Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL Case No.  CH/912/2012

ADMINISTRATIVE APPEALS CHAMBER

Before Judge Mark

Decision:  The appeal is allowed.  I set aside the decision of the First-tier Tribunal and remit the case to be reheard by a new tribunal in accordance with the directions given below.

REASONS FOR DECISION

1.      Regulation 30(1) of the Housing Benefit Regulations provides that, for the purpose of assessing entitlement to housing benefit, “Where a claimant’s income consists of earnings from employment as a self-employed earner his average weekly earnings shall be estimated by reference to his earnings from that employment over such period as is appropriate in order that his average weekly earnings may be estimated accurately but the length of the period shall not in any case exceed a year.”  There is a similar provision in regulation 20 of the Council Tax Benefit Regulations 2006.

2.     No doubt because of the difficulties many claimants have in producing evidence of their likely self-employed earnings during a period for which they are claiming housing benefit and council tax benefit, a practice has grown up of assessing entitlement by reference to income based on the claimant’s last complete accounting year or the last such year for which figures are available.  That would also appear to be administratively convenient for councils as they have pre-prepared figures which have usually been prepared by an accountant.

3.     It is a practice that achieves sensible results where there is little change from year to year in a claimant’s earnings.  It does not produce sensible results where there are significant fluctuations in a claimant’s earnings, for example in the present case due to illness, or in another case possibly due to the loss, or recent acquisition, of a major client, or in certain seasonal occupations due to unexpectedly bad, or unexpectedly good, weather.

4.     In CH/329/2003, Mr. Commissioner Powell, as he then was, was dealing with the equivalent provision in regulation 15 of the Council Tax Benefit (General) Regulations 1992.  At paragraph 6, he stated:

“The important words for present purposes are “over such period as is appropriate in order that his average weekly earnings over the benefit period may be estimated accurately”.  CTB is not awarded indefinitely.  It is awarded for a set period of up to 60 weeks.  The period of the award will be decided in advance and it is “average weekly earnings” over that period that the regulation is focussing on.  Such average weekly earnings must, of necessity, be estimated but the estimate must be as accurate as is reasonably possible.  It appears that any reasonable period can be taken provided that it does not exceed one year.”

5.     Mr. Commissioner Powell went on in paragraph 10 to give, as an example of a case where the previous year’s earnings would be of little help, a roofer who was badly injured towards the end of a successful year and whose resulting condition severely limited the amount of work he could do.  In the case before him, he was dealing with a claimant who contended that his income in the relevant year had suffered a downturn so that, at the time of the decision under appeal, he was receiving little or nothing.  The tribunal had simply accepted the formula set out by the council as the formula it used to assess income.  He continued at paragraph 15:

“That was too simplistic approach and ignores the clear wording of regulation 15(1).  The appeal tribunal should have considered the claimant’s arguments and ruled upon them.  It did not do so and therefore erred in law.”

6.     In the present case, the claimant contended that there had been a substantial downturn in her work due to her illness.  Apart from an allowance during a period when she was doing no work at all, the Council simply applied a formula based on her previous year’s accounts to determine her entitlement to benefit.  The tribunal upheld that approach.  It put the position as follows:

“The tribunal judge was satisfied that the local authority had applied the regulations correctly when using the previous year’s income in calculating the appellant’s entitlement to housing benefit and council tax benefit.  Although there is a discretion to use another more representative period and whilst there is authority in the Commissioner’s decision CH/0329/2003 for the local authority to be able to consider using real-time income during the year 2010/2011 this would then lead to the same period being used twice.  To use real-time income for the current year would result in the current assessment of full Housing benefit and council tax benefit to be re-assessed and result in an overpayment for the current year.  To use real time income each year would cause uncertainty and a recalculation each year when the year-end income became known.”

7.     It is plain that the tribunal wholly failed to understand both the relevant regulations and the effect of CH/329/2003.  The regulations require the council to estimate earnings “over such period as is appropriate in order that his average weekly earnings may be estimated accurately”.  Where there has plainly been a significant change in weekly earnings, whether up or down, from the previous year, it is plain that to simply use the previous year’s earnings without any allowance for the downturn or upturn is the antithesis of estimating the earnings accurately.  This is so both in the year in question and, in the following year, if by that time the claimant’s earnings had returned to normal.  There is also no need for the period used to be a year.  A shorter period can be selected where appropriate.  There should be no using the same period in two successive years, as the tribunal suggested, because it would be as wrong in the second year to use the reduced earnings of the year in which the claimant was ill, as it was wrong in the year in which she was ill to use the earnings of the previous year.  Once the earnings level has recovered, or even started to recover, it is open to the council to recalculate average earnings rather than using historic figures that are no longer accurately represent current earnings.

8.     The approach of the council and the tribunal is not only clearly wrong in the light of the wording of the relevant regulations but it is productive of an absurd situation where a claimant is denied benefit in a period in which she needs it because of lost income, with attendant hardship and possible loss of her home, and is then awarded it in a period of plenty because of her previous year’s earnings. 

9.     The new tribunal will need to consider all the evidence and determine (1) over what period it is appropriate that the claimant’s average weekly earnings should be calculated in order that they may be estimated accurately; (2) what those average weekly earnings were; and (3) what her resulting entitlement to benefit was, and what overpayments there have been, if any, in the period in question as a result of her failure, if there was one, to notify the council that she had started work again.

(signed) Michael Mark

Judge of the Upper Tribunal

26 February 2013