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 a Social Security and Child Support appeal tribunal. The appeal tribunals are administered by the Tribunals Service, which is an agency of the Ministry of Justice, and hears appeals involving social security benefits as well as tax credits.



• More information about the Social Security and Child Support appeal tribunal can be found on the Tribunals Service website.



• If you are dissatisfied with the decision of the appeal tribunal, you can appeal further, but only on a point of law and with permission, to the Social Security and Child Support Commissioners. On matters of fact, as opposed to law, the decision of the appeal tribunal is nearly always final.



• Further information about the Social Security and Child Support Commissioners can be found here.



• From the Social Security Commissioners, 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. Although the appeal is to the appeal 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, but 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.



• The TCO should acknowledge receipt of your letter of appeal, but it is currently taking several weeks to process them. 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.

Settling your appeal with the TCO

• Once the appeal letter is processed, someone at the TCO will contact you 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 appeal 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 appeal 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.

Late appeals

• If the 30 day time limit for appealing has passed, it is not necessarily fatal. HMRC and the Appeal Tribunal have discretion to accept a late appeal provided it is made within a year of the decision.



• An application for a late appeal may be granted if a panel member of the Appeal Tribunal is satisfied that there are reasonable prospects that the appeal will be successful, or the panel member 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 Appeal Tribunal.




• In deciding whether an application to lodge a late appeal is in the interests of justice, HMRC or the Appeal 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 Appeal Tribunal must ignore the fact that the applicant, or their adviser, may have been ignorant of the law; or that an appeal 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 appeal 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 appeal tribunal lies to the Social Security Commissioners who have the same powers in relation to the appeal tribunal's determination as the appeal 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 appeal tribunal on application by HMRC, and appeal against such penalties therefore lies to the Social Security Commissioners.

• 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 after the end of the tax year to which it relates.



• 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.

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 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 singularly 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 we have handled it, then give you a final decision.

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

• 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

• During 2008 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). We understand that HMRC will phase in new customer service 'umbrella' team who will deal with all three categories: claimant disputes, complaints and explanation requests. Further details will be posted in our news section as soon as they are available.