UK Social Security and Child Support Commissioners' Decisions

 


[2007] UKSSCSC CH_1099_2007 (17 September 2007)

CH/1099/2007

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. This is an appeal by the Claimant, brought with my permission, against a decision of an appeal tribunal sitting at Chesterfield and made on 12 February 2007. For the reasons set out below I dismiss the appeal.
2. The issue in the appeal concerns the Claimant's entitlement to council tax benefit in respect of the period from 29 October 2001 to 10 March 2002. The Claimant was self-employed during that period, and his wife worked part time as an employee (not in the Claimant's business).
3. On 4 December 2003 Bassetlaw District Council ("the Council") made a decision recalculating the Claimant's council tax benefit in respect of the period referred to in the previous paragraph. Under those calculations, the Claimant was entitled to council tax benefit of £8.30 per week in respect of the period 29 October 2001 to 25 November 2001 and of £3.35 per week in respect of the period from 26 November 2001 to 10 March 2002.
4. During the relevant period the Claimant's business was making a loss. His income for the purposes of the calculations was treated as including the amount of his wife's earnings. No sum was deducted from those earnings in respect of the loss made by the Claimant on his own business.
5. The Claimant appealed, contending that the loss made in his business should be deducted from his wife's earnings, which would have the effect that he would be entitled to full council tax benefit.
6. The matter came before the Tribunal on 12 October 2006. At that hearing the Claimant indicated that, if he lost on the deduction of loss point, he would wish to argue that in any event his wife's earnings had not been calculated correctly, but that he was not in a position to argue that latter point at the hearing. Both parties asked the chairman to give a preliminary ruling on the deduction of loss point, which he did in a reasoned written decision on the same day. In that decision he held that the Council had been right not to permit deduction of the Claimant's self-employed loss from his wife's earnings as an employee. The appeal was adjourned to 7 December 2006, with a Direction that the Claimant should within 21 days file a submission saying why he disagreed with the calculation of his wife's income.
7. On 23 November 2006 the Council sent to the Tribunals Service revised calculations under which the Claimant was not entitled to any council tax benefit for either of the two periods referred to in paragraph 3 above. The reason for the recalculation was that (in respect of the first period) the wrong figure for the Claimant's wife's average net earnings had been put on to the computer and (in respect of the second period) the average figure for the Claimant's net earnings had been calculated omitting two weeks in respect of which the Council had been provided with wage slips for the Claimant's wife. Those recalculations, if correct, meant that there had been overpayments of council tax benefit to the Claimant.
8. By a letter dated 26 November 2006 the Claimant asked for a postponement of the hearing which had been fixed for 7 December, by reason of the new evidence. However, the main substantive point which he made in the letter was the deduction of loss point.
9. The application for a postponement was initially refused by the chairman, but then granted on the day of the hearing (7 December). The case was refixed for 12 February 2007. The chairman commented in the Decision Notice: "In view of the recalculation by the Local Authority which now has the result of a potential nil award and further enquiries that [the Claimant] wishes to make I am just persuaded that it is right to give [the Claimant] a little more time to prepare his case."
10. On 5 February 2007 the Claimant wrote to the Tribunal stating that he would not be able to appear on 12 February because he would be abroad and making two points (see p.59): (1) the deduction of loss point and (2) that the Council's errors in calculating council tax benefit could not reasonably have been known to the Claimant or his wife and therefore any overpayment should not be repaid.
11. On 12 February 2007 the Tribunal held that the calculations of council tax benefit as set out in the revised calculations enclosed with the Council's letter of 23 November 2006 were correct, and also incorporated into its decision its reasoning on the deduction of loss point which I referred to in para. 6 above. In the Decision Notice the chairman further commented that he had been assured by the Council that they would not seek to recover any overpaid benefit from the Claimant. (The Council has confirmed that in its submission in this appeal).
12. The Claimant sought leave to appeal to a Commissioner on two grounds: (1) the deduction of loss point and (2) "that my wife's income should be reviewed with regard to the periods that it has been applied. The Council have twice applied different formulae in assessing her income without sufficient explanation and may be wrong in law. The tribunal has not considered nor decided this point although raised by me in my original appeal to the tribunal."
13. Leave to appeal was refused by the chairman, and application was made to a Commissioner on Form OSSC 1. The only point which the Claimant made in that Form was the deduction of loss point. I gave leave to appeal as the point was one on which there appeared to be no direct authority
14. In my judgment, save for the deduction of loss point the Claimant did not mount any specific challenge before the Tribunal to the revised calculations enclosed with the Council's letter of 23 November 2006. Nor did he do so in his grounds of application to the chairman for leave, nor did he do so in his submissions in reply in this appeal. Since the Claimant has not, either before the Tribunal or before me, sought to point to any specific error (other than the deduction of loss point) in the Council's revised calculations, I decline to consider those calculations in detail. The Tribunal was not wrong in law in the approach which it adopted.
15. That leaves the question whether, in calculating the Claimant's income for the purpose of council tax benefit, the Tribunal was right to hold that the loss on the Claimant's own business could not be deducted from his wife's earnings as an employee.
16. By s.136(1) of the Social Security Contributions and Benefits Act 1992:

"Where a person claiming an income-related benefit is a member of a family, the income and capital of any member of that family shall, except in prescribed circumstances, be treated as the income and capital of that person."

