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Cite as: [2014] UKUT 251 (AAC)
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GC v HMRC (TC) (Residence and presence conditions : ordinary residence) [2014] UKUT 251 (AAC) (30 May 2014)
IN THE UPPER TRIBUNAL Case No. CTC/1585/2012
ADMINISTRATIVE APPEALS CHAMBER
Before Upper Tribunal Judge Rowland
Decision: The claimant’s appeal is allowed. The decision of the First-tier Tribunal dated 1 December 2011 is set aside and the case is remitted to a different judge of the First-tier Tribunal. I also direct that, subject to any further direction by the First-tier Tribunal –
(a) this case is to be determined at an oral hearing at the same time as the claimant’s appeal in respect of the year 2009-10, sent to HMRC on 5 January 2011;
(b) HMRC is to provide to the First-tier Tribunal, within one month of the date this decision is sent to them –
(i) a transcript or recording of the telephone call made by the claimant to HMRC’s Helpline at about 7.30 on 25 June 2009;
(ii) a copy of the TC60 (or TC 600) guidance notes in force from April 2009;
(iii) a further submission in the light of this decision and all the evidence now available.
REASONS FOR DECISION
1. This is an appeal, brought by the claimant with my permission, against the decision of the First-tier Tribunal, dated 1 December 2011 dismissing her appeal against a revised decision of the Commissioners for Her Majesty’s Revenue and Customs (“HMRC”) in respect of the year 2010-11, awarding her working tax credit from 14 September 2010 to 5 April 2011 and child tax credit from 6 April 2010 to 5 April 2011. The claimant seeks working tax credit from 6 April 2010 to 18 August 2010.
2. On 10 August 2009, the claimant took up work, on a self-employed basis, in Spain. Her children, the younger of whom was an 18-year old full-time student on a BTEC course, remained in her home in the North-East of England and she returned from time to time. On 14 July 2010, she returned for what was intended to be a four-week holiday but obtained employment in England to start on 19 August 2010 and stayed. Employment prospects in Spain were not good and the claimant says that she made a loss while working there.
3. When the claimant went abroad in 2009, it appears that HMRC decided that she was no longer entitled to working tax credit and, indeed, that she had been overpaid for a short period. The claimant appealed against the resulting decision in respect of the year 2009-10 and it appears she did so on 5th January 2010 on the ground that she remained entitled to working tax credit while in Spain, for reasons that I will explain more fully below. Unfortunately, that decision was not processed and was not sent to the First-tier Tribunal until after I had given permission to appeal in the present case. It remains pending before the First-tier Tribunal.
4. The present appeal relates to the year 2010-11 and arises out of a decision awarding child tax credit for the whole year but working tax credit only from 14 September 2010. In the claimant’s first ground of appeal to the First-tier Tribunal, made by letter dated 3 March 2011, she argued that she was entitled to working tax credit from 19 August 2010 on the basis of her employment in England. However, she added –
“I would like to state that I believe I should be entitled to claim from 5th April 2010 as I was working full time within the EU as my original appeal of 5th January 2011 which is presently being dealt with.”
Unfortunately, as I have said, that earlier appeal was in fact not being dealt with at all.
5. HMRC originally took the view that working tax credit was payable only from 14 September 2010 on the ground that the claimant had only notified them of her employment in England on 14 December 2010 and the award could be backdated only for three months of her notification of that change of circumstances. However, on receipt of the appeal and further correspondence, HMRC eventually accepted that it had been notified of the change of circumstances at the time and so it issued “an award notice” and paid the claimant the arrears from 19 August 2010. Following the issuing of the award notice, it wrote to the claimant about her appeal on 30 August 2011, saying that –
“As all points of this specific appeal have been met the appeal is now closed. You do have 30 days to contact us if you do not agree with this decision and the specific appeal can be re-opened, after 30 days you cannot appeal the same points.”
