Kirklees Citizens Advice & Law Centre supported a client who was victorious in the Court of Appeal in a landmark judgement handed down on Friday, 19th January 2024.
Law Centre victory in Court of Appeal exposes bad practice at HMRC and overturns undemocratic processes in the tax credits system.
Mr Arrbab had been in receipt of an award of tax credits. In 2018, Mr Arrbab changed his employer and telephoned HMRC to inform them of this. The call handler wrongly interpreted the purpose of Mr Arrbab’s call as being to inform HMRC that he was now self-employed.
In error, a separate self-employed income was added to his employment income and his tax credit award was reduced to £0, leaving Mr Arrbab without the critical income top-up he needed to get by.
Mr Arrbab completed a form requesting a review of the decision. HMRC rejected it, stating that the form had been submitted late.
He wrote a letter to HMRC, setting out health issues that had been responsible for the delay and providing evidence as to his earnings. English was not his first language, and he needed help to understand the decision letter, which also contributed to the delay. This triggered an appeal, but the First-tier Tribunal struck out Mr Arrbab’s appeal, stating that it did not have jurisdiction to hear it.
Mr Arrbab sought advice from his local Citizens Advice in Wakefield and they suggested he contact Kirklees Citizens Advice & Law Centre who assisted him to appeal to the Upper Tribunal. The appeal was successful and the Upper Tribunal ruled that the appeal should not have been struck out, but HMRC were granted permission to Appeal to the Court of Appeal.
Prior to the Court of Appeal case, HMRC finally looked at Mr Arrbab’s case properly and accepted that its own internal guidance had not been followed, and that Mr Arrbab should be repaid the money lost as a result of the flawed tax credits calculation. This meant that the appeal to the Court of Appeal was academic, but HMRC requested that it go ahead in order to decide an important point of law.
At play in Mr Arrbab’s case had been a “Henry VIII power.” In 2014, without Parliamentary scrutiny, the government introduced an Order which set out a procedure for the review of tax credit decisions. Crucially, there were provisions for carrying out a review requested later than 30 days, but HMRC could decide whether it would carry out a late review.
This is what Mr Arrbab had done, but HMRC refused to carry out a review and therefore argued that he could not make an appeal to the First-tier Tribunal.
Mr Arrbab’s legal team argued that the government had acted beyond its powers in the provisions of the 2014 Order, an argument that was upheld by the Court of Appeal. HMRC could not be the “gatekeeper” for late appeals, and implicitly, the gatekeeper of recourse to the courts.
In its Judgement the Court of Appeal has struck out the secondary legislation which created this unfair process.
This case has wider implications for the shutting down of access to justice. Indeed, when handing down the judgment, Lady Justice Falk acknowledged the lengthy legal process and the vulnerability of claimants:
“It is highly unfortunate, and of real concern, that it took two tribunal decisions and the immediate prospect of a hearing in this court for the facts of Mr Arrbab’s case to be properly considered by HMRC.
“[It is] an unfortunate illustration of the reality that only a right of recourse to an independent tribunal may provide effective protection against failures of administration.
“Many tax credit claimants will be vulnerable in some respect… the difficulties that many claimants have may be insufficiently appreciated by HMRC decision makers.”
Nick Whittingham, Chief Executive of Kirklees Citizens Advice & Law Centre, said:
“This case demonstrates the vital role played by Law Centres in protecting the rights of individual citizens against the powers of government departments and the failures of administration. Here government has first created a complicated system for claiming Tax Credits and then used an arcane back-door procedure, avoiding Parliamentary scrutiny, to put in place rules which would block many people from being able to appeal when officials get decisions wrong. We are delighted that by taking on HMRC we have been able to persuade the Court of Appeal to strike out this injustice.”
Joe Power, Mr Arrbab’s solicitor at Kirklees Citizens Advice & Law Centre said:
“It was encouraging to note that the Court of Appeal acknowledged that many tax credit claimants will be vulnerable in some respect and indicating that the difficulties that many claimants have may be insufficiently appreciated by HMRC decision makers and that only a right of recourse to an independent tribunal may provide effective protection against failures of administration. In these circumstances, it goes without saying that the role of Law Centres will be crucial”.
Read the full judgement below: