UK Social Security and Child Support Commissioners' Decisions

 


R(CS) 3/00


Mr. J. Mesher CCS/3542/1998
1.12.99

Maintenance assessment - calculation of net income - whether contributions under a retirement annuity contract deductible as an expense - whether use of capital to make lump sum pension scheme contributions capable of constituting deprivation - whether the rule in CAO v. Hogg can be applied to income from rented property

The parent with care of the qualifying child appealed to a child support appeal tribunal against the amount of child support maintenance which the child support officer, in a decision of 13 June 1997, had found the absent parent was liable to pay with effect from 27 February 1997. The tribunal allowed the appeal and gave directions to the child support officer for reassessment. The parent with care appealed to the Commissioner.

Some of the issues raised on the appeal concerned payments which the absent parent, who was in employed earner's employment but not a member of an occupational pension scheme, was making to provide for his retirement under both a retirement annuity contract and a personal pension policy. During the course of 1996, in addition to the regular payments due, he made additional lump sum payments into both schemes. The tribunal held that all these payments were to be taken into account in the calculation of the absent parent's net income as allowable deductions from earnings. The parent with care contended that (a) the payments under the retirement annuity contract should not have been allowed as a deduction; and (b) the tribunal should have considered whether, in making the additional lump sum payments under both schemes, the absent parent had deprived himself of capital which would otherwise be a source of income.

Another issue concerned house property owned by the absent parent from which he obtained a rental income. The tribunal held that, in taking this into account in the calculation of his net income, deductions should be made in respect of the cost of water rates, buildings insurance premiums and maintenance expenses relating to the property. The parent with care contended that only the water rates were properly allowable as a deduction.

Held, allowing the appeal, that:

contributions under a retirement annuity scheme can be deducted from the earnings of an employed earner under paragraph 1(3)(c) of Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 ('the MASC Regulations'). The definition of 'personal pension scheme' in Regulation 1(2) of the MASC Regulations adopts, in relation to employed earners, the definition in section 1 of the Pensions Schemes Act 1993, i.e. a scheme which provides 'benefits in the form of pensions or otherwise payable on death or retirement'. An annuity payable under a retirement annuity contract constitutes a pension for the purpose of this definition (para. 13);

the tribunal erred in law in failing to consider whether the lump sum pension contributions additional to those required under the terms of the schemes constituted a deprivation of capital for the purpose of paragraph 27 of Schedule 1 to the MASC Regulations. The use of capital on a form of expenditure which is allowable as a deduction in the calculation of net income may constitute a deprivation of capital (para. 18);

in considering whether income from capital should be taken into account under paragraph 27 of Schedule 1 to the MASC Regulations, the intention which has to shown is one to reduce income which might be relevant to a child support assessment which is being made or is reasonably expected to be made. In the interpretation of the phrase 'with a view to reducing the amount' it might be relevant that cases on the phrase 'with a view of' in the now repealed section 44 of the Bankruptcy Act 1914 have held that that phrase required it to be established what the person's dominant intention was (para. 19);

the only items deductible from rental income in the calculation of a parent's net income are those specified in paragraph 23 of Schedule 2 to the MASC Regulations. In calculating income (such as rental income) which falls to be taken into account under paragraph 15 of Schedule 1 to the MASC Regulations, it is not possible to apply any principle analogous to that applied in the context of a different provision by the Court of Appeal in CAO v. Hogg [1985] 1 WLR 1100 i.e. that any expenditure necessarily incurred in the obtaining of an income can be deducted in calculating the amount to be taken into account. The use in paragraph 15 of the phrase 'payments or other amounts received' indicates that it is the gross receipts that are to be taken into account, subject to any disregard provided for in Schedule 2. The suggestion to the contrary in decision CCS/5310/1995 disapproved (para. 23).

The Commissioner remitted the case to an appeal tribunal for determination in accordance with his directions.