6. I need not consider how accurate that statement of the claimant’s rights was – or would have been had section 54 of the Taxes Management Act 1970 still been applied to tax credits cases (see JI v Commissioners for Her Majesty’s Revenue and Customs (TC) [2013] UKUT 199 (AAC)) – because the claimant did promptly object to the closing of her appeal, restating her claim to be entitled to working tax credit from 6th April 2010 and referring again to her earlier appeal. Accordingly, her appeal was referred to the First-tier Tribunal.
7. HMRC’s response to the appeal stated that, to be eligible for working tax credit, “a person must be in the United Kingdom, allowing for temporary absences measured in weeks”, citing section 3(3) and (4) of the Tax Credits Act 2002. It pointed out that she was not in the United Kingdom until she returned for her holiday in July 2010. It did not explicitly state why she was not entitled from the date of her return, but I suspect that it did not consider her to be in remunerative work until 19 August 2010.
8. On 2 November 2011, the First-tier Tribunal notified the parties that the appeal would be heard on 1 December 2011 at 10.30 am. On 22 November 2011, the claimant wrote to ask that the appeal either be heard at 9 am or at 4 pm, so as to cause as little interference as possible for her employers. She added –
“Is this appeal also taking into account my ongoing appeal pre April 2011 (sic) which was being dealt with by the Washington office? They were supposed to contact me by April 2011 but I have still not heard other then the case was ongoing!!! I would prefer 1 appeal relating to my whole case if one appeal is possible.”
On 25 November 2011, the day the letter was received, a judge refused to postpone the hearing, because the request had not been made promptly – although he erroneously thought the notice of hearing had been issued on 20 October 2011, when that was the date on which the standard enquiry form had been issued – and also because the “appointment times requested do not fall within those operated by the Tribunals Service.”
9. On the morning of the hearing, the claimant hand-delivered a letter to the county court where the hearing was to take place, explaining the delay in her previous application. She said that, although she had enquired about asking for a postponement on 9 November 2011, she and her manager had subsequently decided that she could be spared from work and so she had not asked for the postponement. However, three members of her team of eleven had then been off at once and so she had enquired again on 22 November 2011 about asking for a postponement and had been told it was not too late. She again asked for a postponement, saying –
“My job in the nursery relies on staff ratios to the number of children who can attend on a daily basis and this week we now have 4 members of staff off work so to say we are stretched to the limit is an understatement and there is no possibility that I can attend this appeal.”
10. The judge considered the letter but refused the postponement and dismissed the appeal. He noted that a case could be listed at 4pm but refused the postponement on the basis that the claimant had no chance of success on her appeal. He dismissed the appeal on the ground that the claimant could not be treated as residing in the United Kingdom while living and working in Spain and her visit to the United Kingdom in July 2011 had been intended to be only temporary. He said he was unaware of any other appeal but, if the claimant had one, it would be dealt with in due course.
11. The First-tier Tribunal judge subsequently refused permission to appeal. The claimant made an application to the Upper Tribunal for permission to appeal and Upper Tribunal Judge Lloyd-Davies granted her request for an oral hearing. The case was transferred to me and I granted permission to appeal. I explained my reasons for doing so as follows –
“2. I give permission to appeal because the claimant’s appeal to the First-tier Tribunal may not have been as hopeless as the First-tier Tribunal thought it was – and, indeed, as hopeless as I thought it was before the hearing today. That may be due to the Respondent not having provided all the relevant information to the First-tier Tribunal.
3. The claimant’s account to me was as follows.
She has lived at her present address for many years. She went to Spain in August 2009 only after checking that she would remain entitled to tax credits if she was not absent for more than 8 weeks at a time. She obtained advice from the HMRC Helpline (Stuart in Dundee, at about 7.30 pm on 25 June 2009). Two of her children, aged 18 and 20, remained in her home in the United Kingdom and she flew back frequently from Spain so as to ensure that she was not absent for more than 8 weeks, staying in her house for a couple of days each time, or for a week at Christmas and for even longer at Easter when she was delayed by the Icelandic volcano. Details of her flights to and fro were provided to HMRC in the context of her child benefit claim. She was refused working tax credit and appealed against both the assessment for 2009-10 and the assessment for 2010-11.
