Better late than never?
PLEASE NOTE: this article argues that JI v HMRC is not binding. That position is incorrect. However the other reasons given in the article as to why JI is wrongly decided may still be used. Please see also the further article (Feb 2015)
A recent decision of the Upper Tribunal has decided there is no possibility of making a late appeal in tax credits cases. Martin Williams considers the case.
In JI v HMRC (TC) [2013] UKUT 199 (AAC), Judge Rowland expresses the opinion that there is no power for either the HMRC, or the First-tier Tribunal, to extend the time for appealing in a tax credit case. This means that any appeal submitted more than 30 days after the decision notice is issued is not valid.
HMRC has reassured CPAG that it does not intend for claimants to lose the right of appeal. However, if the decision in JI v HMRC is correct, then a problem exists: whatever HMRC’s intentions, an HMRC decision maker cannot give a tribunal jurisdiction to deal with an appeal where none exists. Therefore, it is important for advisers to understand what can be done in such cases.
Does it bind tribunals and HMRC?
A close reading of JI v HMRC shows that the reasons which explain why, in the view of the Upper Tribunal, there is no power to extend time for late appeals in tax credits cases are not a binding part of its decision. At paragraph 47, the judge explains that HMRC regards the last appealable decision as having been sent to the claimant on 8 December 2009 and the appeal as having been received on 15 March 2011. This means that, regardless of whether there is a power to extend time, on the facts of this particular case, the appeal was outside the absolute ‘long stop’ time-limit of 30 days plus 12 months, and therefore any comments the judge had to make about whether there would have been a right of appeal had this not been the case were obiter dicta – ie, not binding. The point reserved by the Upper Tribunal for further decision (effectively whether, on the facts of the case, there was an in-time appeal against a different decision that also carried a right of appeal – see ‘Appeals against refusals to revise for official error’ below) is not capable of changing the fact that the Upper Tribunal’s views on late appeals are not binding. In summary, either the appeal was outside the ‘long stop’ time limit (so even if there is a right to extend time, that would not help the claimant) or, as remains to be determined, it was an appeal made within the 30-day time limit (and so no issue as to extending time arises).
Why no right of appeal
The explanation given by the Upper Tribunal of why late appeals are no longer permitted is, of necessity, complicated and difficult to summarise – what follows is therefore rather abbreviated but at least identifies where the problems have arisen.
The time limit for appeals in tax credit cases was set as 30 days in section 39(1) of the Tax Credits Act 2002 (‘TCA 2002’). When tax credits were first introduced, the power of the then appeal tribunal to extend time arose in a complicated way. Section 63(8) of the TCA 2002 allowed for the application of certain provisions of the Social Security Act 1998 (‘SSA 1998’) to tax credit appeals. These included section 12(7) of SSA 1998, which allowed for the making of regulations as to the time within which an appeal had to be brought. Section 12(7) of SSA 1998 was thus used to make the Tax Credits (Appeals) (No.2) Regulations 2002 (SI No.3196) (‘Appeals No.2 Regs’). These provided at reg 5 for late appeals – in particular reg 5(4) allowed for a panel member of the appeal tribunal to extend time.
Things started to go wrong when the appeal tribunal was abolished and replaced with the new First-tier Tribunal. From 3 November 2008, the Appeals No.2 Regs were amended by the Tribunals, Courts and Enforcement Act 2007 (Transitional and Consequential Provisions) Order 2008 (SI No.2683). Article 6 applied the amendments in Schedule 1. Paragraph 209 of the Schedule amended the Appeals No.2 Regs so that reg 5 no longer allowed a tribunal to extend time for appealing. The drafter presumably thought that this could be provided for in the Tribunal Procedure (First-tier Tribunal) (Social Entitlement Chamber) Rules 2008 (SI No.2685). However, those rules could not change the date for a time limit in tax credit cases as that had already been put in the TCA:
Tribunal Procedure Rules cannot permit an extension or shortening of the time for complying with a provision in primary legislation unless there is a specific enabling provision in primary legislation permitting such a rule (Mucelli v Government of Albania [2009] UKHL 2; [2009] 1 WLR 287). There is no such provision in primary legislation relevant to the present case.
Thus, from this point onwards, on the judge’s analysis there was no power for the First-tier Tribunal to extend time.
But that is not the end of the story; the situation was made even worse in 2009. From 1 April 2009, the situation was made even more complex. The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (SI No.56) amended the TCA: s63(8) from that point onwards had no application outside of Northern Ireland. That was problematic because, as explained above, this was the enabling provision under which the Appeals No.2 Regs had been made in as much as it allowed the power to make regulations extending time limits for appeal in section 12(7) of SSA 1998 to apply to tax credits. Once there was no primary legislation allowing their existence in Great Britain, the Appeal No.2 Regs ceased to be valid altogether. Thus, there was, outside Northern Ireland, from 1 April 2009, not even any power for the HMRC to admit a late appeal.
