[2025] UKUT 166 (AAC)

In RS (No.2) Upper Tribunal Judge Wikeley held that

“31.

The effect of Article 7(1) is that the default position is that a person who lives in an area in which universal credit has been brought into force cannot claim tax credits (or indeed housing benefit or income support). However, this is “except as provided by paragraphs (2) to (6).” So persons who can bring themselves within one of those exceptions may still claim tax credits (or one of the other legacy benefits mentioned) ...

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36.

Paragraph (6) is the sole remaining exception. Accordingly, the claimant has to show that he falls within the terms of this exception to be eligible to maintain a claim for tax credits. Failing that, he is subject to the default rule in Article 7(1), namely that he could not claim tax credits, instead having to claim universal credit. Paragraph (6) provides thus:

(6)

Paragraph (1) does not apply to a claim for a tax credit where a person has or had, or persons have or had, an award of child tax credit or working tax credit in respect of a tax year and that person or those persons makes or make (or is or are treated as making) a claim for that tax credit for the next tax year.

37.

So, this exception applies if a person has, or has had, a tax credit award “in respect of a tax year” and makes a claim (or is treated as making one) for the same tax credit “for the next tax year”.

38.

The claimant had undoubtedly had a tax credit award for 2018/19, and so an award “in respect of a tax year”, meaning that 2019/20 was necessarily “the next tax year”. The question, however, was whether the claim made part way through that year (on 1 August 2019) was one made “for the next tax year”, namely 2019/20.

39.

The gist of the FTT’s reasoning – that the claim was indeed made for the next tax year – was contained in paragraph 13 of its statement of reasons:

When he telephoned on 01.08.2019 the Appellant was hoping to make a claim for a tax credit for the tax year 2019/20 having had an award for the preceding tax year 2018/19. 2019/20 was the next tax year after 2018/19 in which he had an award. The Tribunal considered that the exception in Article 7(6) therefore applied.

The parties’ submissions

40.

In its notice of appeal to the Upper Tribunal, HMRC submitted that the benefit of Article 7(6) of the Commencement No.23 Order was confined to those cases where there was what was commonly referred to as a ‘renewal claim’ for tax credits. On this analysis, the claimant had gained the benefit of Article 7(6) when the final decision on his 2018/19 claim had led to him being treated as having made a further such renewal claim as from 6 April 2019 and in respect of the 2019/20 tax year (under the procedure mandated by section 17 of the Tax

Credits Act 2002 and regulation 11(2) and (3) of the 2002 Regulations). However, that award for 2019/20 was later terminated and consequently the subsequent claim made on 1 August 2019 (assuming it was a valid claim) was not a renewal claim. As such, it did not fall within the scope of Article 7(6) and so the claimant was subject to the default rule in Article 7(1), meaning that he was now barred from claiming tax credits. This approach, HMRC argued, was consistent with the underlying policy intention governing renewal claims.

41.

In response, the claimant’s representative submitted that there was no warrant for reading Article 7(6) as being confined to renewal claims, there being no such limitation in the wording of the provision. The representative further argued that there was no reason why the policy intention could not have been to allow anyone entitled to tax credits in a previous year to continue on tax credits even when it was not strictly a renewal claim. It was further noted that Upper Tribunal Judge Mitchell’s decision in W v HMRC [2020] UKUT 239 (AAC) did not suggest that Article 7(6) was confined to renewal claims.

42.

In reply, HMRC reiterated its contention that Article 7(6) is limited to renewal claims. On that basis, it was not intended to permit a fresh claim for tax credits in circumstances where a prior award of tax credits has terminated owing to an event that required such termination (as on the facts here). HMRC submitted that to hold otherwise would be inconsistent with the policy objective that, going forward, means-tested state support for people of working age should be delivered via universal credit rather than via tax credits.

43.

The parties’ arguments were further developed in several later written submissions, culminating in Judge Poynter’s set aside ruling.

Discussion and analysis

44.

There is no dispute that the claimant had a tax credits award “in respect of a year” for 2018/19. There is also no argument that in principle in such a case “the next tax year” was necessarily 2019/20. However, I conclude that the claim made on 1 August 2019 and so in 2019/20 was not made “for the next tax year”.

