Upper Tribunal (Administrative Appeals Chamber)

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[2009] UKUT 78 (AAC)(24 April 2009)
Remunerative work
Engaged in work

IN THE UPPER TRIBUNAL Appeal No. CTC/244/2008

ADMINISTRATIVE APPEALS CHAMBER

Before MARK ROWLAND

Decision: The claimant's appeal against the decision of the Fox Court appeal tribunal dated 20 April 2007 is dismissed.

REASONS FOR DECISION

The functions of Social Security Commissioners have been transferred to the Upper Tribunal, of which the Commissioners have become judges. As a Commissioner, I granted the claimant leave to appeal after an oral hearing because it appeared that he had not received notice of the hearing before the appeal tribunal and that he might have had an arguable case before the tribunal. HMRC have not suggested that the tribunal's decision should not be set aside on the basis that the claimant was did not receive notice of the hearing but argue that it is clear that the decision against which the claimant had appealed to the tribunal must stand. The claimant has asked for an oral hearing but I refuse the request because he has not advanced any argument in support of the ground upon which I granted leave to appeal and he has not advanced any significant new material in relation to the issue upon which I said I would not have granted leave to appeal because it was unarguable. He had the opportunity to persuade me orally there was something in that issue when he had the oral hearing of the application for leave to appeal. I also confirm the decision of the Legal Officer dated 23 June 2008 to extend the time for HMRC to make submissions in this case, which was entirely reasonable.

By section 10(1) of the Tax Credits Act 2002, it is a condition of entitlement to working tax credit that the claimant be "engaged in qualifying remunerative work ". Section 10(2) permits regulations to be made specifying what is and what is not qualifying remunerative work. Regulation 4 of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 (S.I. 2002/2005) makes it a condition of being qualifying remunerative work that work be "done for payment or in expectation of payment".

The adjudication history of this case, which arises out of a claim for tax credits first made on 13 November 2003, is complicated. Complications are to be expected in a system based on tax years, which requires initial decisions for each tax year (under section 14 of the Tax Credits Act 2002), which may be revised (under section 15 or 16) and are then followed by a final decision (under section 18), which may itself be the subject of an enquiry (under section 19). The complications are made worse by HMRC's habit of issuing "informal decisions" before it issues formal decisions. In this case, the claimant appealed, by letter dated 26 November 2005, against an informal decision issued on 22 November 2005 in respect of the tax year 2003/2004 but, due to problems with HMRC's computer system, had to wait until 20 February 2006 for the formal decision to be issued and for action to be taken on his appeal. Moreover, it appears that HMRC's computer is unable to produce duplicate copies of decisions and none is kept in a file which means that a tribunal has to rely on a claimant producing a copy if it wants be sure of the terms of the decision. It is therefore perhaps not surprising that the initial submission made by HMRC to the tribunal in this case was incoherent and resulted in a direction to produce a further submission in which it was confessed that "the decision making in this case has got rather off-track". The state of confusion that existed is well illustrated by the need of the writer of the supplementary submission to state that, as a result of the correspondence between the claimant and HMRC over a number of months, the appeal before the tribunal –

"… is against the following decisions:

(a) Any decision purporting to revise

(i) the section 19 decision given on 20/2/06 (for tax year 2003/2004), and

(ii) the section 16 decision given on 16/2/06 (for tax year 2005/2006),

(b) Any decision purporting to undo the decision purporting to revise; and

(c) The section 19 decisions given on 20/2/06 (for tax year 2003/2004) and 20/3/06 (for tax year 2004/2005), and/or

(d) The section 16 decision given on 16/2/06 (for tax year 2005/2006)."

The decisions of 16 and 20 February 2006 were to the effect that the claimant was not entitled to working tax credit because he was not engaged in qualifying remunerative work because he did not receive any income from the company and registered charity of which he was a director and trustee. The claimant had already appealed, by his letter dated 26 November 2005, against the informal version of at least one of those decisions on the basis that the charity "pays me £75,000 per year as well as expenses". Not surprisingly, HMRC then took the view that the ground upon which the appellant was not entitled to working tax credit was that his income was too high. The appellant promptly informed HMRC that he had not received any remuneration because he was due to be paid only when the company could afford to pay him and so HMRC reverted to its previous stance.

