Upper Tribunal (Administrative Appeals Chamber)

DECISION OF THE UPPER TRIBUNAL

The claimant’s appeal is allowed. The first-tier tribunal’s decision is set aside as erroneous in law and  replaced under section 12(2)(b) of the Tribunals, Courts and Enforcement. Act 2007 with this decision, that the appellant and her husband were jointly entitled to child tax credits in respect of their two children for the tax year 6 April 2008 to 5 April 2009 inclusive. 

REASONS

Mr P L Howell QC:

1. The decision of the Cardiff appeal tribunal sitting on 1 June 2010 is conceded to have involved the errors in law identified in the direction I gave on 25 May 2011 (at pages 67-70 of the appeal file) and it is agreed in the very helpful submission of Ms K Dinham on behalf of HM Revenue and Customs dated 10 August 2011 at pages 74-77 that following further investigation and confirmation of the correct facts, the appellant and her husband were after all entitled to the child tax credits they claimed for the tax year 2008/9 and a decision should be substituted to that effect. 

2. Understandably, the appellant says in her observations in reply at page 79 that she would prefer to have a decision that clarifies the reasons for this conclusion rather than one simply given by consent.  The following summary will I hope set out the position in a self-contained way though much of it is repeated from my earlier direction.  As there noted, this is an appeal by a joint claimant for child tax credit, which is in effect an appeal on behalf of her husband as well, though he is not named as a party.

3. The undisputed facts as they appear from the material now before me are that at all relevant times for the joint claim to child tax credit with which the appeal is concerned (that is for the year 6 April 2008 to 5 April 2009) the two joint claimants, who are both United Kingdom nationals, were a married couple, not separated or estranged.  They were and are therefore a “couple” within section 3(5A) of the Tax Credits Act 2002.  However they maintained separate residences: the husband throughout being both resident and ordinarily resident in the UK, but the wife being resident in Spain and (as is accepted) not ordinarily resident in the UK.  He therefore met the condition in section 3(3) of the Act of being in the United Kingdom in order to claim tax credits but she did not.  The claim was in respect of their children, who at all times lived with their mother in Spain; so that she (and not he) counts as the person “responsible” for them under section 8 of the Act and regulation 3 of the Child Tax Credit Regulations 2002 SI No. 2007.

4. The only claim made for this period has been a joint claim by the two of them as a couple, and nobody disputes that the whole of their two incomes would have to be taken into account in calculating any entitlement there is on that claim.  The only issue before the first-tier tribunal and before me was whether there could be any such entitlement on that claim for the tax year 2008-9. That substantive question of entitlement was squarely and properly in issue before the first-tier tribunal on the appeal as submitted to it, and although it is unsatisfactory that as noted by the first-tier judge HMRC failed to provide a copy of the decision appealed against, there is no doubt that it raised the substantive issue, and was appealable. There was therefore nothing in the technical point earlier taken on behalf of HMRC at paragraphs 17ff on pages 50-52 that the tribunal’s decision was “ineffective” or the appeal not properly constituted.

5. It is beyond dispute that looking only at the domestic law in the Tax Credits Act 2002 and the related regulations as in force for 2008-9:

(a) the wife though responsible for the children could not make or join in making a valid claim for child tax credit for them under section 3, because she was not in the United Kingdom;

(b) the husband though in the United Kingdom could not make or join in making a valid claim under section 3 either, because for the purposes of section 8 he was not the person “responsible” for the children himself, and because of (a) was not able to make a claim jointly with the person who was. 

6.  So far as the husband’s participation in the joint claim is concerned (and whatever might be his position on a single one, which is not this case) it is irrelevant whether he was working or on benefit.  He meets all the conditions of entitlement under UK domestic law for a joint claim if only his wife is able to join with him in making it: as a UK national and resident he needs no separate recourse to EU law.  The only question is therefore whether EU law enables the joint claim to succeed by entitling the wife to take part in it, overriding the residence condition in section 3 so far as she is concerned.

7. That in turn depends only on whether she is within the provision in Article 73 of Council Regulation 1408/71/EEC that an “employed person subject to the legislation of a member state” is to be entitled to family benefits (which include child tax credits) in respect of members of his or her family residing in another member state.

8. For that purpose the material issues for the first-tier tribunal to decide were (or should have been):

(1) whether the wife was during 2008-9 “subject to the legislation” of the UK as the “competent state” for social security purposes (cf. CIB 3552/08 SSWP v PS [2009] UKUT 226, [2010] AACR 14 and Article 13 and Annex VI of the Regulation);

(2) if so, whether she counted as an “employed person” by virtue of the extended definition in Article 1 (cf. Martinez-Sala v Freistaat Bayern [1998] ECR I-2691 and HMRC v Ruas [2009] EWCA Civ 1043, [2010] AACR 31).

9. If the answer to both of those questions is yes, it is now conceded (and I so hold) that Article 73 requires the wife, as a UK national residing in another EEA country in exercise of her EU free movement rights, to be entitled to claim child tax credits in respect of her children residing in Spain despite the condition in the national legislation about her own residence.  For both of those questions the effect of her being in receipt of incapacity benefit, specifically raised in her letter of 2 September 2009 stating the grounds on which she wished to pursue her appeal, was of fundamental relevance because it implies a UK work and social security contribution record and continuing insurance entitlement.  These being inquisitorial proceedings whose purpose is to determine a claimant’s true statutory benefit entitlement on the basis of the actual facts, there was nothing in an earlier suggestion (not now pursued) that the tribunal, and for that matter HMRC itself, did not have to be concerned with the point.

10. The first-tier tribunal’s decision, as recorded in the formal decision notice at page 18 and statement of its findings and reasons at pages 27-28, was that the appellant and her husband could not be entitled to child tax credits for the year in question, because he was not in employment or in receipt of a jobseeker’s allowance, and that this concluded the case against them without further inquiry into her national insurance position. For the reasons already given, the tribunal thus in my judgment erred in:

(1) holding that entitlement to child tax credits on the joint claim depended on the husband being in employment or on jobseeker’s allowance (the sole stated reason for the decision); and

(2) failing to address, or determine the facts relevant to, the two issues identified above as the material ones to decide the appeal.

11. The further submission on behalf of HMRC at pages 74-77 now confirms that on the true facts as now known the answers to both of those questions was indeed yes and that the UK was the competent member State in relation to her social insurance for the year 2008/9 as she was not employed or self employed in Spain at that time.  It follows that she was entitled to participate in the joint claim by virtue of Article 73 of EU Regulation 1408/71, disapplying the national condition about her own residence, and a decision must be given confirming their entitlement to the child tax credits for that year.

P L Howell

Judge of the Upper Tribunal

29 November 2011

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