UK Social Security and Child Support Commissioners' Decisions

[2000] UKSSCSC CF_66_1997 (23 May 2000)

 


THE SOCIAL SECURITY COMMISSIONERS

Commissioner's Case no: CF 667 1997

SOCIAL SECURITY ACTS 1992 - 1998

APPEAL FROM A DECISION OF A SOCIAL SECURITY APPEAL TRIBUNAL

ON A QUESTION OF LAW

DECISION OF THE SOCIAL SECURITY COMMISSIONER

Mr Commissioner David Williams

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. I allow the claimant's appeal against the decision of the Portsmouth social security appeal tribunal on 25 September 1996. It was brought by leave of the Commissioner. The tribunal's decision was that the claimant is not entitled to child benefit from and including 2 November 1992 and that as a result there is an overpayment of 2,440.85 pounds which is recoverable from the claimant. For the reasons given below, that decision is erroneous in law. I therefore set it aside. I substitute for that decision the following decision:

The case is to be referred back to the Secretary of State to put any relevant questions about whether Mrs M or Mr M is employed or self-employed within the scope of British legislation at any time relevant to this appeal to the Inland Revenue for decision.

Once any appropriate decisions are taken by the Inland Revenue, then, subject to any appeal to the tax appeal tribunals, the appeal is to be referred to a social security appeal tribunal to determine the appeal in the light of this decision and the decisions of the Inland Revenue.

2. This case is now extremely old. This is in part because it is also extremely complex, although at first sight the facts may seem straightforward. When it first came before me for decision in 1999, I issued a lengthy direction on the points of law that seemed to be in issue. That direction indicated also my provisional view that the tribunal had erred in law in its decision and should therefore be set aside. I received a full and helpful submission from Secretary of State's representative in reply but have received no response from the claimant or her representative. As that direction indicated that I proposed to deal with the appeal by allowing it and remitting the case to others to decide, I am deciding it now, without further delay and without calling an oral hearing. Any irregularity thereby occasioned is waived under regulation 27 of the Social Security Commissioners (Procedure) Regulations 1999.

Background to this appeal

3. The claimant (Mrs M) and her husband (Mr M) received child benefit for their four children up to 31 August 1992, when Mrs M left Britain for France with the four children. A few days before they left, Mr M advised the Overseas Branch of the DSS that they were leaving. The letter stated that Mrs M and the children would be living in France on a permanent basis, but that Mr M was staying in Britain for the time being. It also stated that Mrs M would remain self-employed in Britain as a sub-postmaster. The letter asked for advice.
4. Overseas Branch sent out a questionnaire which Mr and Mrs M sent back in November 1992. They gave further information of their position as requested. A letter from Overseas Branch on 29 December 1992 advised that benefit would continue "as your husband is employed and insured under UK legislation and you are not employed in France". It added that they should tell the Child Benefit Centre "at once if you/your husband start employment in France or your husband ceases employment in the UK". I add that there was no question of Mrs and Mr M being separated in a matrimonial rather than geographical sense.
5. In March 1994, Mrs M wrote from France to ask that British child benefit be stopped so that she could now claim French child benefit. This was because she needed a certificate that British benefit had stopped before she claimed the French benefit. The DSS sent a further form, and it appeared from the reply that Mr M had stopped self-employment in Britain at the end of October 1992, had joined Mrs M in France in July 1993, and was not employed in France. This eventually led to a review of the claimant's entitlement to child benefit and a decision that she was not entitled, retrospectively to 2 November 1992. Hence the claim for overpayment from November 1992.