17. The income of the Claimant's wife is therefore to be treated as his income, for the purpose of calculating his income for council tax benefit purposes.
18. By reg. 22(10) of the Council Tax Benefit (General) Regulations 1992 (which were the regulations in force at the material time):

"For the avoidance of doubt, where a claimant is engaged in employment as a self-employed earner and he is also engaged in one or more other employments as a self-employed earner or employed earner any loss incurred in any one of his employments shall not be offset against his earnings in any other of his employments."

19. If the part time earnings as an employee had been those of the Claimant himself, rather than of his wife, reg. 22(1) would have been directly in point and would have prevented the Claimant offsetting his self-employed losses against his earnings as an employee.
20. The Claimant says, however, that reg. 22(10) does not apply because, although his wife's earnings are required by s.136 to be treated as his, s.136 does not say that he is required to be treated as engaged in the employment undertaken by his wife, and reg 22(10) only applies where the claimant is engaged in two or more employments. I accept that submission. I do not think that reg. 22(1) is directly in point, although it would be very odd if it made a difference whether the employed earnings were those of the Claimant himself or of his wife.
21. Given that there is, in the situation with which I am concerned, no provision which directly prevents offset of the self-employed losses, the question, as the Tribunal rightly identified, is whether the income from self-employment can be a minus figure, or whether in the case of a loss it must simply be treated as nil. If the latter, then of course there is nothing to offset.
22. By reg. 13(1) of the 1992 Regulations:

"……….. the income of a claimant shall be calculated on a weekly basis –

(a) by estimating the amount which is likely to be his average weekly income in accordance with this Chapter and Chapters III to V of this Part and Part V;

(b) ……………….."

23. Regulation 14 deals with the estimation of the average weekly earnings of employed

earners.

24. Regulation 15 provides that the claimant's earnings from employment as a self-employed earner shall be calculated in accordance with Chapter IV (i.e. regulations 21 to 23).
25. By Regulation 22:

"(1) For the purposes of regulation 15 (average weekly earnings of self-employed earners) the earnings of a claimant to be taken into account shall be –

(a) in the case of a self-employed earner who is engaged in employment on his own account, the net profit derived from that employment;

(3) For the purposes of paragraph (1)(a) the net profit of the employment shall …………..be calculated by taking into account the earnings of the employment over the assessment period less –

(a) …………any expenses wholly and exclusively incurred in that period for the purposes of the employment.

(b) ……………………."

26. It is to be noted that regulation 22 speaks only of net profit. It gives no indication that, in performing the calculation required by reg. 13(1), the amount to be taken into account as self-employed earnings, after deduction of allowable expenses, can be a loss. In my judgment it is quite clear that it cannot be less than nil.
27. In R(FC)1/93 the claimant was employed as a sub-postmistress and also carried on, in the same premises, a retail business on a self-employed basis, on which she made a loss. The relevant regulations (the Family Credit (General) Regulations 1987) were in similar form to the 1992 Regulations, and the equivalent in the 1987 Regulations of reg. 22(10) of the 1992 Regulations was therefore directly in point. Significantly for present purposes, however, the Commissioner, when discussing the loss made by the claimant in the retail business, said this (at para. 10):

"The erroneous calculation of Mrs. G's expenses produced a smaller loss on the retail business than would have been the case had the correct allowances been made. That, of course, merely has the effect of increasing the loss and that, as I have said above, does not affect the outcome; a nil assessment from the retail business is as low as it is possible to go, and any losses cannot be set off against any income from Mrs. G's other occupation."

28. It follows that in my judgment it is not possible to offset the loss from the Claimant's self-employed business against the earnings of his wife. It may be objected that the meaning which I have given to reg. 22 (i.e. that it cannot result in a minus figure) renders reg. 22(10) unnecessary. That is so, but I do not regard that as indicating that the view which I have taken is wrong, because reg. 22(10) begins with the words "for the avoidance of doubt." Those words confirm that the result would have been the same even if reg. 22(10) had not been enacted.
29. Another indication in favour of the conclusion which I have reached is that reg. 22(10) in terms only prevents deduction of self-employed losses from other employed or self-employed earnings of the claimant. It does not prevent deduction of such losses from "other income" (i.e. income other than earnings), which is dealt with in regs. 16 and 24 to 27. It would, however, be extraordinary if self-employed losses could be deducted from "other income", but not from employed earnings or self-employed earnings from another business. The reason why they cannot be so deducted can only be that the sum arrived at for "net profit" of a business cannot be less than nil.
30. The Tribunal's decision was therefore not erroneous in law, and I dismiss the appeal.
31. The Claimant requested an oral hearing of this appeal, stating that he had tried to keep his arguments to the Commissioner simple and brief, but felt that an oral hearing would be beneficial. As far as the deduction of loss point is concerned, I am satisfied that the Claimant has in his written submissions said all that can be usefully said on the point. As far as the calculation of his wife's income is concerned, the Claimant has had more than ample opportunity to identify any error in the Council's calculations, but has not given any indication that he is able to do so. Given that the amounts potentially involved are small, and that the Council has confirmed that it will not seek recovery of the overpayments to which the revised calculations have led, it would not in my judgment be right to direct an oral hearing simply for the purpose of given the Claimant a yet further opportunity to identify errors. I therefore refuse the request for an oral hearing.

(signed on the original) Charles Turnbull

Commissioner

17 September 2007