Colleagues,

Here is a clip from the familiar s16 of the TCA 2002...

"16 Other revised decisions

1) Where, at any time during the period for which an award of a tax credit is made to a person or persons, the Board have reasonable grounds for believing-

(a) that the rate at which the tax credit has been awarded to him or them for the period differs from the rate at which he is, or they are, entitled to the tax credit for the period, or

(b) that he has, or they have, ceased to be, or never been, entitled to the tax credit for the period,

the Board may decide to amend or terminate the award."

My question is, do they have to be reasonable to start revision action, or do they only have to be reasonable at the point they alter/terminate the award? I say the former, if only because this distiguishes in year revisions/examinations from the random sampling enquiries, under s19 (similar to what they do with income tax etc). I suppose it boils down to at what point HMRC "believes" something is incorrect etc.

Para 4190 of the compliance manual gives me modest grounds for believing I am correct...

"CCM4190 - Opening the Examination: Post-Award Examinations - Conditions
S16 is more restrictive than S14, as it requires you to believe the award is incorrect before you issue a formal information notice. In practice this will make little difference, as all the cases you examine in-year will have been identified by CCRO staff on the basis of risk."

Then came along para 43 of CTC/4390/2004

"The tribunal’s approach was that there had been no change of circumstances to justify invoking section 16. That is not the test. It should have considered whether there were reasonable grounds to end F’s entitlement. It did not do so, and was therefore wrong in law in its decision."

What do you think?

Steve

I've probably got this completely wrong, but it seems to me that the wording of S. 16 is quite clear. They do an investigation of some kind (not covered by the clip you quote) as a result of which they have "reasonable grounds for believing". Then - using the clip you quote - they cancel or amend the award. So the reasonable bit comes in at the end.

I don't know under what provision they do the investigation but I would guess it is not constrained by the "reasonableness" test - otherwise they wouldn't be able to do random checks.

Hi Derek,

Thanks for your message. Do they do random checks 'in-year'? I have only come accross them in the context of enquiries etc, after the end of the year.

Steve

Steve

Good point - I don't know; like you I've only come across this after year end.

i've only come across 2 or 3 cases of in- year examinations, so they appear random-ish, numberwise, but "identified by CCRO staff on the basis of risk" suggests risk profiling of some kind as the basis of selection.

developments in 'fraud world' suggest 'profiling' is an increasingly favoured tool, and c'mon, the PM's ideas for identifying pre-natal 'anti-social behavioural problems'for early intervention, and his support for pre-emptive strikes generally, indicates a certain amount of momentum behind this approach. : )

it doesn't chime with the traditional views of justice, in which it is an individual's actions which are relevant, not what 'type' of person he is classified as, and maybe 'science' and law are set on a collision course, sooner or later, or maybe law will radically change?

i find it fascinating that the PM, a lawyer himself, married to a lawyer, and with a government consisting of probably more lawyers than ever before, displays at times such thorough disenchantment with the law. as a non-lawyer, i wonder what accounts for it... : )

practically, i suppose that an individual subjected to an 'audit' of their life by HMRC investigators (see the 'TC routine enquiry- thread) might find the demonstration of state power such an unpleasant experience that it might deter someone who is the 'type', from straying from the straight and narrow. the statistics might then 'prove' the effectiveness of the method...it all sounds a bit 'creationist' to me...<shudder>

at present, civil risk profiling is basically stratified on the basis of income, but presumably the national identitity registration scheme will allow for finer tuning and equalising...heh!

oh don't mind me - i shouldn't have listened to the foreign secretary being grilled by the ghost of Christmas Present on the radio this morning - Bah!

at least it highlighted the humbug in the 'predicted risk' approach, if applied to government. i suppose it boils down to the question is there one law for them and one law for everybody else? : )

The suggestion then is that the Revenue uses risk assessment in order to trigger 'in year' investigations/examinations (unless of course there is a specific report of a change of circumstances, or a third party report etc). I wonder if this risk assessing is actually 'reasonable' enough to trigger s16 activiity?

Take the sterotypical example of the lone parent, who may have had an Ad Pen before from the DWP for unreported working etc. The lone parent is now working. Lets say the individual receives an 'informal' Revenue letter, under the compliance procedures, and ignores the letter, as well as the subsequent invitation for a meeting. The next most likely thing would be a formal s16(2) information request. There is no right of appeal against the issue of this request. What happens then? Presumably the decision maker either gives up, or applies for a penalty to punish the claimant for ignoring the request. The claimant could appeal a penalty decision, but I do not see how failing to comply with an information request based on risk assessment would entitle the Revenue to terminate an award, unless the Revenue has 'reasonable gounds' for believing the award to be wrong etc.

I am getting lost in the fog. Its like watching LOST on the telly.

Happy Christmas.

Steve

I had a case where the claimant's daughter (for whom he had been claiming CTC) moved out and made her own claim (baby). She told TCO the date she had left FT education and TCO then amended claimant's CTC from that date and created a £4K+ overpayment! No query or consultation with the claimant at all! The daughter had got the date entirely wrong (or TCO recorded it wrongly). This (& various other issues) is with the Adjudicator's Office at present.

I mention this only as an illustration that I don't think TCO necessarily use S16(2) when coming to their conclusion that amending a claim under S16(1) is "reasonable". S16(2) seems to me to be even more restrictive than (1) - they have to believe, not just (as in (1)) have reasonable grounds for believing.

I agree they shouldn't amend or terminate unless they have reasonable grounds, but I suspect there are a variety of ways in which they arrive at the point where they conclude they do have such grounds.

Hi Derek,

Point taken. The case you refer to puts me in mind of the often repeated statement in the compliance manual, confirming the decision makers 'free standing' power to make decisions, if it wishes to, irrespective of the processes decribed for an investigation under compliance. These statements (from memory) often pop up when the Revenue envisages claimant reluctance to co-operate in compliance requirements.

The case you quote does not seem to have been subject to compliance measures. Maybe it should have, because proper scrutiny of the facts via the informal letter/meeting/formal letter system might have prevented the error (assuming there is one). Maybe the 'reasonableness' test is a bit of a paper tiger.

Steve

What it really boils down to is a claim can be subject to an examination / enquiry if there is a reason to believe it is wrong. The amending or terminating issue ( if appropriate ) depends on what happens after the examination / enquiry starts and where it leads to. There is no definitive answer as it depends on the facts of the individual case i.e. level of co-operation - additional information received - existing information held etc.