45.

In essence, my reasoning is largely in accord with the reasoning of Judge Poynter in the decision that he has set aside. In summary, it runs as follows.

46.

A tax year runs from 6 April in one calendar year to 5 April in the following year (see Tax Credits Act 2002, section 48, which applies to relevant subordinate legislation by virtue of section 11 of the Interpretation Act 1978). Article 7(6) of the Commencement No.23 Order makes a distinction between the previous award (which must have been made “in respect of a tax year”) and the new claim (which must have been “for the next tax year”). The phrase “for the next tax year” involves a reference to the next tax year as a whole, from 6 April in one year to 5 April in the following year, and not to a part tax year. This interpretation is consistent with both the statutory wording and the underlying policy intent.

47.

As to the wording, if the draftsman had wanted to include within the scope of Article 7(6) tax credits claims which were made in year, and for part of a current tax year, it would have been a straightforward matter to do so. If that had indeed been the policy intention, the Order could have made provision for those persons who make “a claim for that tax credit for the next tax year or part of that tax year”. Thus, for example, section 3(1) of the Tax Credits Act 2002 concerns “entitlement to a tax credit for the whole or part of a tax year” (see also section 17(1)).

48.

As to the policy intent, the purposes of the Welfare Reform Act 2012 include the replacement of tax credits (and other means-tested legacy benefits) by universal credit. Transitional protection typically has the effect that a claimant remains on an ‘old’ benefit until that person ceases to satisfy the relevant entitlement conditions, at which point the individual must make a claim for the ‘new’ benefit (or not at all). It is entirely consistent with this approach that transitional protection ceased (and so the option of claiming the ‘old’ benefit disappeared) once any entitlement to tax credits had terminated.

49.

This analysis can then be applied to each of the claimant’s two tax credit claims.

50.

The first was the renewal claim he was treated as having made by virtue of having an award “in respect of” 2018/19. This claim was for “the next tax year”, being the whole of 2019/20, and so satisfied the terms of Article 7(6). The fact that the claim led to a nil award and subsequent events led to the award’s early termination after three months or so makes no difference in this respect.

51.

The second was the brand new claim he made at a date when he had no extant award (on 1 August 2019). He may still be a person who “had” (rather than “has”) an award of tax credits “in respect of a tax year” within the first part of Article 7(6). However, his claim was not “for the next tax year” (being the period from 6 April 2019 to 5 April 2020) within the latter part of Article 7(6). Rather, it was only for the part tax year from 1 August 2019 (or any such earlier date within the preceding 31 days fixed by reference to regulation 7 of the 2002 Regulations) to 5 April 2020.

52.

As a result, the claimant did not fall within the exception in Article 7(6) of the Commencement No.23 Order but rather was barred from claiming tax credits by virtue of Article 7(1) of that same Order.

53.

I should make it clear I am not expressly deciding that the protection afforded by Article 7(6) only applies in the context of renewal claims. It may well be that a claimant with a renewal award under section 17 of the Tax Credits Act 2002 and regulation 11 of the 2002 Regulations is the paradigm case under Article 7(6). However, and in the absence of full argument on the point, I do not exclude the possibility that there may be other types of case which fall within the remit of Article 7(6).

54.

In reaching my conclusions I have not overlooked the further arguments advanced by the claimant’s representative on the proper construction of the Commencement No.23 Order. These relate to both the period that tax credit claims are made for and also the meaning of “for the next tax year”.

55.

As to the former, the representative’s submission is that a claim for a tax credit is always made simply for a particular tax year and not for particular periods within any tax year. In addition, section 5 of the 2002 Act provides for the determination of the period of any tax credits award simply by reference to the date on which the claim is made. Whilst that may be an accurate portrayal of the general tax credits decision-making machinery, the issue here is the proper interpretation of the wording of the specific transitional provision in Article 7(6).

56.

As to the latter, the representative’s submission is that the phrase “for the next tax year” does not necessarily mean for the whole of the next tax year. While acknowledging that sections 3 and 17 of the Tax Credits Act 2002 specify “the whole or part of a tax year”, reference is made to sections 18-20 where several mentions of a “tax year” must from their context include part tax years. The difficulty with this argument is that it fails to give sufficient weight to the fact that the legislative phrase now under scrutiny is not simply “the tax year” but rather “the next tax year”.