DECISION OF THE CHILD SUPPORT COMMISSIONER

1. The parent with care's appeal is allowed. The decision of the Preston child support appeal tribunal dated 1 December 1997 is wrong in law, for the reasons given below, and I set it aside. The case is referred to a differently constituted appeal tribunal for determination in accordance with the directions given in paragraph 30 below (Child Support Act 1991, section 24(3)(d), as amended by Schedule 7 to the Social Security Act 1998).
2. This appeal stems from the child support officer's (CSO's) decision of 13 June 1997 making the absent parent liable to pay child support maintenance of £106.93 per week in respect of the qualifying child (Robert) with effect from 27 February 1997. Robert was born on 10 October 1996. The application for a maintenance assessment was made on 13 November 1996. The maintenance enquiry form (MEF) was issued to the absent parent on 2 January 1997. The parent with care applied for review of the CSO's decision, which was refused by a second CSO on 30 July 1997. It was her appeal against that decision which was before the appeal tribunal.
3. The appeal tribunal allowed the appeal and in its decision notice set out five directions for the CSO who was to deal with the case on its remission. Most of those were on uncontroversial points put forward in the CSO's written submission to the appeal tribunal. The chairman prepared a full statement of findings of fact and reasons, to which, after an application by the absent parent for a correction, was added what was in effect a sixth direction about rental income of the absent parent.
4. The parent with care now appeals, with my leave, against the appeal tribunal's decision. Following the exchange of lengthy written submissions, an oral hearing was directed. The parent with care attended and was represented by her father (who I shall refer to as "the representative"). The absent parent did not attend. The Secretary of State (who took over the functions of CSO's with effect from 1 June 1999) was represented by Miss C. Goldburg, of counsel. I am grateful to all those present for their assistance, and record that sight was not lost of the interests of the absent parent.
5. At the oral hearing, four issues remaining in dispute were helpfully identified. I shall deal with each of those in turn, giving enough of the background to enable my decision to be understood, rather than attempting to describe the previous course of the case in any detail. There are first two issues to do with "pension" contributions made by the absent parent; whether the type of contributions made fell within paragraph 1(3)(b) or (c) of Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (the MASC Regulations) and whether paragraph 27 of Schedule 1 needed to be considered in relation to one-off lump sum contributions. The third issue is to do with the calculation of the amount of rental income to be taken into account under paragraph 15 of Schedule 1 and paragraph 23 of Schedule 2 to the MASC Regulations. The fourth issue is to do with the possible application of paragraph 27 of Schedule 1 to the absent parent's interest in the rented property and to the buying of a new home on an increased mortgage.

Pension contributions and retirement annuity contracts

6. The appeal tribunal accepted the absent parent's evidence on the contributions made. He made regular contributions of £70 per month under a Scottish Widows retirement annuity contract, and also made additional lump sum contributions (£2,000 in 1996, in October). He also had a personal pension policy with Friends Provident requiring a regular annual premium of £1,000. He had made an additional premium payment of £700 in January 1996. The absent parent was an employee under a contract of employment. He was not self-employed. The representative submitted that consequently none of the contributions under the retirement annuity contract could be deducted in calculating the absent parent's net earnings. I have no hesitation in rejecting that submission, but the route through the legislation is obscure.
7. The starting point is paragraph 1(3) of Schedule 1 to the MASC Regulations, which identifies the deductions which are be made from the gross earnings of a parent who is an employed earner. The deductions include:

"(b) one half of any sums paid by the parent towards an occupational pension scheme;

(c) one half of any sums paid by the parent towards a personal pension scheme, or, where that scheme is intended partly to provide a capital sum to discharge a mortgage secured upon the parent's home, 37.5 per centum of any such sums."

Paragraph 3(3), on earnings from employment as a self-employed earner, requires the deduction of:

"(e) one half of any premium paid in respect of a retirement annuity contract or a personal pension scheme, or, where that scheme is intended partly to provide a capital sum to discharge a mortgage or charge secured upon the parent's home, 37.5 per centum of the contributions payable."

8. Regulation 1(2) of the MASC Regulations contained the following definitions at the relevant time, which apply in the regulations unless the context otherwise requires:

" 'occupational pension scheme' has the same meaning as in section 66(1) of the Social Security Pensions Act 1975;

'personal pension scheme' has the same meaning as in section 1 of the Pension Schemes Act 1993 and, in the case of a self-employed earner, includes a scheme approved by the Inland Revenue under Chapter IV of Part XIV of the Income and Corporation Taxes Act 1988;

'retirement annuity contract' means an annuity contract for the time being approved by the Board of Inland Revenue as having for its main object the provision of a life annuity in old age or the provision of an annuity for a partner or dependant and in respect of which relief from income tax may be given on any premium;"