The tribunal decision

6. The tribunal heard the appeal with Mrs M and a representative present. The typed decision notice states that there was a medical assessor present, but I suspect that was a mistake. There is no record of proceedings, which is another mistake. The tribunal decided that, unless Mr M met a condition to be satisfied after the hearing, the child benefit determined to be overpaid by the adjudication officer was repayable in full by Mrs M. This conditional decision appears to have been an attempt to help the claimant by giving a further chance to produce a certificate of exemption of Mr M from National Insurance contributions.
7. The tribunal's decision, record, and reasoning are patently defective. It purported to give a conditional decision without dealing properly with the issues involved, not least as the condition was to be satisfied by Mr M while the repayment was from Mrs M. It also purported to decide, or rely on, contribution issues over which it had no jurisdiction and which, at least in part, seem to be irrelevant to the issues before it. At the same time it failed to deal with points that Mrs M had put before it in the letter of appeal, and also points raised by the adjudication officer. In particular, the tribunal did not deal with the underlying question whether Mrs M (or Mr M) was entitled to child benefit during the period in question. Without further discussion, I must set that decision aside.

Was the claimant entitled to child benefit after 2 November 1992?

8. The payment of child benefit up to 2 November 1992 is not in question, so I do not consider it. Similarly, British child benefit stopped being paid as from 20 March 1994 at Mrs M's request, so I do not consider any later period.
9. The key underlying issue during the period in question is whether the Overseas Branch of the DSS was right in the advice it gave Mr and Mrs M. They asked it for advice, and it gave them that advice, and told them what to report and when. Broadly, the letter was right but it, perhaps understandably, somewhat simplified things. Entitlement in this case involves both British and European law. It also involves questions of the jurisdictional limits on both tribunals and Commissioners. It now also involves changes in the law brought about by two separate Acts of Parliament (the Social Security Act 1998 and the Social Security Contributions (Transfer of Functions, etc.) Act 1999), and the transitional arrangements under both Acts. I set out some of the issues at considerable length in my direction in September 1999 in the somewhat vain hope of reducing some of the complexity. I must now go back again over some of that ground.

Who is the claimant?

10. Throughout the case to date there has been official confusion between Mrs M and Mr M. They have not themselves added to that confusion as they have acted together, and as each other's agent, throughout but others, including the tribunal, have muddled up the separate roles of the two completely. In my direction, I stated that at this stage the matter should now be regarded in fairness as a claim by either or both of them. The Secretary of State accepted this approach in the submission made on my direction. The other side of that is that any repayment would be due from either or both of them, but it would appear in practice that this makes no practical difference to the family. I therefore examine this case on the basis that both Mrs and Mr M are claimants for establishing entitlement to child benefit.

What were the employment statuses of Mrs and Mr M?

11. At the time that Mrs M left Britain, the facts put to the Overseas Branch suggested that she would continue to be self-employed in Britain. But because the form of self-employment was as a sub-postmistress, she was or would have been regarded as employed for social security purposes. That is confirmed by a note in the file saying that she was paying Class 1 contributions, and that she would continue to pay the contributions while in France. However, no one seems to have paid any attention to her continuing status in Britain on this basis. That apart, it appears she was not employed in Britain or France.
12. Mr M's employment status is even more obscure. It appears that he worked in Britain at first when Mrs M left the country, then worked in both Britain and France on individual short-term jobs, and finally located himself in France from July 1993 but without finding permanent work during the relevant period. Such work as he did was found by the tribunal to be work for cash. But the tribunal also found that Mr M was also a nominee director of a British company (document 19), although he did not pay British National Insurance contributions on this. As a matter of law, if Mr M was a director of a British company he was, for social security purposes, in the same position as an employee. But no facts were found or conclusions drawn about this - for example, how long and until when he was a director.
13. My conclusion must be that neither the employment status of Mrs M nor that of Mr M has been established in this case. In so far as any claim for recovery of an overpayment is said to be based on a change in the employment status of either, the simple fact is that this is not yet known.

Was there entitlement to child benefit under British law?

14. The general British rule is that child benefit is not payable to a claimant who is not in Great Britain: section 146(3) of the Social Security Contributions and Benefits Act 1992. The exceptions to this rule are in the Child Benefit (Residence and Persons Abroad) Regulations 1976.