57.

It is further argued that there should be no difference in terms of the provision for savings made by the Commencement No.32 Order and the Commencement No.23 Order. However, this submission overlooks the fact that the two Orders serve very different purposes. The Commencement No.32 Order deals with those categories of case who are protected from the (immediate) effect of the abolition of tax credits. The Commencement No.23 Order deals with the conceptually separate issue as to whether certain categories of claimants for whom tax credits have not been abolished can still actually make a fresh claim for such tax credits.

58.

I have also considered Judge Mitchell’s decision in W v HMRC [2020] UKUT 239 (AAC). That case concerned a different issue arising under Article 7(6) (whether a widower could claim the benefit of the provision when the previous year’s claim had been a joint claim with his now late wife). It does not in any way address whether “for the next tax year” means the whole tax year or includes a part tax year.

59.

Finally, reference is made to observations in Judge Poynter’s now set aside decision to the possibility that “in respect of a tax year” could include part of a tax year. It is suggested that this could mean that a fresh tax credits claim could be made in April 2020 for the whole of the 2020/21 tax year. It is further argued that it would be wholly illogical to allow a new claim in April 2020 but not in August 2019. I express no view on the scope of the phrase “in respect of a tax year”, and so the apparent illogicality simply does not arise.”

I am satisfied that Judge Wikeley was correct to have decided RS (No.2) for the reasons which he gave and that a claim made on 9 August 2019 and so in the 2019/20 tax year was not made “for the next tax year”.

As Judge Wikeley held, rightly in my judgment,a tax year runs from 6 April in one calendar year to 5 April in the following year. Article 7(6) of the Commencement No.23 Order draws a distinction between the previous award, which must have been made “in respect of a tax year”, and the new claim, which must have been “for the next tax year”). Like Judge Wikeley, I consider that the phrase “for the next tax year” involves a reference to the next tax year as a whole, from 6 April in one year to 5 April in the following year and not to a part tax year.

That interpretation is consistent with both the statutory wording and the underlying policy intent. If the draftsman had wanted to include within the scope of Article 7(6) tax credits claims which were made in year, and for part of a current tax year, it would have been easy to do so by making provision for those persons who make “a claim for that tax credit for the next tax year or part of that tax year”, as was done, for example, in s.3(1) of the TCA 2002 with its reference to “entitlement to a tax credit for the whole or part of a tax year” (see also s.17(1) thereof).As to the policy intent, the purposes of the Welfare Reform Act 2012 include the replacement of tax credits (and other means-tested legacy benefits) by universal credit. Transitional protection typically has the effect that a claimant remains on an “old” benefit until he ceases to satisfy the relevant entitlement conditions, at which point he must make a claim for the “new” benefit (or not at all). It is entirely consistent with that approach that transitional protection ceased (and so the option of claiming the “old” benefit disappeared) once any entitlement to tax credits had terminated.

I would have followed the decision in RS (No.2) unless I had been convinced that it was wrongly decided. I am not so convinced and would have followed it as a matter of comity in any event. The argument that “for the next tax year” involves part of a tax year was rejected by Judge Wikeley and I reject it for the same reasons.

As Upper Tribunal Judge Church said in DB:

“10.

While FE is not binding on me, in the interests of comity and to avoid confusion on questions of legal principle, a single judge of the Upper Tribunal will normally follow the decisions of other single judges of the Upper Tribunal (see Dorset Healthcare NHS Foundation Trust v MH [2009] UKUT 4 (AAC) at [37]).

11.

In any event I agree wholeheartedly with Judge Wikeley’s analysis and nothing that the Appellant has said in his submissions persuades me that there is any good reason to depart from it. I adopt Judge Wikeley’s reasons as my own. For these reasons the Appellant’s arguments on interpretation fail.”

If it had been sought to challenge the correctness of Judge Wikeley’s decision, the correct course would have been to seek permission to appeal to the Court of Appeal in that case, not to revisit the argument in another case before the Upper Tribunal.