I agree with the supplementary submission writer that any purported review of the section 19 decision of 20 February 2006 was ultra vires but, in any event, the alterations to both decisions were reversed and would anyway have been overtaken by the decisions on the appeal against the original decisions of 16 and 20 February 2000. Accordingly, they may safely be ignored.

The tribunal went further and, in its decision notice, referred only to the decision of 20 February 2006 as the decision it confirmed. However, as it also found that the claimant was not entitled to working tax credit for any of the three tax years in issue, it may be inferred that it actually upheld the three decisions issued on 16 and 20 February and 20 March 2006. No statement of reasons was ever obtained but the decision notice contains all that was required in this case. There is a reference to section 10 of the Act and the Regulations and a finding that the claimant was not in remunerative employment, the explanation being –

"The burden of proof is on [the claimant and] he has failed to comply with directions given by this Tribunal or provide any credible evidence that he was in remunerative employment."

For reasons I gave when I granted leave to appeal, I am inclined to accept that there was a genuine mix-up regarding the claimant's address and that notice of the hearing before the tribunal was therefore sent to the wrong address. However, that is not enough to require the tribunal's decision to be set aside if the tribunal would have been bound to reach the same decision anyway.

I granted leave specifically because the claimant told me that he wished to argue that he was employed in remunerative work by Black Tie Media UK or Black Tie Media Inc, a point he had raised in correspondence before the tribunal hearing and that he could have argued at the hearing. I directed him –

"… to state whether he was self-employed and/or employed and, if employed, the precise name of the business(es) by which he was employed. If he was an employee, he should provide a copy of the contract of employment. He should provide copies of the accounts for the relevant business(es) for the financial years ending during the tax year 2002-2003 and the three subsequent years. He should also provide his P60s for April 2004, April 2005 and April 2006."

He has not produce a shred of evidence that he was engaged in remunerative work for either of the businesses he mentioned at the hearing.

Instead, he has reverted to the argument that he was engaged in remunerative employment by the company of which he is a director. He has produced a contract of employment stating that his salary was £73,838 per annum. However, it is common ground that he has never actually received a penny in the form of salary from the company and the contract is plainly not to be taken at face value. Instead, the claimant claims to be working for the company in expectation of payment in the future. He has not produced any P60s although I am told that PAYE was set up for the claimant as a director after an interview on 2 June 2005. He has produced copies of the accounts for the four years ending 31 March 2006. These show that the company had no income. Its outgoings each year are said in the accounts to be balanced by a loan from the claimant. The accumulated debt at 31 March 2006 was £133,812 (see the claimant's letter dated 17 July 2008 (doc 283)). The figure is erroneously shown in the relevant balance sheet as £141,508 because the assets have accidentally been added to the debt rather than subtracted from it, an error not made in the earlier years. Apparently the figure had risen to £193,683 by the following year.

In his letter of 17 July 2008, the claimant argues that his company has generated income resources of £193,683, that he is the only working trustee and that Black Tie Media is the sole contributor of the income. The implication is that the company is gaining resources from which the claimant can reasonably expect to be paid a salary in due course. This is all nonsense. Since the company has no source of income or capital other than what the accounts say are loans from the claimant and as it has no assets capable of producing an income, there is no reason to suppose that the claimant will ever be repaid his loans, far less that he will ever be paid a salary. He also argues that the company remunerates him with benefits in kind "such as telephone, electricity, home and cell phone payments, car payments and other payments", which amount to remuneration. Payments of bills would not usually be regarded as payment in kind and, in any event, the company accounts do not show any payments that are not for the company's own purposes. More significantly, in several years corresponding with HMRC, that letter is the first time that the claimant has suggested that the remuneration he expected for working was in the form of such payments. That does not seem to have been his understanding at the time the payments were being made.

Quite what the practical purpose of the company was, whether the claimant ever did anything of practical value for it, who received the £35,000 management fees in each of the years ending 31 March 2005 and 31 March 2006 and what actual means of support the claimant had are not matters into which I need delve. The claimant has failed to produce any credible evidence that he was engaged in qualifying remunerative work in any of the three tax years in issue and I therefore cannot be satisfied that he was so engaged. An oral hearing before the tribunal could not possibly have led to it reaching any different conclusion. Despite all the opportunities the claimant has had to produce evidence, there is nothing that begins to show that he could ever have expected to be remunerated by anyone for whom he has claimed to work.

I therefore dismiss the claimant's appeal.

MARK ROWLAND

24 April 2009