When you install CPAN modules the installer typically runs tests for the module before installing it.
In this case, one of the tests that is run is a test that checks if the in-module documentation is correct; and this fails because it can not recognize the character set. It's really nothing you should worry about too much as this has nothing to do with the code itself.
The best thing to do is to 'force install' the module:
cpan> force install XML::Tidy
This will still run the test suite, but installs, even if one of the tests is not passing.
BTW I created an RT ticket with a patch to fix this issue: https://rt.cpan.org/Ticket/Display.html?id=85592