CPAG in Scotland: Tax Credits Project: Tax Credits

CPAG in Scotland Tax Credits Project: Factsheet 8

Tax Credits – Challenging Decisions

Tax Credit decisions
Challenging decisions
Appeals
Further information and advice

Tax Credit decisions

Tax credit awards are given for tax years. The tax year runs from 6 April in one calendar year to 5 April in the next.

The amount you receive during the year is an award based on your likely entitlement. Your actual entitlement is only finalised after the end of the tax year. This means that a number of decisions may be made by the Revenue on your tax credits claim. An initial decision will be made following the claim, and later, after the annual review, a final decision on entitlement for the year which has ended. Other decisions may be made during or after the tax year, including decisions about overpayments of tax credits.

This leaflet explains what you can do if you disagree with one of these decisions.

The following table sets out the decision-making process and explains some of the words which have a particular meaning in the tax credits context.

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Claim	To be entitled to tax credits you must make a claim. You might claim more than once in the course of the year: for example, if you start or stop living with someone as a partner you must make a new claim.
Initial decision	An initial decision is a decision on whether or not you are entitled and an award of how much you are likely to be entitled to. Following this initial decision, an award may be stopped or amended if the Revenue has reasonable grounds for believing it is wrong, or if you report a change of circumstances. This is called a revised decision. Following an initial decision, or before an initial decision is made, the Revenue can investigate your claim. This is called an examination and may result in a revised decision. The Revenue may decide that you have been overpaid tax credits and that you must repay the overpayment.
Annual Review / Annual Declaration	After the end of the tax year the Revenue gathers the information needed to finalise your award for the previous tax year. It does so by sending out an annual review form (TC603R) and often also an annual declaration form (TC603D). You must return the annual declaration by the specified date. The annual review / declaration also acts as your claim for the new tax year.
Final decision	The final decision is made after the end of the tax year. The Revenue decides whether you had an entitlement and, if so, at what level, for the completed tax year. You may have been underpaid tax credits and if so the underpayment will be paid to you. The Revenue may decide that you have been overpaid tax credits and that you must repay the overpayment. The Revenue may revise (change) a final decision because, there is an official error, they have made an enquiry (eg a random check or because of new information), they have made a discovery of fraud or neglect or a change to income tax liability.

Challenging decisions

Many, but not all, decisions made by the Revenue about your tax credits award can be challenged by appealing to an independent tribunal. Below is a table explaining which decisions you can appeal against, and which you can’t.

Decisions you can appeal against

Decisions you cannot appeal against

Initial decision

Final decision

Revised decision eg, after a change of circumstances

Revised decision following an examination

Revision on enquiry

Revision on discovery

Decision imposing a penalty

Decision to charge interest on an overpayment

Decision to pursue an enquiry – you can appeal to a tribunal to bring the process to a close

Decision to recover an overpayment

Decision regarding the rate of recovery of an overpayment

Decision about how your tax credit is paid

If you do not have the right to appeal against a decision, an alternative legal remedy may be available through the courts, see Tax credits and judicial review for more information. The decision to recover an overpayment of tax credit can cause difficulties for claimants and yet these are decisions you cannot appeal against. However, you can appeal against the final or revised decision about how much tax credits you are entitled to, ie if you do not agree that you have been overpaid, or you think that the amount of the overpayment is wrong.

Example
Maria is a lone parent with 2 children. She works 28 hours per week. She claims tax credits in April 2008. An initial decision is made awarding working tax credit and child tax credit for 2008/09. The award includes an amount for a disabled child even though neither of Maria’s children has a disability. In November 2008 the Revenue realises its mistake and revises the initial decision, removing the disability element. Maria has been overpaid tax credit from April to November and the Revenue decides that she should repay it. Even though she did not cause the overpayment, the Revenue says that she should have checked her award and notified them that she wasn’t due the disability element.
Maria cannot appeal against the decision to recover the overpayment.

