Upper Tribunal (Administrative Appeals Chamber)

IN THE UPPER TRIBUNAL                 Appeal No: CIS/803/2012

ADMINISTRATIVE APPEALS CHAMBER

Before: Upper Tribunal Judge Wright

DECISION

            The Upper Tribunal allows the appeal of the appellant.

The decision of the First-tier Tribunal sitting at Fox Court on 1 September 2011 under reference 242/10/14792 involved an error on a point of law and is set aside.

The Upper Tribunal substitutes its own decision for that of the First-tier Tribunal. That decision is that the respondent’s decision of 5 March 2012 is set aside and the substituted decision made that from 5 February 2010 to 21 February 2010 the appellant had tariff income of £25 per week and from 22 February 2010 the tariff income is £24 per week, and the entitlement to income support needs to be recalculated accordingly.     

This decision is made under section 12(1), 12 (2)(a) and 12(2)(b)(ii) of the Tribunals, Courts and Enforcement Act 2007

REASONS FOR DECISION

1.                   I allow this appeal because I am satisfied that the First-tier Tribunal (“the tribunal”) erred materially in law in not giving adequate reasons for its decision. I apologise to the parties to this appeal for the time it has taken me to decide this appeal since it was transferred to me by Judge Powell on his retirement earlier this year.

2.                  This appeal is concerned with the application of the capital disregard rule concerning payment of arrears of social security benefits found in paragraph 7 of Schedule 10 to the Income Support (General) Regulations 1987.    The effect of this paragraph 7 is to provide that there is to be disregarded as a capital “…any arrears of…(a) [Disability Living Allowance]; (b) an income related benefit…but only for a period of 52 weeks from the date of receipt of the arrears…”.        

3.                  As the appellant points out, and the Secretary of State agrees, the reasoning of the tribunal made no attempt to grapple with, let alone explain away, the appellant’s ground of appeal questioning why the arrears of income support had not been disregarded and his further and wider ground that, in effect, the 52 week capital disregard for arrears of income support (”IS”) and disability living allowance (“DLA”) had to be set off against his total capital generally. To say in response to these arguments simply that the appellant had misunderstood the regulations and that “[h]e will note that the disregards have been properly applied” is, in truth, no reasoning at all: the appellant’s central case was that the capital disregard in respect of arrears of social security benefits had not been applied properly and the tribunal fails singularly to say why the disregard had been applied correctly.

4.                  Moreover, as the Secretary of State now submits, and I agree, the arrears disregard was not applied correctly as there was a failure to apply it to the arrears of income support.

5.                  However, I do not accept the appellant’s wider argument that the benefit from the arrears disregard was conferred on him generally in the sense of it applying to the totality of his capital for 52 weeks regardless of the source of that capital.  The flaw in that argument, in my judgment, is the failure to recognise that what is provided for under the law is a disregard for 52 weeks in respect of the arrears of, here, DLA and IS, for a period of 52 weeks from the date of receipt of the arrears. What is not provided for is a disregard for 52 week of a sum equivalent to the arrears sum.  The disregard only attaches to the arrears of the benefit.  

6.                  In a case such as this one where the arrears money is paid into a bank account with other sums of money already in it, and from which sums of money are then withdrawn and paid in, a search has to be made at the relevant time by the decision making body to identify whether the sum in the account is the arrears of DLA or IS or something else. Here that has been done in the appellant’s favour as it has been assumed that the sums remaining in the two relevant accounts at the relevant times were still the arrears of DLA and IS, and not that those sums had already been spent and replaced with some other monies from another source. 

7.                  The history of the DLA arrears and the bank account into which they were paid illustrates the point well. On 26 March 2009 the appellant was paid arrears of DLA amounting to £1,171.50.  For as long as those arrears had remained in place as part of the appellant’s capital for the 52 week period from 26 March 2009 they would be disregarded as his capital, but thereafter they would count as his capital.  The arrears sum was paid into a bank account of the appellant.  The 52 week disregard ran up to and including 24 March 2010.  The two dates relevant to assessing the appellant’s entitlement to income support for the purposes of this appeal fell before this 24 March 2010 date.  However, as at the two relevant dates only £388.16 was left in this account. The Secretary of State has proceeded on the assumption that the £388.16 figure was still part of the arrears of DLA, and it was disregarded as the appellant’s capital.  In other words, the Secretary of State accepts that all the arrears had not been spent by then and so the £388.16 figure was not in fact a capital sum from another source.  To that extent, this assumption acts in the appellant’s favour.

8.                 The appellant’s counter argument is that this does not correctly apply the 52 week exemption. He says that the arrears of DLA sum was used to pay off debts within the 52 week period but notwithstanding this the disregard of £1,171.50 ought still to have applied for 52 weeks in respect of his capital generally. As he puts it:

“I contend that it was Parliament’s intention that the exemptions should be offset against all capital for the whole duration (in this case 52 weeks) until expiry of the exemption period”

9.                  I do accept this argument as soundly made because it is contrary to the words used in paragraph 7 of Schedule 10 of the Income Support (General) Regulation 1987.

10.              On the appellant’s own evidence the arrears of DLA had been (mostly) spent by the two relevant dates. Assuming for the sake of argument and simplicity that the arrears of DLA had all been spent by the relevant dates then the terms of paragraph 7 of Schedule 10 to the Income Support (General) Regulations 1987 would have nothing to bite on, in my judgment, as, on the appellant’s own evidence, no arrears of DLA existed to then be disregarded.  The same analysis applies with equal force to the £388.16 left of the arrears. The appellant’s argument, on the other hand, has the effect that even if the arrears of DLA have long since been spent he can still benefit from the 52 week disregard in respect of other sums of capital in his bank account before the 52 week disregard period expires; sums from different sources and which may have been paid in since the arrears were spent.  However, that analysis robs the specific words used in paragraph 7 of Schedule 10 of their particular effect, and it instead requires that provision to be read as if it meant that a sum equivalent to the arrears sum has to be disregarded as the appellant’s capital for 52 weeks. That is not what paragraph 7 says, nor do I consider it can reasonably be construed as having that meaning. As I have stressed above, what paragraph 7 of Schedule 10 disregards is the arrears of DLA and not just a sum equivalent to that arrears figure.  

11.               To use the appellant’s language, the arrears disregard does not apply to “exempt” and “non-exempt” capital, it only applies to the “exempt” capital. 

12.              As for the arrears of income support, the Secretary of State now concedes, and I accept the concession as properly made, that paragraph 7 of Schedule 10 was not applied correctly to these arrear sums, and he has applied it to disregard £987.50 + £56.82 as arrears of income support as at the two relevant dates. He has again assumed in the appellant’s favour that all of the arrears of income support remained in the relevant bank account at the relevant dates and none of the arrears had been spent by then. I am prepared to decide the appeal on this basis, and that leads to the more favourable decision for the appellant as set out above (based on tariff income of £25 and £24 instead of £29 and £25 respectively).  

13.              The above analysis is not affected by whether the arrears sum is paid into an earmarked bank account which contains only the arrears sum or a mixed account with other sums of money in it.  It would probably be advisable for the arrears sum, if possible, to be paid into an account designated for that sole purpose only; not least because that then makes it easier to identify how much of the arrears sum remains after the 52 week disregard period.  However, the Secretary of State’s approach of assuming the sums left in the bank accounts at the relevant dates were only arrears of DLA and IS comes to the same result.                                                      

 (Signed) S. M. Wright

Judge of the Upper Tribunal

Dated 11^th December 2013