9. Section 66(1) of the Social Security Pensions Act 1975 defined "occupational pension scheme" as:

"any scheme or arrangement which is comprised in one or more instruments or agreements and which has, or is capable of having, effect in relation to one or more descriptions or categories of employments so as to provide benefits, in the form of pensions or otherwise, payable on termination of service, or on death or retirement, to or in respect of earners with qualifying service in an employment of any such description or category;"

The definition is exactly the same in section 1 of the Pension Schemes Act 1993, which from January 1988 has been referred to in the MASC Regulations. That section defines "personal pension scheme" as:

"any scheme or arrangement which is comprised in one or more instruments or agreements and which has, or is capable of having, effect so as to provide benefits, in the form of pensions or otherwise, payable on death or retirement to or in respect of employed earners who have made arrangements with the trustees or managers of the scheme for them to become members of it;"

Chapter IV of Part XIV of the Income and Corporation Taxes Act 1988 (ICTA) deals with the approval of personal pension schemes. Chapter III of Part XIV deals with retirement annuity contracts.

10. The representative's first submission was that, because the definition of personal pension scheme in regulation 1(2) of the MASC Regulations contained the specific extension for the self-employed (which he said extended the definition to include retirement annuity contracts for that purpose), the definition did not cover retirement annuity contracts for employed earners. But that was based on a misunderstanding, that Chapter IV of Part XIV of ICTA was to do with retirement annuity contracts. It is not. It is Chapter III which deals with such contracts. Chapter IV is about the approval of personal pension schemes. The explanation for the extension of the definition of personal pension scheme in the MASC Regulations is this. The basic definition refers on to the definition in section 1 of the Pension Schemes Act 1993, which is restricted to schemes for the provision of benefits to employed earners. Therefore, in order to include personal pension schemes set up by self-employed earners, a specific provision was necessary. The definition is, though, misleading in form. In effect there is one exclusive definition for employed earners and one for the self-employed, and it is not really a matter of extending the basic definition at all.
11. The representative accordingly fell back on the submission that, as paragraph 3(3)(e) of Schedule 1 to the MASC Regulations (on the self-employed) specifically refers to premiums under retirement annuity contracts in addition to premiums under personal pension schemes, the reference in paragraph 1(3)(c) (on employed earners) to sums paid towards personal pension schemes excludes premiums under retirement annuity contracts. That approach was supported in the CSO's written submission dated 4 February 1999, and that support was maintained by Miss Goldburg at the hearing, although she acknowledged the force of the argument to the contrary. The absent parent submitted, in his observations dated 2 March 1999, that paragraph 1(3)(c) covers contributions under retirement annuity contracts as well as contributions under personal pension schemes. He pointed out that before 1 July 1988 retirement annuity contracts represented the only tax deductible method of making pension provision for employed earners who did not have access to an occupational scheme, and it would be odd if contributions under contracts made before that date could not be deducted for child support purposes, while contributions to personal pension schemes started after that date had to be deducted.
12. The child support context may well be one where some unfairnesses and oddities have to be accepted if they result from the words of the legislation. However, on the particular point, the representative's submission for the parent with care is flawed. There is a reason why there has to be a specific reference to retirement annuity contracts in paragraph 3(3)(e) of Schedule 1 to the MASC Regulations. As explained in paragraph 10 above, the definition of personal pension scheme for the self-employed only extends to schemes which are approved under Chapter IV of Part XIV of ICTA. The bulk of such schemes will be personal pension schemes set up on or after 1 July 1988 (although possibly some pre 1 July 1988 schemes were amended so as to be capable of approval). If contributions by the self-employed to continuing retirement annuity contracts (which were allowed to continue to operate after 1 July 1988 if then in existence) were to be deductible for child support purposes, an express provision had to be inserted in paragraph 3(3)(e). In my judgment, the existence of that express provision does not indicate that there should be any limitation of the ordinary meaning of the definition of personal pension scheme in cases of employed earners.
13. That definition, adopting the definition in section 1 of the Pension Schemes Act 1993, is in very wide terms. A retirement annuity contract comes within its terms if it provides benefits which are "benefits, in the form of pensions or otherwise, payable on death or retirement". Miss Goldburg submitted that retirement annuity contracts and personal pension schemes were different animals, and that a contributor gets different things from the different schemes. However, the basic benefit under both retirement annuity contracts and personal pension schemes approved under Part IV of Chapter XIV of ICTA is an annuity (see section 620 of ICTA on retirement annuity contracts and sections 630(1) and 633(1) on personal pension schemes). Such an annuity is plainly a pension for the purposes of the definition in section 1 of the Pension Schemes Act. As the title of Chapter III of Part XIV of ICTA, and more importantly the conditions for approval in section 620(2) and (4), makes clear, approved retirement annuity contracts provide for such pensions on retirement, and may do so on death. Such contracts are plainly within the definition of personal pension scheme in the case of employed earners. I add that a retirement annuity contract does not come within the definition of "occupational pension scheme" for the purposes of the MASC Regulations because its benefits are not dependent on the completion of any qualifying service as an employee.
14. Accordingly, the appeal tribunal did not err in law in directing that all the absent parent's pension contributions, subject to verification, be taken into account in calculating his net earnings under paragraph 1 of Schedule 1 to the MASC Regulations. That conclusion is without prejudice to the possible operation of paragraph 27 of Schedule 1, discussed immediately below, which does not directly affect the calculation under paragraph 1.

