Outer House finds HMRC wrong to refuse claim for backdated child tax credits by refugee couple

A judge in the Outer House of the Court of Session has found that a married couple who were granted refugee status are entitled to a reduction of a decision by the tax authority not to accept their claim for backdated child tax credits.

Ali and Saima Adnan were granted refugee status in October 2019 after initially applying for asylum in February 2013. They sought judicial review of the decision by HM Revenue and Customs to refuse their claim for child tax credit and declarator that it had acted ultra vires.

The petition was heard by Lord Tyre. The petitioners were represented by M Dailly, solicitor advocate, and the respondents by G MacIver, advocate.

Applied to ordinary claimants

Following a fresh asylum application in 2018 and their receipt of formal notification of their refugee status, the petitioners successfully applied for Universal Credit in December 2019. It was their position that, having been granted refugee status, they had entitlement to tax credits under the old system as if they had applied at the time that they submitted their asylum claim under the provisions of the Tax Credits (Immigration) Regulations 2003.

The process of making a back-dated application in the transition period between welfare regimes was regulated by article 7 of the Welfare Reform Act 2012 (Commencement No 23 and Transitional and Transitory Provisions) Order 2015. It was the position of the petitioners that these provisions applied only to the “ordinary” tax credit claimants and not to asylum seekers.

Counsel for the petitioners submitted that as at the dates of their original and fresh claims for asylum, the petitioners could not have applied for Universal Credit and so article 7 of the Commencement No 23 Order did not exclude entitlement to child tax credits. Their entitlement to claim tax credits under the 2003 Regulations had been preserved and article 7 did not operate to disentitle them.

It was further submitted that under section 16 of the Interpretation Act 1978 there was a presumption against the repeal of their right to claim child tax credits without express statutory provision to that effect. In this case, Parliament had not intended to remove this right, a claim which was supported by its amendment of the 2003 Regulations after the enactment of the Commencement No 23 Order.

On behalf of HMRC it was submitted that where the Universal Credit provisions applied to a person because they had the ability to make such a claim in an area where those provisions had been rolled out, as was the case for the petitioners, they were prevented from making a claim for legacy benefits, including child tax credit. The removal of their ability to make a backdated claim was a consequence of the replacement of the legacy benefits system.

Not sought to amend special rules

In his decision, Lord Tyre noted: “The critical point of dispute is whether the terms of article 7(1)and (8) of the Commencement No 23 Order entirely exclude the possibility of a claim being made under regulation 3(5)(a) of the 2003 Regulations to which the backdating in regulation 3(6) is capable of applying.”

Examining the statutory provisions in detail, he went on to say: “The argument presented on behalf of HMRC depends upon a distinction being drawn between entitlement to tax credit on the one hand and the possibility of ‘making a claim’ for tax credit on the other, with the latter having been cut off by the prohibition in the opening words of article 7(1) read together with article 7(8)(a).”

On whether the provisions relied upon the petitioners had been disapplied by the Order, the judge said: “Regulation 3(6) treats the petitioners as having claimed tax credits on the date of their claim for asylum and on every subsequent 6 April. I find no reason to treat that deeming provision as overridden by article 7 of the Commencement No 23 Order. In my opinion the opposite interpretation is preferable: because the petitioners’ claim is treated as having been made on the dates specified in regulation 3(6), they simply fall outside the prohibition in article 7(1).”

Turning to Parliament’s amendment of the Regulations, he continued: “In technical provisions of such complexity, this cannot in my view be dismissed as a ‘lacuna’. It is rather an indication that Parliament has not sought, in the transitional provisions for the introduction of Universal Credit, to amend the special rules relating to claims for tax credits by asylum seekers, and in particular has not sought to interfere with the scheme in the 2003 Regulations whereby persons seeking asylum as refugees were excluded from entitlement to certain credits unless and until their refugee status was confirmed, at which time a backdated claim could be made.”

He concluded, examining the effect of the Interpretation Act: “It does not seem to me that the petitioners’ argument based on section 16 of the Interpretation Act 1978 adds much. I have held that there is no statutory provision removing the entitlement to backdated tax credits that accrued to them when they obtained refugee status and made a timeous claim.”

For these reasons, the petition was granted. Lord Tyre added: “I am advised that HMRC will wish to consider whether any entitlement to tax credits that the petitioners may have goes no further back than 20 January 2018 when they made the fresh claim that was accepted. The petitioners’ claim will therefore now have to be determined afresh by HMRC, with regard being had to my decision in these proceedings.”

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