HMRC lose appeal against decision that refugee couple were entitled to backdated child tax credits

Lord Woolman

About this case:

• Citation:
  [2022] CSIH 2
• Judgment:
  External link
• Court:
  Court of Session Inner House
• Judge:
  Lord Woolman

The petitioners, Ali and Saima Adnan, were granted refugee status in 2019 after originally applying for asylum in 2013. They contended that HMRC’s decision was unlawful as it did not correctly implement the relevant legislation.

The appeal was considered by the Lord President, Lord Carloway, sitting with Lord Woolman and Lord Pentland. M Dailly, solicitor advocate, appeared for the petitioners and Maciver, advocate, for the reclaimers and respondents.

Entitled to universal credit

In 2013, the petitioners made their first application for asylum, which was refused and unsuccessfully appealed. They submitted further representations in 2018 which were accepted as a fresh claim by the Home Secretary and were granted refugee status on 4 October 2019. Following the receipt of formal confirmation of their status in December 2019, the petitioners made a successful claim for universal credit, which by that time had been rolled out across the whole of the UK.

The petitioners made a claim for child tax credit backdated to the date of their original asylum claim in January 2020. Their claim was refused by HMRC in March 2020, with a confirmation of that decision being issued the following September after a request for reconsideration.

After extensive correspondence between the parties, it was agreed that judicial review was the correct mode of challenge, and that if the petitioners’ arguments prevailed HMRC would determine whether they would receive child tax credits from the date of their original claim or the date of making fresh representations.

It was submitted for HMRC that Article 7 of the Welfare Reform Act 2012 (Commencement No. 23 and Transitional and Transitory Provisions) Order 2015 provided that a person could not make a claim for a tax credit once they became entitled to universal credit. However, the petitioners contended they were entitled to a claim under Regulation 3 of the Tax Credits (Immigration) Regulations 2003 on account of being recorded as refugees.

Three major difficulties

Delivering the opinion of the court, Lord Woolman began: “The attractive simplicity of [HMRC’s construction of the 2015 Order] runs into three major difficulties. First, it treats regulation 3 as being of no force or effect. The 2015 Order, however, did not (as HMRC accept) expressly revoke or repeal it. Indeed it did not refer to the 2003 Regulations at all.”

He continued: “Second, since the 2015 Order came into force, regulation 3 has been amended on three occasions: 10 March 2015, 20 July 2018, and 1 January 2021. HMRC submits that there remained a small pool of individuals who were entitled to claim tax credits until they were abolished on 1 February 2019. This only provides an explanation for amendments made before this date. They fail to explain why amendments were being made after this date to a redundant regulation.”

Lord Woolman concluded on this point: “Third, it yields an arbitrary result. A refugee’s ability to claim backdated child tax credit would turn on a random event - whether universal credit has been rolled out in a particular area. In other words, it would truly be a ‘postcode lottery’.”

Addressing an argument that Parliament could not have intended for refugees to continue to benefit from backdated claims, Lord Woolman said: “No material, whether in the nature of a policy statement, ministerial statement to Parliament or any travaux préparatoires, was cited in support of this contention. It is difficult to explain why article 7(8)(b) expressly excluded the backdating of other tax credit claims under the 2002 Regulations, but only did so implicitly in relation to regulation 3(6) claims.”

Noting the result of a recent English case, he concluded: “The Lord Ordinary’s decision [in this case] was followed in R (on the application of DK) v HM Revenue and Customs (2021). Bourne J did so on the broad ground of comity. He expressed some doubt about the conclusion. He queried why there had been no express exception for refugees’ tax credit claims in the 2015 Order. We understand the basis for his doubt, but for the reasons given above hold that the result is sound.”

The reclaiming motion was therefore refused.