The Revenue does, however, have discretion not to recover overpayments and there are many situations where recovery of an overpayment is not appropriate. You can challenge the decision even though you cannot appeal to an independent tribunal. For further information on how to challenge overpayment recovery please see CPAG in Scotland’s leaflets, No.14 Tax credits overpayments and No.2 Tax credits and complaints

Appeals

Where you do have the right of appeal the Revenue’s decision is looked at again by a tribunal which is completely independent of the Revenue. This is the First-tier Tribunal (Social Entitlement Chamber), which also deals with social security appeals. Tax credits appeals are usually heard by one legally qualified person, known as a judge, although the procedure is less formal than in court.

Example
Jez and Sam have 2 children aged 7 and 9. Jez works 40 hours per week. Sam is unable to work due to ill-health and is on incapacity benefit. Both children go to an after school club and this costs £40 per week. When they claim tax credits, the Revenue makes an initial decision awarding working tax credit and child tax credit, but the award does not include the child care element. Jez and Sam do have the right to appeal against this decision, and do so on the grounds that they are eligible for the child care element as a couple where one is working and the other is incapacitated.

Example
Sophia is a lone parent with one child, Ben. Ben is disabled and is entitled to disability living allowance. Sophia claims tax credits in April 2008 and an initial decision is made awarding child tax credit for 2008/09. It does not include the disability element. Sophia has the right of appeal against this decision but doesn’t know that there is anything wrong with her award and so doesn’t appeal. After the end of the tax year the Revenue makes a final decision on Sophia’s entitlement for 2008/09. It still doesn’t include the disability element. Sophia checks the final decision with an adviser and realises that it’s wrong. She has the right to appeal against this decision and submits an appeal.

How to appeal

Your appeal must be made in writing. The Revenue has a special appeal form (form TC623) which is inside the leaflet WTC/AP How to appeal against a tax credit decision or award. Alternatively, you can write a letter, which must include the following details:

enough information to identify you (eg, name, NI number)
enough information to identify the decision appealed against (eg, date of decision, whether it relates to child tax credit, working tax credit or both)
grounds of appeal
signature

In a joint claim, both you and your partner or either one of you can appeal. If one partner appeals, the other has the right to be heard by the tribunal and should be sent the same appeal papers as the partner who has appealed and given the opportunity to attend the hearing. If you have an appointee acting on your behalf they can appeal for you.

If the decision that you are appealing against led to an overpayment of tax credits, the Revenue has stated that it will suspend recovery until the appeal has been resolved.

Time limit for appealing

Your appeal should be received by the Revenue within 30 days of the date given on the decision letter. Late appeals are possible as long as they are made within the absolute deadline of one year beyond the normal 30 day time limit. If your appeal is late, you must include the reason why the appeal was not made in time. The appeal will be treated as being made in time if the Revenue does not object. If the Revenue does object to the late appeal, or considers that it has been made more than one year beyond the normal 30 day limit, it must refer the case to the tribunal immediately. The tribunal will consider whether to accept the late appeal in light of its overriding objective to deal with a case fairly and justly.

Settling an appeal

Once you submit an appeal it is possible for the case to be settled without it actually going to an appeal hearing. This might happen when, after further discussion, or further information being produced, the Revenue alters the disputed decision in your favour. It could also happen where you decide, after further discussion, not to pursue the case.

If a case is settled the Revenue should write to you setting out the terms of the settlement. There is then a 30 day ‘cooling off’ period (from the date of the Revenue’s letter) during which you can change your mind and decide instead to proceed to an appeal. If you do change your mind, you must write to the Revenue within the 30 day period, otherwise your appeal will lapse.

Example
Jez and Sam submit their appeal stating that they believe they are eligible for the child care element. The Revenue looks again at the facts of the case and realises that the child care element should have been included. The Revenue writes to Jez and Sam giving them the new amount of tax credits (including the child care element). Jez and Sam seek advice and are happy that the decision is now correct. They do not have to write back to the Revenue. Their appeal lapses.

Going to appeal

If the case is not settled, the Revenue must send the appeal papers to the Tribunals Service as soon as is reasonably practicable and a copy to you and your representative, if you have one. The appeal papers include copies of paperwork relating to the disputed decision and the Revenue’s submission, setting out the basis of their decision. If there is a delay in the Revenue passing your appeal to the Tribunals Service, consider making a complaint or write to the District Principal Judge to request that he or she instructs the Revenue to produce appeal papers.

