​Thousands could appeal for backdated cash after judges declare ministers were wrong to impose sanctions on thousands of claimants

Appeal Court judges have declared sanctions imposed on thousands of benefit claimants were implemented unlawfully.

Judges upheld a High Court decision after the government passed a new law to make the sanctions legal.

Government ministers argued that the new law also retroactively applied to people whose sanctions had been imposed before the law was passed but the judges disagreed.

It could pave the way for millions in refunds to people who had their incomes cut while they were unemployed.

Sanctions had originally been ruled unlawful because a court said the government had not provided sufficient information to claimants on how to make representations before benefits were stopped.

It is up to the government, subject to any further appeal, to decide what action to take in response

University graduate Cait Reilly, from Birmingham, first brought the challenge after having to work without wages at a local Poundland outlet.

Lord Justice Underhill for the Court of Appeal concluded: “We have … held that in the cases of those claimants who had already appealed against their sanctions the Act was incompatible with their rights under the European Convention on Human Rights.

“Under the Human Rights Act that 'declaration of incompatibility' does not mean that the 2013 Act ceases to be effective as regards those claimants; it is up to the government, subject to any further appeal, to decide what action to take in response.”

Last month the DWP also lost a legal challenge to keep problems with Universal Credit under wraps after a freedom of information request from campaigners.

A spokesperson for the DWP said: “It's only right that jobseekers do all they can to find work while claiming benefits. We are considering the judgment.”