!6 Of the exceptions in those regulations, one of the exceptions in regulation 6 may be relevant, namely the case of an individual (or the spouse of an individual) who:

"on any day within or week beginning in an income tax year is temporarily absent from Great Britain by reason only of the fact that he is in employment (whether under a contract of service or not) outside Great Britain, being an income tax year in relation to which that person proves that at least half of his earnings or other emoluments from that employment are liable to United Kingdom income tax."

15. No attempt has been made to consider this exception in the context of this claim. In the further submission to me, the Secretary of State argues that on the available evidence this does not apply. I am not so sure. The regulation seems to require application for each tax year. There may be entitlement for Mr M here, at least with regard to the first income tax year involved (the period to April 1993), because such facts as there are show the claimant to have been working in France for part only of the year, as he found work. He also had work in the United Kingdom and so may have been liable to United Kingdom tax on all his work. I stress liable to because this does not require United Kingdom income tax to have been paid. It is enough that the liability is proved. The complication lies in any earnings Mr M had outside the United Kingdom in any relevant tax year. For as long as Mr M remained resident or ordinarily resident in the United Kingdom for tax purposes, and was so regarded under the terms of the United Kingdom - France double taxation agreement, then he remained liable for United Kingdom tax on his work. This is subject to any exemption from United Kingdom taxation under the "183 day" rule in the United Kingdom - France double tax agreement (in summary, that he was employed for 183 days or more in France).
16. On the scanty facts in this case, my view is that he was probably liable to United Kingdom tax on work in France during the tax year to April 1993, but probably not beyond that time. But no firm view can be given on the present evidence. Nonetheless, the onus lies on Mr M to show the exemption applies. The problem in this case is that Mr and Mrs M were relying on the advice of the Overseas Branch as to the information they should provide, and no mention appears to have been made to them of this provision, so no opportunity to see if it does apply has arisen. That may not be relevant to entitlement, but it may be relevant to the question of recovery of any overpayment.

Was there entitlement to child benefit under European Community law?

17. The relevant rules of European Community law are in Regulation 1408/71. For them to apply, it must be shown that Mrs or Mr M are within the personal scope of the Regulation. They are clearly within the territorial scope and also the potential scope for entitlement as parents. Personal scope depends, as the Secretary of State rightly submits, on whether either Mr M or Mrs M is an "employed person" or a "self-employed person" for the purposes of the Regulation.
18. The importance of that test arises from the terms of article 73 of the Regulation. This provides:

"An employed or self-employed person subject to the legislation of a member state shall be entitled, in respect of the members of his family who are residing in another member state, to the family benefits provided for by the legislation of the former state as if they were residing in that state, subject to the provisions of Annex VI."

Annex VI includes special rules for each member state, and part L applies to the United Kingdom. Part L paragraph 3(b) contains the following provision:

"If, pursuant to Title II of the Regulation, United Kingdom legislation is applicable in respect of an employed or self-employed person who does not satisfy the condition imposed by united Kingdom legislation in relation to child benefit concerning:

(i) presence within Great Britain ... he shall be regarded, for the purpose of satisfying such condition, as being so present..."