You will also be sent a form to fill in, asking if you want a hearing at which you and or your representative can attend in person or if you want your appeal to be decided without a hearing. You must return this form if you want your appeal to proceed. Statistically, there is more likelihood of success at a hearing, where you have the opportunity of attending in person (with a representative, if you have one) and putting your side of the argument to the tribunal. If you opt for a decision without a hearing the case is decided by the judge on the basis of the appeal papers alone, and you are not given the opportunity of attending in person.

You can withdraw the appeal if you decide that you do not wish to proceed. The Revenue can refuse to let the appeal be withdrawn, but must write to you advising you of this within 30 days. If the Revenue does not do so then the appeal is treated as withdrawn.

The tribunal must consider the grounds of appeal raised in the written appeal application, but can also consider other matters, providing they were not ‘wilfully or unreasonably’ omitted from the appeal application. The tribunal can only consider the circumstances as they were at the time of the disputed decision. The decision of the tribunal will either confirm or alter the Revenue’s decision.

If the appeal is against a revised decision which has been made in the course of the tax year (ie before the final decision has been made), it will become redundant if a final decision is made before the appeal is heard. You will then have to appeal against the final decision if the disputed issues remain unresolved.

Example
Ada is a lone parent and works part time. Her hours average out at 17 per week. She claims tax credits in April 2007 and an initial decision is made awarding working tax credit and child tax credit. In February 2008 the Revenue examines her award and makes a revised decision that her hours are now only 15 per week and therefore she is not entitled to working tax credit. Ada disagrees with this decision and appeals. She is still waiting for her appeal to be heard in July 2008 when a final decision for 2007/08 is made. This decision has the same effect as the revised decision of February 2008. She will have to submit a further appeal against the final decision.

After the appeal

Once the tribunal has made its decision, both parties (you and the Revenue) have the opportunity to request a full statement of reasons for the tribunal’s decision. This must be requested, in writing, within one month of the tribunal’s decision being sent or given. . The tribunal can extend this time limit if this is consistent with its overriding objective to deal with cases fairly and justly.

Requesting a full statement of reasons is necessary if either side wishes to try and appeal against the tribunal’s decision. This further appeal (from either you or the Revenue) must be on a ‘point of law’ and is dealt with by the Upper Tribunal (Administrative Appeals Chamber), formerly the Social Security and Child Support Commissioners. You must apply to the First-tier Tribunal for permission to appeal to the Upper Tribunal within one month of being sent the statement of reasons (the First-tier Tribunal can extend this time limit if it is fair and just to do so).

You can apply to the First-tier Tribunal for a decision to be set aside (cancelled and remade) if:

You, your representative or the tribunal were not sent or did not receive a document relating to the proceedings;
You or your representative were not present at the hearing; or
There has been some other procedural irregularity

Your request for a decision to be set aside must be received within one month of the tribunal decision (the tribunal can extend this time limit if it is fair and just to do so, but you should not wait for the statement of reasons or permission to appeal if you want to apply for a decision to be set aside).

You can apply to the First-tier Tribunal to correct a clerical error or accidental slip or omission in its decision at any time.

Further information and advice

CPAG in Scotland Tax Credits Project summary webpages

Child Poverty Action Group in Scotland
0141 552 0552 advice line for advisers on benefits and tax credits,
Monday, Tuesday, Wednesday and Thursday 10am to 12 noon.

Email: advice@cpagscotland.org.uk
email advice for advisers on benefits and tax credits

Website: www.cpag.org.uk
for more tax credit leaflets from CPAG in Scotland

CPAG publishes the Welfare Benefits and Tax Credits Handbook, a comprehensive guide to benefits and tax credits for claimants and advisers.

CPAG in Scotland’s advice line is only for advisers. If you are having problems with your own tax credit or benefit claim and are in need of advice you should contact your citizens advice bureau or other local welfare rights service.

HM Revenue and Customs (formerly the Inland Revenue)
Tax Credit Helpline 0845 300 3900
(textphone 0845 300 3909)

Child Poverty Action Group is a charity registered in England and Wales (registration number 294841) and in Scotland (registration number SC039339). Company limited by guarantee registered in England (registration number 1993854). Registered office: 94 White Lion Street, London N1 9PF

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