Garden Court represent tax credit claimant in a landmark Court of Appeal decision on access to justice

Mr Arrbab was in receipt of an award of tax credits. In July 2018, he changed his employer. When he 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. This led to an inflated income figure being used to calculate his tax credit award.

For the tax year 2018/2019, HMRC used a current income of £20,589.40, whereas his P60 showed his income to be £13,358.53. Mr Arrbab requested a mandatory reconsideration of the decision saying that he had never been self-employed and, therefore, could not have earned the £10,602.00 recorded as being from self-employment. On 23 July 2019, HMRC rejected his request on the basis that it was submitted late. Mr Arrbab sent a reply setting out health issues that had been responsible for the delay in applying and providing evidence as to his earnings. His letter was treated as a notice of appeal to the First-tier Tribunal (“FTT”).

The FTT, however, struck out the appeal on the basis that it had no jurisdiction to hear it. The Upper Tribunal (“UT”) allowed Mr Arrbab’s appeal, holding that the legislation did not exclude a right of appeal, relying on R(CJ) and SG v Secretary of State for Work and Pensions (ESA) [2017] UKUT 324 (AAC), [2018] AACR 5. HMRC were granted permission to appeal to the Court of Appeal.

Shortly before the Court of Appeal hearing, HMRC accepted that their decision to refuse the request for a mandatory reconsideration was “unsatisfactory” as it had not properly engaged with Mr Arrbab’s request for an extension of time. In those circumstances, HMRC had decided to repay Mr Arrbab the amount that they had wrongly recouped from him. As this resolved the dispute between these parties this meant the appeal was academic, but the court decided to exercise its discretion to hear the appeal as it raised an issue of public importance.

The Court held that the FTT should not have struck out the Mr Arrbab’s appeal.

Falk LJ, who gave the lead judgment, said UT Judge Fiona Scolding KC had erred in law in concluding that the provisions of ss.21A, 21B and 38 of the Tax Credits Act 2002 permit an appeal to be brought in a case where HMRC have decided that the period to apply for a review should not be extended.

Falk LJ went on to uphold the Respondent’s argument - that the statutory instrument that introduced those provisions into the 2002 Act was ultra vires. The principal amendment to the 2002 Act was introduced by the Tax Credits, Child Benefit and Guardian’s Allowance Reviews and Appeals Order 2014, SI 2014/886 (the “2014 Order”). The enabling provision was section 124 of the Finance Act 2008. This was an example of a “Henry VIII power”, a provision of primary legislation which permits subordinate legislation to be used to amend primary legislation. The Respondent argued that the 2014 Order was ultra vires this legislation insofar as it sought to amend s.38 of the 2002 Act to make the review process mandatory. Falk LJ referred to the following principles of law:

• It is well established that any genuine doubt about the scope of the power conferred by a Henry VIII provision should be resolved in favour of a restrictive approach. The leading authority is R (on the application of Public Law Project) v Secretary of State for Justice [2016] UKSC 39, [2016] AC 1531.
• There is a strong presumption that rights of appeal will not be excluded where they would be otherwise available (R v Emmett [1998] AC 773).
• Even if the need for infringement of such a right does arise by necessary implication, the rule will still be ultra vires if it is unreasonable, in the sense of being “wider than is necessary; if it infringes the fundamental right to a greater extent than is required”: Roch LJ in R v Secretary of State for Home Department, Ex parte Saleem [2001] 1 WLR 443.
• Even where a statutory power authorises an intrusion upon a right of access to the courts, there is implied limitation such that the degree of intrusion must not be greater than is justified by the objectives which the measure is intended to serve: Lord Reed in R(UNISON) v Lord Chancellor [2017] UKSC 51, [2020] AC 869.
• It is well-established that Explanatory Notes may be used “to ascertain the context of the provision and the mischief which it addresses as aids to purposive interpretation”: McDonald v Newton [2017] UKSC 52 per Lord Hodge at [30].

It was common ground that the internal review procedure introduced by the 2014 Order had as its aim a reduction in the need for appeals, by providing an opportunity for the claimant to provide further information and for HMRC to correct mistakes. Falk LJ said while the aim of the 2014 Order was legitimate, Parliament did not pass primary legislation to enable the new procedure to be adopted for tax credits. Instead, the Treasury sought to use s.124 FA 2008, which had been enacted some four years before Parliament even considered the topic of mandatory reconsideration in the different context of social security reforms. The Explanatory Notes to what became s.124 FA 2008 said nothing either about mandatory reviews, and there was no hint that a right of appeal might be lost if the time limit for such a review was missed:

“The purpose of s.124 FA 2008, as is clear from the Explanatory Notes to the Bill, was to facilitate the transition to the new tribunal system and allow the introduction of a right to a formal review. That is very different from a mandatory review on terms that excludes the FTT’s ability to determine whether to entertain a late challenge. There is nothing in s.124 FA 2008 that makes clear that it authorises a provision which has the effect of making the decision maker the effective gatekeeper of appeals to the FTT in the event of a late challenge, subject only to the possibility of judicial review. Although s.124(2)(a)(ii) permits provision about the “circumstances in which” an appeal may be made, that is insufficiently clear to permit HMRC to become the gatekeeper. While I understand HMRC’s argument that s.38(1A) simply regulates the exercise of a right of appeal rather than excluding it as in Saleem, I cannot accept it. In substance and in reality, the effect of s.38(1A) is to remove a right of appeal where time is not extended by HMRC under s.21B.” (At [61]).

“The facts of Mr Arrbab’s case are an unfortunate illustration of the reality that only a right of recourse to an independent tribunal may provide effective protection against failures of administration, including a failure to recognise that time ought to be extended. This reinforces the need for a clear indication that Parliament intended to remove that right, leaving only the possibility of a judicial review of HMRC’s decision-making. Section 124 FA 2008 does not provide such an indication.” (At [71]).

The decision of the UT on the construction point was set aside, but the Respondent’s case on the ultra vires issue was upheld. As a result, the appeal against the FTT decision dated 17 March 2021 striking out the Respondent’s appeal for want of jurisdiction was allowed.

Click here for the full judgment – The Commissioners for His Majesty’s Revenue and Customs v Mr Abubaker Arrbab [2024] EWCA Civ 16