The Revenue and Customs Appeals Order 2012 (SI No.533) sought to undo some other unforeseen consequences of the 2009 Regulations (in particular restoring the power of the HMRC to settle cases under the Taxes Management Act 1970). It ensured that section 63(8) of the TCA 2002 should again apply to cases in Great Britain. But the judge is of the view that this did not have the effect of restoring the validity of the Appeals No.2 Regs.
Is the Upper Tribunal right?
Nowhere in the decision of JI v HMRC (TC) does Judge Rowland expressly address human rights concerns. At paragraph 25 he does say:
25. The Appellant submits that the result is unfair, but I am not persuaded that any unfairness is such that I can read into the legislation provisions that are not there.
It may be arguable that Judge Rowland is incorrect. In Stubbings v UK [1996] 23 EHRR 213, the European Court of Human Rights considered what the right to a court in Article 6 meant. It explained:
‘48. [...] The Court records that Article 6 embodies the ‘right to a court’, of which the right of access, that is the right to institute proceedings before a court in certain matters, constitutes one aspect.
However, this right is not absolute, but may be subject to limitations; these are permitted by implication since the right of access by its very nature calls for regulation by the State. In this respect, the Contracting States enjoy a certain margin of appreciation, although the final decision as to the observance of the Convention’s requirements rests with the Court. It must be satisfied that the limitations applied do not restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired. Furthermore, a limitation will not be compatible with Article 6 (1) if it does not pursue a legitimate aim and if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be achieved.
49 .... They [the limitation periods] serve several important purposes, namely to ensure legal certainty and finality .... ’
In Denson v SSWP and Anr [2004] EWCA Civ 462, the Court of Appeal relied on Stubbings in finding the ‘long stop’ rule of 13 months (in that case, in a child support appeal) was a proportionate response to pursuing a legitimate aim.
In the case of the removal of the right to extend time in a tax credit case, we can see that:
changes made when the First-tier Tribunal was created unintentionally removed the right to extend time on the part of a tribunal (see para 34 of JI v HMRC);
similarly, the 2009 amendments inadvertently removed the basis in primary legislation for extending time (on the part of either the tribunal, although that was already removed), or indeed the HMRC (outside of Northern Ireland). Again that was inadvertent – the judge finds this to be the case at para 44).
Both of these changes appear to be limitations on the right of access to a tribunal. It can be seen from Denson and Stubbings v UK that limitations on the right of access to a court must be proportionate and in pursuit of a legitimate aim. It can be argued that the particular limitations that appear to remove the power to make a late appeal cannot have been in pursuit of a legitimate aim. The consequences for extending time to appeal and the way in which they thus limited the right of access to the tribunal were mistakes rather than things done in
pursuit of a policy. It is difficult to see how accidentally reducing appeal rights can be in pursuit of a legitimate aim. As such, it is arguable that they represent a breach of Article 6.
If that is right, the question then arises whether, as both of the provisions which remove the possibility of a late appeal are in secondary legislation, they can be either disapplied or have words read in so that they do not produce the infringement to Article 6. It is arguable that they can be.
Wanting to make a late appeal
Advisers should still encourage claimants to submit appeals in tax credit cases, even when the appeal appears to be late. Advisers can argue that both the HMRC and the First-tier Tribunal still have the power to admit a late appeal.
If the First-tier Tribunal wishes to either decline to extend time itself because it believes that it has no power to do so, or strikes out an appeal in which the HMRC has purported to extend the time itself, then claimants will have a right of appeal to the Upper Tribunal against such a decision. CPAG has seen many cases where appeals have been struck out and the notes sent with the decision by HM Courts and Tribunals Service does not explain that there is a right of appeal, or a right to request a statement of reasons for the decision. Cases such as LS v LB Lambeth (HB) [2011] UKUT 461 (AAC); [2011] AACR 27, make clear there is a right of appeal to the Upper Tribunal against such decisions.
The First-tier Tribunal is supposed to give claimants an opportunity to make comments when proposing to strike out an appeal because it believes it does not have jurisdiction (rule 8(4)). However, again, CPAG has seen many cases where this has not occurred. Advisers should be alert, therefore, to the need to make representations about why time can be extended in tax credit cases.
JI v HMRC has another interesting aspect, which may yet give rise to some positive caselaw for claimants, albeit on a different point altogether. The judge explains that he does not necessarily accept that the HMRC is right about whether there was no in-time appeal in the case before him. He considers that there may in fact be an in-time appeal against a later decision, which is arguably a refusal to revise for official error (see the Tax Credits (Official Error) Regulations 2003 (SI No.692). The judge has reserved his decision on whether this is the case, and if so, whether it is possible to appeal against such a decision (which will depend upon whether a decision not to revise for official error is a decision ‘under [...] [the Official Error] regulations’. If the judge decides this point in the claimant’s favour, this will be an important case for tax credits, as it would mean that ultimately it is for a tribunal to decide whether an official error exists, even in a case where the HMRC does not accept this.
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