Good law, bad law

I’ve just finished a judging stint at the Rolls Building.  One of the things I did was to set aside a decision of the First-tier Tribunal on a tax credits appeal.  The tribunal had no jurisdiction to hear the claimant’s appeal but went ahead and heard it anyway.

Tax credits, although they don’t have anything to do with tax, are delivered through the tax system and are therefore administered by HMRC.  I get the feeling that HMRC may be out of their depth in the unfamiliar world of claimants rather than taxpayers but at least they don’t call claimants ‘customers’.

In my case the claimant’s appeal was made in September 2012 against a decision on tax credits notified to him by HMRC on 15 August 2011.  The appeal was therefore well outside the 30 day time limit in section 39 Tax Credits Act 2002.  HMRC purported to extend that time limit under regulation 5 of the Tax Credits (Appeals) (No. 2) Regulations 2002 and, guess what, they had no power to do so.

In JI v HMRC Upper Tribunal Judge Rowland set out his reasons for concluding that from 3 November 2008 the First-tier Tribunal had lost the power to extend the 30 day time limit in section 39 Tax Credits Act 2002 and from 1 April 2009 HMRC could not do so either.  This left a claimant who was outside the 30 day period with no right of appeal.

How did this happen?  The short answer is, it was a drafting ****-up caused by the complexity of the subject-matter.  Believe me, some of the benefits legislation makes the Finance Acts look like they were written by Enid Blyton.  For the long answer see paragraphs 26 to 46 of Judge Rowland’s decision where he sets out the labyrinthine detail of how the relevant provisions were unintentionally amended out of existence.  It makes you wonder if anyone has got a grip on the process.

In 2013 the Office of the Parliamentary Counsel and the Cabinet Office commissioned a report on ‘When laws become too complex‘ in which it was stated that:

‘while users would like legislation that is simple, accessible, easy to comply with and not unnecessarily burdensome, at present those are not the features of modern legislation’ …

As a consequence the good law initiative was launched.  I wish it well but look what they have to contend with.  As Judge Rowland said in JI:

‘The power to extend the time limit in the 2002 Act [the Tax Credits Act 2002] was to be found in subordinate legislation made under a different Act, which Act was modified by subordinate legislation made under the 2002 Act.  In this case, the complexity of the legislation has led to it being misunderstood by HMRC … and Government lawyers charged with drafting amending legislation.’

The Tax Credits (Late Appeals) Order 2014 to an extent corrected the position.  The Order made provision for HMRC to allow late appeals.  Article 2(3) provides that a new section 39A Tax Credits Act 2002 validates any decision by HMRC to allow a late appeal but only where that appeal was made on or after 1 April 2013 and before 2 April 2014 (the date the Order entered into force).

In my case, as the claimant’s late appeal was made before 1 April 2013, the Order did not help him.  He had lost his right to contest HMRC’s decision.  The tribunal had no jurisdiction to hear his appeal and, in so doing, they erred in law.

As for the good law initiative, the old joke about the psychiatrists and the light bulb springs to mind:

Q: How many psychiatrists does it take to change a light bulb?

A: Only one, but the bulb has got to really WANT to change

Well we’ll have to see what happens.  Meanwhile, back to the day job.

Tax lawyer specialising in business tax, SDLT and VAT