what HMRC offer. Look at the case studies in the Adjudicator's annual Reports to get an idea of the kind of sums that are agreed after reference to the Adjudicator's office.

TCO reorganisation

• The Tax Credit Office are changing the way in which they handle disputes, complaints and requests for explanations. Previously, individual teams dealt with these items separately from each other (i.e. a disputes team dealt with disputes, a complaints teams with complaints, etc). Since early 2009, HMRC have roled out CSSG (Customer Service and Support Group) Teams who deal with disputes, complaints and requests for explanations.

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