[2025] UKUT 166 (AAC)

The claimant sought to argue that he was not eligible because he was in receipt of “other relevant childcare support” during a “relevant period”. In that regard he relied upon his award of the childcare element of WTC. Although the point does not in fact arise for decision in the light of what I have said above, like the Tribunal I will consider it for the sake of completeness.

In that respect I accept the submission of Mr Pritchard for HMRC that that analysis is flawed because the childcare element of WTC is not “other relevant childcare support”. “Other relevant childcare support” is defined as “any payments towards the costs of childcare which are made out of funds provided by a national authority…”.

In the first place, the childcare element of WTC, and indeed tax credits as a whole, are provided by HMRC and not a Minister. It therefore falls outside the scope of the definition of “other relevant childcare support”. In my judgment, HMRC is not a “national authority” as defined by s.13(3) of the 2014 Act for the reasons set out by Mr Pritchard, which I have set out in paragraph 85(b) and (c) above, which I do not need to repeat here. In summary, whilst S.5A of the MCA 1975 gives the Crown power to transfer certain functions to and from HMRC, that power does not make HMRC a Minister of the Crown and it clearly cannot affect tax credits because s.5A(3) specifically prohibits the transfer of certain of HMRC’s functions, including “the payment and management of tax credits for which the Commissioners of Inland Revenue were responsible before the commencement of this section”.

Mr Ellinson accepted that HMRC does not fall within the definition of a “Minister of the Crown”, but argued that tax credits (including the childcare element) are still support “provided” by a Minister of the Crown, as the definition included the Treasury. He accepted that HMRC administers the tax credits system, but that the Treasury still had ultimate responsibility for the design and policy decision-making of the system. That was exemplified by the fact that all substantive regulations for tax credits were made by the Treasury and not HMRC under s.65(1) of the TCA 2002. I do not accept that argument.

What is clear from s.2 of the TCA 2002 is that it is HMRC which is responsible for the payment and management of tax credits. S.28 goes on to provide that

“Overpayments

(1)

Where the amount of a tax credit paid for a tax year to a person or persons exceeds the amount of the tax credit to which he is entitled, or they are jointly entitled, for the tax year (as determined in accordance with the provision made by and by virtue of sections 18 to 21C), the Commissioners maydecide that the excess, or any part of it, is to be —

(a)

repaid to the Commissioners; or

(b)

treated as if it were an amount recoverable by the Secretary of State under section 71ZB of the Administration Act ...”

and by s.29

“Recovery of overpayments

(1)

Where an amount is liable to be repaid or paid by a person or persons under section 28, the Board must give him, or each of them, a notice specifying the amount”.

and it is HMRC which operates the penalty regime for tax credits. HMRC’s involvement therefore goes far beyond being a mere conduit for disbursing funds. In short, tax credits are “made out of funds provided by” HMRC, not by the Treasury.

I also accept Mr Pritchard’s submission which I have set out in paragraph 85(e) above that the Explanatory Notes accompanying s.13 of the 2014 Act accurately set out the position in giving an example of “other relevant childcare support” which is support paid by central government and which refer to s.13 as affecting “Government childcare support”:

Mr Ellinson submitted that it is nevertheless the Treasury which “provides” child tax credits because it is the Treasury which has “ultimate responsibility for the design and policy decision-making of the system”. That submission must fail in the light of s.2 of the TCA 2002, which makes it clear that it is HMRC which is responsible for the management of tax credits. In any event, the argument also fails because s.13(2) of the 2014 Act is not concerned with policy making, but rather with the entity which provides the funds out of which payments are made, which is HMRC.

Lastly, Mr Ellinson sought to rely on the rule-making power conferred by s.65(1) of the TCA 2002, but that power is narrowly circumscribed and does not assist him. It is not accurate to say that “all substantive regulations for tax credits are made by the Treasury, and not HMRC”. What s.65(1) of the TCA 2002 in fact provides is that

“Any power to make regulations under section 3, 7 to 13, 42 and 43, and any power to make regulations under this Act prescribing a rate of interest, is exercisable by the Treasury”.

Subsection (2) then provides that

“Any other power to make regulations under this Act is exercisable by the Board”.

Moreover, the determination of the maximum rate of the childcare element of WTC is provided for in s.12 of the TCA 2002 and in regulation 13 of the Working Tax Credit (Entitlement and Maximum Rate Regulations) 2002. Those provisions do not make Treasury responsible for the payment or management of tax credits; on the contrary, that is the responsibility of HMRC.

I also accept the submission made by Mr Pritchard as set out in paragraph 88 above, namely that, in terms of the statutory purpose of s.13, by ss.11-13 Parliament has enacted provisions which are intended to stop parents getting double government support for their childcare costs (s.11 excludes recipients of Universal Credit, s.12 excludes “relevant childcare schemes” and s.13 excludes recipients of “other relevant childcare support” (e.g. childcare vouchers)). The reason why those provisions do not address tax credits is because claimants on tax credits are not (and are not supposed to be) ineligible. Instead, the mechanism for stopping double government support in relation to tax credits is the automatic stop of tax credits applicable when a valid declaration for TFC is made (i.e. s.30).

I also accept that, consistently with the previous point, and as a matter of statutory construction, Parliament must have intended tax credits to fall outside the scope of “other relevant childcare support”.

That is because, as Mr Pritchard submitted, s.30 in its terms expressly envisages that a claimant can make a “declaration of eligibility” at a time when an award of a tax credit has been made. If the claimant is right, a person with a childcare element of WTC could never apply for TFC and there would therefore be no need for a statutory mechanism to terminate the tax credit award.

Moreover, if he is right, a recipient of the childcare element of WTC would necessarily be ineligible for TFC and would be unable to make himself eligible because there is no mechanism voluntarily to terminate a tax credit claim mid-year.

Finally, I am satisfied that Mr Pritchard is also correct to say that, prior to the introduction of Universal Credit, legislation envisaged that individuals might choose to switch between tax credits and TFC and that there were tax credit claimants in receipt of very low awards who were better off on TFC. Following a change in circumstances in which, for example, their income dropped considerably, the position would revert to tax credits being the most beneficial option.