4. The claimant handed me a copy of a P85 form that she completed in 2010 and the accompanying letter. She also handed to me copies of the 2009-10 decision and her appeal against it, which appears never have been sent by HMRC to the First-tier Tribunal.
5. It is arguable that the claimant remained resident in the United Kingdom throughout the year she was working in Spain (even if she was also resident in Spain) and that she was ordinarily resident in the United Kingdom. More importantly, it is arguable that, if her account is accepted, she remained throughout the material time “in the United Kingdom” for the purposes of section 3(3)(b) of the Tax Credits Act 2002 by virtue of the operation of regulation 4(1)(a) of the Tax Credits (Residence) Regulations 2003 (SI 2003/654).
6. There does not appear to be anything in regulation 4 of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 (SI 2002/2005) requiring that “qualifying remunerative work” for the purpose of section 10 of the Act must be in the United Kingdom. Nor does the definition of “self-employed” in regulation 2 have that implication. I am therefore at a bit of a loss as to the basis for HMRC’s submission to the First-tier Tribunal that the claimant was not entitled to working tax credit because her work as a self-employed person was not in the United Kingdom. (Different considerations might apply to an employed person due to the definition of “employed” in regulation 2.)
7. I am satisfied that, contrary to the view of the First-tier Tribunal that her case was hopeless, it is arguable that the claimant was in fact entitled to working tax credits and, what is more, that HMRC had the information necessary to show that that was so but had failed to produce it to the First-tier Tribunal. It currently seems to me that, had the First-tier Tribunal been provided with all the relevant documents, it might at least have granted the claimant’s request for a postponement and it might even have allowed the claimant’s appeal on the papers.
(Rereading HMRC’s submission to the First-tier Tribunal I am not sure that it did make the error I suggested in paragraph 6 of those reasons.)
12. HMRC considers that it had provided all the relevant information to the First-tier Tribunal and does not support the appeal.
13. HMRC has helpfully set the material legislation as to entitlement to tax credits out in its submission to the Upper Tribunal. Entitlement to tax credits is determined in accordance with part 1 of the Tax Credits Act 2002. First, section 3(3) provides that a claim for a tax credit may be made only by a person who is “in the United Kingdom” and section 3(8), when read with the definition of “prescribed” in section 67, has the effect that regulations may prescribe circumstances “in which a person is to be treated for the purposes of this Part [of the Act] as being, or as not being, in the United Kingdom”.
14. The regulations material to the present case are regulations 3(1) and 4 of the Tax Credits (Residence) Regulations 2003 (SI 2003/654).
“3.–(1) A person shall be treated as not being in the united Kingdom for the purposes of Part I of the Act if he is not ordinarily resident in the United Kingdom.”
“4.–(1) A person who is ordinarily resident in the United Kingdom and is temporarily absent from the United Kingdom shall be treated as being in the United Kingdom during the first –
(a) 8 weeks of any period of absence; …
(2) A person is temporarily absent from the United Kingdom if at the beginning of the period of absence his absence is unlikely to exceed 52 weeks.”
15. Therefore, as HMRC appears to accept, if the claimant did manage to avoid being absent from the United Kingdom for more than eight weeks at a time, her entitlement to working tax credit depended on whether she was ordinarily resident in the United Kingdom during the period from August 2009 to July 2010 when, on her own account, she was principally living in Spain. She was doubtless resident in Spain and quite probably ordinarily resident there, but it does not follow that she might not also have been ordinarily resident in the United Kingdom.
16. As to ordinary residence, HMRC argues that, in the light of R. v Barnet L.B.C., ex parte Shah [1983] 2 AC 309, a person is ordinarily resident in the United Kingdom if normally living in the United Kingdom (apart from temporary or occasional absences) and if the residence has been adopted voluntarily and for settled purposes as part of the regular order of his or her life for the time being. I agree with that. However HMRC go on to argue that, because the claimant’s periods of presence in the United Kingdom appear to have been only “visits” and served the purpose of holidays and to see family and friends and for the purpose of engaging regulation 4, they cannot be regarded as having been for the “settled purposes” of her life. I do not accept that that is necessarily so. In my judgment, the point is at least arguable.
