The claimant was in receipt of tax credits under the Tax Credits Act 2002. During the Covid-19 pandemic she travelled to Spain on several occasions, intending a short stay of a few weeks, but on each occasion her return to the United Kingdom was delayed by circumstances beyond her control including difficulties relating to the pandemic such as the need to quarantine and problems with cancelled flights. As a result, on her first visit she was outside the UK for more that the eight-week temporary absence allowed for by regulation 4(1) of the Tax Credits (Residence) Regulations 2003, which prescribed the period of absence during which a person who was ordinarily resident in the UK could continue to be treated as being “in the United Kingdom”. Since being in the UK was a condition of entitlement to tax credits under section 3(3) of the 2002 Act, after the claimant’s first visit to Spain the revenue decided that she was no longer entitled to tax credits from the end of the eight-week period. That decision was confirmed on mandatory reconsideration and the claimant’s appeal was dismissed by the First-tier Tribunal, which held that a person could not be treated as being “in” the UK following a period of temporary absence in excess of eight weeks regardless of the reasons for that absence. On the claimant’s further appeal, evidence was adduced that the revenue considered itself to have power, in exceptional cases, to waive or disapply the requirements of the 2002 Act as to when a tax credit ought to be paid.
On the appeal—
Held, appeal dismissed. The eight-week rule in regulation 4(1) of the Tax Credits (Residence) Regulations 2003 was clear in providing that the first eight weeks of any period of absence from the UK was to be disregarded, regardless of the reason for that absence, but that any period of absence beyond eight weeks (other than in certain cases of medical treatment abroad, not applicable in the present case, where a longer 12-week period was permitted) would mean that the person had ceased to be in the UK, again regardless of the reason for the absence. The eight-week rule did not provide for exceptions or extensions by reference to the Covid-19 pandemic and there had been no legislative “easement” or amendment to the rule for any period of that pandemic. The First-tier Tribunal had therefore been correct, on the basis of the arguments presented to it, to conclude that it had to apply the eight-week rule strictly with the result that it had to uphold the revenue’s decision that the claimant had ceased to be entitled to any form of tax credit on the expiry of the eight-week period (paras 3, 31, 32).
Per curiam. While the revenue has a discretion deriving from its general statutory functions in relation to the care and management of tax collection, the discretion is circumscribed and is to be used for essentially managerial purposes with the overall intention of obtaining the best net tax return. Accordingly, the revenue is not entitled to exercise a general dispensing power as to what taxes ought or ought not to be collected. Moreover, the present case is concerned not with the collection of tax but rather with the payment of a benefit or allowance in the form of tax credits, entitlement to which is subject to specific statutory conditions, as is the power of the revenue to make such payments. Further, in so far as section 2 of the 2002 Act provides powers as to the management and payment of tax credits, the concept of “payment” of tax credits in that section means payment in accordance with, rather than outwith, the statutory scheme and the concept of “management” in section 2 does not extend to disregarding or overriding the statutory conditions. Accordingly, although the issue falls outwith the present appeal, it is doubtful whether the revenue has the power which it asserts to “override” statutory conditions as to eligibility for tax credits in “exceptional circumstances” (paras 35, 36, 43, 44, 47, 48).
The claimant did not appear and was not represented.
Rachel Dixon, solicitor (instructed by Solicitor’s Office and Legal Services, HM Revenue and Customs) for the revenue.