Pension contributions and paragraph 27 of Schedule 1 to the MASC Regulations

15. Before the appeal tribunal the representative had submitted that contributions made by the absent parent in addition to the regular contributions which he was contractually obliged to make should not be deducted. The absent parent gave evidence that he had always organised his contributions in this way as it was more economic to make lump sum contributions when he could afford to, at appropriate points in the tax year. The appeal tribunal dealt with this by saying in its reasons that it accepted that:

"provided the pension is legitimate and payments made in a permitted manner, the law does not make any further indication in respect of enquiry into reason for voluntary payment. We did not regard [the absent parent's] account of his payments as unreasonable."

16. On appeal, the representative has submitted that the appeal tribunal failed to consider, either at all or at least properly, paragraph 27 of Schedule 1 to the MASC Regulations on intentional deprivation of capital:

"27. Subject to paragraphs 28 to 30, where the child support officer is satisfied that, otherwise than in the circumstances set out in paragraph 26, a person has intentionally deprived himself of-

(a) any income or capital which would otherwise be a source of income;

(b) any income or capital which it would be reasonable to expect would be secured by him,

with a view to reducing the amount of his assessable income, his net income shall include the amount estimated by a child support officer as representing the income which that person would have had if he had not deprived himself of or failed to secure that income or, as the case may be, that capital."

Neither paragraphs 28 to 30 nor paragraph 26 are relevant in the present case.

17. The CSO has submitted in writing that if the pension contributions were allowable as deductions under paragraph 1(3)(c) of Schedule 1, the capital used for them could not fall within paragraph 27, because they were specified as not being income. Miss Goldburg submitted that it would be incongruous if paragraph 27 applied.
18. On this point I accept the representative's submission. If paragraph 27 operates in the present circumstances, it would not treat the additional pension contributions as part of the absent parent's income or as not deductible under paragraph 1(3)(c). It would treat the absent parent as in receipt of the income which would have been received from the capital if it had not been spent on the contributions. I do not find it at all incongruous that that effect should be possible. An obvious method of depriving oneself of capital so as to reduce assessable income is to use capital on expenditure which is deductible from earnings or income under other provisions of the MASC Regulations. In my judgment, the appeal tribunal's consideration of the point was too general and unfocused. It should have specifically considered paragraph 27 and made findings on the tests under that paragraph. The appeal tribunal went wrong in law in failing to do that.
19. However, it should be stressed that the conditions for the application of paragraph 27 are strict, although it is not very helpfully drafted. Where capital is spent it is almost inevitable that the person has intentionally deprived himself of the capital. In the case of a lump sum contribution under a personal pension scheme or a retirement annuity contract (which will normally be made out of capital, in the form of savings from past income), the contribution goes to increase the value of the person's rights under the scheme or arrangement, but there has been a deprivation of the capital in a form in which it could immediately yield income. The crucial factor is whether or not that deprivation was "with a view to reducing the amount of his assessable income". That makes the test the person's intention, which can be determined on direct evidence or by inference from all the circumstances of the transaction constituting the deprivation. I have not had any detailed submissions on this point, but, for the guidance of the new appeal tribunal I should say that my view is that the intention which has to be shown is to reduce income which might be relevant to a child support assessment which is being made or is reasonably expected to be made. That makes the timing of any deprivation important. I also draw attention to the authority on a similar phrase ("with a view of") in the now-repealed section 44 of the Bankruptcy Act 1914, on when a fraudulent preference was given to one creditor over others. It was held that that phrase required it to be established what the person's dominant intention was (e.g. Peat v. Gresham Trust Ltd [1934] AC 252, Re Cutts (a bankrupt) [1956] 1 WLR 728 and Re FLE Holdings [1967] 1 WLR 1409).