19. Article 73, read with Annex VI, part L, paragraph 3, leads to the rule that any individual who is either employed or self-employed within the scope of British legislation and who is claiming British child benefit for members of her or his family who are resident in another member state is entitled to have herself or himself treated as present in Britain and as having the children resident in Britain for the purposes of the British claim.
20. If that applies to either Mrs or Mr M, then she or he and the children are to be treated as remaining present in Britain for as long as the employment condition is met. It must therefore be determined if either Mrs M or Mr M were within the scope of British legislation for the purposes of Title II of Regulation 1408/71 for all or any part of the period in question in this case. Only if neither is within the scope of British legislation is it the case that the entitlement to child benefit ended. Title II of the Regulation is "Determination of legislation applicable", which in British law means liability to contributions. This refers back at least in part to the definitions of "employed person" and "self-employed person" in article 1 of the Regulation, defining the personal scope of the Regulation.
21. I have already discussed the problems in identifying if either Mrs M or Mr M were within the scope of British legislation as either employed or self-employed. There is certainly some evidence that both Mrs M and Mr M had employments or self-employment that were within the scope of British legislation after they left Britain - in particular the suggestion that Mrs M remained liable to Class 1 contributions after leaving Britain. But this is, as the Secretary of State has submitted, not something that a tribunal or I can decide. It was, when this case started, a Secretary of State's question and not open to the tribunal. It now falls to be decided by the Inland Revenue (and in cases of dispute by the tax tribunals), under the terms of the Social Security Contributions (Transfer of Functions, etc.) Act 1999.
22. Who should decide, given that these events occurred before the enactments of the Transfer of Functions Act, and also involve European Community law? I accept the submission of the Secretary of State that it is not now for him, but is for the Inland Revenue, to determine whether either Mrs M or Mr M are within the scope of British legislation for the purposes of Title II of the Regulation both as to current events and as to past events.
23. The case must therefore go back to the Secretary of State, who may refer it to the Inland Revenue if he wishes to take this case further. Assuming the Secretary of State continues with the case, it must go first to the Inland Revenue for determination of the legislation applicable and (subject to appeals) then to a social security appeal tribunal to determine whether, on the full facts, article 73 read with Annex VI, Part L, paragraph 3 gives either Mrs M or Mr M entitlement to child benefit for all or any of the relevant period. Only then will the question have been answered: were Mrs or Mr M entitled to child benefit for all or any part of the period in question?

Was any overpayment recoverable?

24. If Mrs and Mr M did not remain entitled throughout the period of payment, then there will be an overpayment of child benefit for the period or periods for which neither was entitled. That overpayment will be repayable if the conditions of section 71 of the Social Security Administration Act 1992 are met, namely that there has been some misrepresentation or failure to disclose. Without going into this issue at any length, there are important issues for a new tribunal here also.
25. Given the complexities of the law in this case, and given that Mr and Mrs M sought the help of the Overseas Branch before any relevant events occurred and acted at least in part on the guidance of the Overseas Branch, then there needs to be close examination of exactly what it was that was not disclosed when it should have been disclosed, and whether it was reasonable to expect that disclosure given the disclosures already made, or what it was that was misrepresented and, given the form of payment of benefit that appears to have been used, when it was misrepresented. For example, I do not see how there could have been a misrepresentation or failure to disclose as required by section 71 before Mr and Mrs M received the guidance given by the Overseas Branch at the end of December 1992, even if its guidance was correct and complete (which it was not). The decision of the adjudication officer that there should be a repayment was based on a failure by Mrs M to disclose "the material fact that Mr M ceased to be employed and insured under United Kingdom legislation". This will also need further consideration, because that is a question of law, not a question of fact. But I leave that for the Secretary of State and for the new tribunal, should this matter go to a new tribunal.

Summary

26. My formal decision is to set aside the decision of the tribunal and refer the matter to the Secretary of State. I also decide that this case is to be taken forward on the basis that either Mrs M or Mr M should be treated as the relevant claimant. But there are still questions of fact to be established in this case before it can be decided if Mrs M or Mr M ceased to be entitled to child benefit for the period in question or any part of it. I must leave establishing those facts to the Secretary of State as it is his case that there is no entitlement, and the onus of proof is on him to show that entitlement ceased. This will probably then involve referring the matter to the Inland Revenue to determine both for British law purposes and for European Community law purposes what was the employment status of Mrs and/or Mr M at the relevant times. Any appeal on that aspect is for a tax tribunal.
27. Once employment status has been established, the immediate relevance of both the Child Benefit (Residence and Persons Abroad) Regulations and Regulation 1408/71 will have clarified, but their application will not have been determined. At that stage, the Secretary of State will need to prepare a new submission and the matter will need to go to a new social security tribunal to determine the issues of British and European Community law outlined in this decision, to resolve the appeal by the claimants that is still outstanding.

David Williams

Commissioner

23 May 2000