17. The position is more complicated than HMRC argues. In Grace v Commissioners for Her Majesty’s Revenue and Customs [2009] EWCA Civ 1082; [2009] STC 2707, the Court of Appeal considered a summary of the law compiled by Lewison J in the Court below and referred also to a list of factors compiled by a Special Commissioner in Shepherd v HMRC (2005) SPC 484, apparently approving both. Lloyd LJ, with whom Dyson and Waller LJJ agreed, said –
6. Lewison J's summary is as follows:
"(i) The word "reside" is a familiar English word which means "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place": Levene v Commissioners of Inland Revenue (1928) 13 TC 486, 505. This is the definition taken from the Oxford English Dictionary in 1928, and is still the definition in the current on-line edition;
(ii) Physical presence in a particular place does not necessarily amount to residence in that place where, for example, a person's physical presence there is no more than a stop gap measure: Goodwin v Curtis (1998) 70 TC 478, 510;
(iii) In considering whether a person's presence in a particular place amounts to residence there, one must consider the amount of time that he spends in that place, the nature of his presence there and his connection with that place: Commissioners of Inland Revenue v Zorab (1926) 11 TC 289, 291;
(iv) Residence in a place connotes some degree of permanence, some degree of continuity or some expectation of continuity: Fox v Stirk [1970] 2 QB 463, 477; Goodwin v Curtis (1998) 70 TC 478, 510;
(v) However, short but regular periods of physical presence may amount to residence, especially if they stem from performance of a continuous obligation (such as business obligations) and the sequence of visits excludes the elements of chance and of occasion: Lysaght v Commissioners of Inland Revenue (1928) 13 TC 511, 529;
(vi) Although a person can have only one domicile at a time, he may simultaneously reside in more than one place, or in more than one country: Levene v Commissioners of Inland Revenue (1928) 13 TC 486, 505;
(vii) "Ordinarily resident" refers to a person's abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life, whether of short or long duration: R v Barnet LBC ex p Shah [1983] 2 AC 309, 343;
(viii) Just as a person may be resident in two countries at the same time, he may be ordinarily resident in two countries at the same time: Re Norris (1888) 4 TLR 452; R v Barnet LBC ex p Shah [1983] 2 AC 309, 342;
(ix) It is wrong to conduct a search for the place where a person has his permanent base or centre adopted for general purposes; or, in other words to look for his "real home": R v Barnet LBC ex p Shah [1983] 2 AC 309, 345 and 348;
(x) There are only two respects in which a person's state of mind is relevant in determining ordinary residence. First, the residence must be voluntarily adopted; and second, there must be a degree of settled purpose: R v Barnet LBC ex p Shah [1983] 2 AC 309, 344;
(xi) Although residence must be voluntarily adopted, a residence dictated by the exigencies of business will count as voluntary residence: Lysaght v Commissioners of Inland Revenue (1928) 13 TC 511, 535;
(xii) The purpose, while settled, may be for a limited period; and the relevant purposes may include education, business or profession as well as a love of a place: R v Barnet LBC ex p Shah [1983] 2 AC 309, 344;
(xiii) Where a person has had his sole residence in the United Kingdom he is unlikely to be held to have ceased to reside in the United Kingdom (or to have "left" the United Kingdom) unless there has been a definite break in his pattern of life: Re Combe (1932) 17 TC 405, 411."
This has the incidental advantage of identifying almost all the decided cases to which I need to refer. Those not already mentioned to which I will refer are Re Young (1875) 1 TC 57, Cooper v Cadwalader (1904) 5 TC 101 and Commissioners of Inland Revenue v Brown (1926) 11 TC 292.