Rental income

20. The absent parent (or the absent parent and his new partner jointly: see below) received £400 per month from the letting of a house. The absent parent had recorded this on his MEF, where he said that the rent was paid to both himself and his partner. The CSO in calculating the assessment under appeal included the £400 as part of the absent parent's income, but deducted from it the cost of water rates for the property, buildings insurance premiums and maintenance costs. The appeal tribunal (subject to the question of the split of the income) said that the rental income had been appropriately taken into account.
21. On appeal, the representative submitted that the deductions went beyond those allowed under paragraph 23 of Schedule 2 to the MASC Regulations. That view was supported by the CSO and by Miss Goldburg at the oral hearing. The absent parent submitted that the expenditure deducted was necessary to enable the rental income to be received and was allowed for tax purposes. On this point I accept the submissions of the representative and the CSO/Secretary of State.
22. The rental income was to be taken into account under paragraph 15 of Schedule 1 to the MASC Regulations as "any other payments or amounts received on a periodical basis which are not otherwise taken into account under Part I, II, IV or V of this Schedule". Schedule 2 sets out amounts to be disregarded when calculating net income and includes:

"23. Where a parent, who is not a self-employed earner, is in receipt of rent or any other money in respect of the use or occupation of property other than his home, that rent or other payment to the extent of any sums which the parent is liable to pay by way of-

(a) payments which are to be taken into account as eligible housing costs under sub-paragraphs (b), (c), (d) and (t) of paragraph 1 of Schedule 3 (eligible housing costs for the purposes of determining exempt income and protected income) and paragraph 3 of that Schedule (exempt income: additional provisions relating to housing costs);

(b) council tax payable in respect of that property;

(c) water and sewerage charges in respect of that property."

Paragraph 1(b) of Schedule 3 applies to mortgage interest and the other subparagraphs apply to other sorts of loans. Paragraph 3 of Schedule 3 extends the category of eligible loans and also covers premiums on insurance and personal pension policies taken out to discharge mortgages or charges.

23. The deductions approved by the appeal tribunal were clearly not authorised by paragraph 23 of Schedule 2 to the MASC Regulations, apart from the water rates. The expenditure on buildings insurance and maintenance could only be taken into account if the principle mentioned in paragraphs 11 and 12 of Commissioner's decision CCS/5310/1995 were applicable. It was there suggested that expenses necessarily incurred in obtaining rent might be deductible by analogy with the decision of the Court of Appeal in Chief Adjudication Officer v. Hogg [1985] 1 WLR 1100 [also reported as an appendix to R(FIS) 4/85] (often also cited as Parsons v. Hogg). The Commissioner did not have to decide the point in that case. With respect to him, I do not agree with the suggestion. I do not find much assistance in the fact that Schedule 1 is concerned with calculating a final figure labelled "net income". In my view, the words of paragraph 15, referring to payments or amounts "received", give a clear indication that gross receipts are to be counted (subject to Schedule 2) and make the context quite different from that in which Hogg was determined. That is consistent with the view I have taken in the past about income other than earnings under the income support legislation (CIS/563/1991). I conclude that the only amounts to be deducted from gross rental receipts are those authorised by Schedule 2, and in particular paragraph 23. If it is thought that that result is unfair or unreasonable by comparison with the tax treatment of rental income, that does not allow me to ignore or disapply the plain words of the child support legislation.
24. Accordingly, the appeal tribunal was wrong in law in accepting the deductions made in calculating the absent parent's rental income in the assessment under appeal, and possibly also in not investigating whether the absent parent had incurred any expenditure on council tax on the rented property. It is not clear whether the absent parent had ever been asked about that.
25. The appeal tribunal also went wrong in law in its direction about whether the rental income belonged solely to the absent parent or jointly to him and his partner. The absent parent had raised the point that the whole £400 per month had wrongly been attributed to him at the hearing. The representative is recorded as having submitted that there should be verifying evidence. I think that that must have referred to his point that at some time in divorce proceedings the absent parent became the sole beneficial owner of the rented property, but later transferred it back to the joint names of himself and his partner (his wife in the divorce proceedings). The appeal tribunal initially said nothing about this, but in the corrected statement included the following:

"We also direct that evidence should be obtained of split rental income between [the partner] and [the absent parent] for the property they jointly own, and, if appropriate, should take this proportioned income into account."

The chairman was obviously in some difficulty in dealing with this point after it had been omitted initially. There were errors of law, in that there was no sufficient explanation of that direction and the delegation of the decision to the CSO was improper, as submitted by the CSO in paragraph 18 of the written submission of 4 February 1999. I do not need to go into the details of the evidence now put forward on behalf of the parent with care, as all that will have to be explored by the new appeal tribunal. Paragraph 16(1) of Schedule 1 to the MASC Regulations must be borne in mind in identifying the dates at which the amount of rental income received by the absent parent is relevant.

Paragraph 27 of Schedule 1 to the MASC Regulations, the purchase of a new home and the rented property

26. On this issue, the representative's main submission was that the appeal tribunal ought to have considered and ruled on the application of paragraph 27 to the increase of the absent parent's and partner's mortgage from about £47,000 to £80,000 in November 1996 on their purchase of a new home. The CSO, in paragraph 20 of the written submission of 4 February 1999, accepted that this issue was before the appeal tribunal and should have been expressly dealt with, but submitted that mere inappropriate expenditure did not fall within paragraph 27. An increased expenditure did not deprive the absent parent of any income. Nor, unless mortgage repayments are made out capital, does it deprive the absent parent of capital. I would not be prepared to find that the appeal tribunal had erred in law by merely saying on this point that "in respect of lifestyle, a Departure application has been submitted and the matter is proceeding independently"
27. In the appeal to the Commissioner (para. 13 of the observations dated 30 March 1999), the representative has raised the point that the absent parent would have put capital into the purchase of a new house, for which the increased mortgage was necessary. Such a use of capital could potentially lead to the application of paragraph 27, but it does not seem to me that the issue was clearly raised before the appeal tribunal. I do not find an error of law on this ground, although it can of course be explored (if raised) in the rehearing before a new appeal tribunal.
28. Finally, it is submitted for the absent parent that her letter of appeal to the appeal tribunal expressly mentioned the transfer to the absent parent in divorce proceedings of the rented property and his subsequent transfer of it into joint names after his reconciliation with his wife. It was expressly alleged that this was done to reduce his assessable income. The CSO in paragraph 21 of the written submission of 4 February 1999 submits that this raised paragraph 27 of Schedule 1 to the MASC Regulations, which should have been addressed by the appeal tribunal and was not addressed. I agree. The appeal tribunal went wrong in law in this respect. Again, I do not need to go into the evidence which has been put forward by both parents, as it can all be explored by the new appeal tribunal.

Conclusions and directions

29. For the reasons given above, the appeal tribunal's decision must be set aside as wrong in law. I am not able to substitute a decision on the parent with care's appeal against the CSO's decision of 30 July 1997, as her representative would have preferred. That is because there are several issues outstanding on which further evidence needs to be obtained or on which fairness demands that the absent parent have the opportunity of putting forward further evidence or observations. I am thinking in particular of the potential application of paragraph 27 of Schedule 1 to the MASC Regulations, of the liabilities relevant to paragraph 23 of Schedule 2 and of the ownership of the rented property and the entitlement to receive the rent. Accordingly, the case is referred to an appeal tribunal (on which no-one who was a member of the child support appeal tribunal of 1 December 1997 is to sit) for determination in accordance with the following directions.
30. There is to be a complete rehearing of the parent with care's appeal against the CSO's decision of 30 July 1997, on the evidence presented and submissions made to the new appeal tribunal, which will not be bound by any findings made or conclusions expressed by the child support appeal tribunal of 1 December 1997. The new appeal tribunal is to apply the principles of law set out above, in particular in paragraphs 12 to 14 (premiums on retirement annuity contract), paragraphs 18, 19, 27 and 28 (deprivation of capital), paragraph 23 (deductions from rental income) and paragraph 25 (amount of rent received by the absent parent). The Secretary of State should prepare a fresh written submission in advance of the rehearing, stating how it is submitted that the new appeal tribunal should determine the appeal in the light of those principles, of the other aspects of the CSO's decision which are agreed to be in error and of the evidence currently available. If either parent then wishes to put forward additional documentary evidence to the Appeals Service, that could helpfully also be done in advance of the rehearing.

Date: 1 December 1999 (signed) Mr. J. Mesher Commissioner