"- that no duration is prescribed by statute and it is necessary to take into account all the facts of the case; the duration of an individual's presence in the United Kingdom and the regularity and frequency of visits are facts to be taken into account; also, birth, family and business ties, the nature of visits and the connections with this country, may all be relevant (Zorab; Brown);
…
that the availability of living accommodation in the United Kingdom is a factor to be borne in mind in deciding if a person is resident here (Cooper) (although that is subject to s 336);
that the fact that an individual has a home elsewhere is of no consequence; a person may reside in two places but if one of those places is the United Kingdom he is chargeable to tax here (Cooper and Levene);"
18. In the present case, it might be regarded as highly relevant that the claimant appears to have been returning to what was still a home of hers, where her children were living. What her intentions were and how settled they were are among the matters that remain to be explored, but her periods of physical presence in the United Kingdom were not by chance, even though short.
19. I am not surprised that, on the information before him, the First-tier Tribunal judge considered the claimant’s case to be hopeless, but he knew nothing about her having been in the United Kingdom between August 2009 and July 2010 and so did not know that it was her case that she had not been physically absent from the United Kingdom for more than eight weeks at a time. Neither party had told him about that. Despite the claimant having referred to her previous appeal, HMRC appears to have made no effort to link the two cases or to put the information obtained in connection with that case before the First-tier Tribunal in the present case. Against the wider background of the claimant’s dealings with HMRC, HMRC’s response to her appeal to the First-tier Tribunal seems to me to have been grossly inadequate. Even worse was its so far unexplained failure to deal with the claimant’s first appeal. It is true that, by the date of the hearing, the claimant knew what information had been provided to the First-tier Tribunal in her current appeal and she could have provided more detail in support of her appeal in either of her applications for a postponement. On the other hand, she was applying for a postponement precisely so that she could explain her case in person and cannot, in my judgment, have been expected to realise that the judge would consider anything other than her reason for not being able to attend the hearing in order to do that.
20. I am satisfied that the judge erred in considering the claimant’s appeal to be hopeless and that he would not have done so, or would have been wrong to have done so, had HMRC provided a proper response and also “copies of all documents relevant to the case in [HMRC’s] possession”, as required by rule 24(4)(b) of the Tribunal Procedure (First-tier Tribunal) (Social Entitlement Chamber) Rules 2008 (SI 2008/2685). The First-tier Tribunal judge was entitled to believe he had all such documents before him and he plainly did not. That procedural defect gave rise to unfairness, particularly in view of the fact that the claimant did not have representation. It seems doubtful that the judge would have refused the postponement had he not considered the appeal to be hopeless. For these reasons, I am satisfied that the First-tier Tribunal’s decision not to grant a postponement was wrong in law and that the subsequent decision to dismiss the claimant’s appeal was therefore also wrong in law. (Since the claimant has already been paid the arrears from 19 August 2011, I need not consider whether, since it accepted HMRC’s submissions, the First-tier Tribunal ought formally to have allowed the appeal to the extent of making an award to from 19 August 2011 or whether HMRC had in fact revised the decision under appeal so that the Fist-tier Tribunal did not need to do so.)
21. I am also satisfied that, as I do not have all the relevant documentary material before me and as the appeal that is more likely to have that material included in the papers is already before the First-tier Tribunal, I should remit this case to be heard by the First-tier Tribunal with that other appeal.
22. Finally, I should add that the claimant asked that I obtain copies of the record of the HMRC Helpline conversation between the claimant and “Stuart in Dundee” at about 7.30 pm on 25 June 2009 and also a copy of the TC60 (or possibly TC600) booklet in force from April 2009, which led her to believe that she would be entitled to working tax credit as long as she returned to the United Kingdom every 8 weeks. Complying with such advice cannot determine whether a person is or is not ordinarily resident in the United Kingdom but where there is an element of discretion or judgment, official advice can create a legitimate expectation that the discretion or judgement will be exercised in a particular way. Good administration requires that effect be given to such expectations if that is consistent with the law, particularly where a person has acted to his or her detriment on the basis of the advice. But it is important to look carefully at the terms of the advice in order to see whether it really did create an expectation and, if so, what could really properly be expected. It may turn out not be necessary, or it may turn out not be permissible, for the claimant to rely on the advice. On the other hand, it may be relevant and for that reason I direct HMRC to provide it to the First-tier Tribunal.