IN THE UPPER TRIBUNAL Case Nos CG/888/2014

ADMINISTRATIVE APPEALS CHAMBER CG/3370/2014

 

Before UPPER TRIBUNAL JUDGE WARD

 

Decision:

 

The appeal is allowed.  The decisions of the First-tier Tribunal sitting at Leeds on 24 October 2013 under references SC007/12/06141 and SC007/13/02728 involved the making of an error of law and are set aside.  Acting under section 12(2)(b) of the Tribunals, Courts and Enforcement Act 2007 I make the decisions in the following terms:

 

(a) The decisions of the Decision Maker dated 16 October 1998 and 9 September 2002 awarding carer’s allowance from 21 September 1998 and 3 June 2002 respectively are superseded because in each case there has been a relevant change of circumstances since the respective decision took effect.  This was that the claimant earned more than the allowable earnings limit during each of the periods 6 April 2000 to 14 January 2001, 15 March 2001 to 5 April 2001 and 6 April 2007 to 26 June 2007.

 

(b) I direct that the Secretary of State is to determine in accordance with the findings and legal principles set out in the Reasons below the effect on the claimant’s entitlement to carer’s allowance as a result of the sums earned during those periods and calculate a revised amount overpaid.  This is to be done and the outcome notified to the claimant within one month of the date of the letter sending this decision.  If the determination and/or the calculation are disputed, the claimant may within one month of receipt of the notification from the Secretary of State refer the matter back to the Upper Tribunal in writing.

 

(c) Overpayments of carer’s allowance have been made of the amount to determined as provided in para 3 above.  Those overpayments are recoverable from the claimant because she failed to disclose to the Carer’s Allowance Unit the material fact that she had started work and/or had earnings that were more than the allowable earnings limit, at the start of each of those periods or as soon as possible thereafter.

 

REASONS FOR DECISION

 

1. Because of the absolute cut-off which the earnings limit for carer’s allowance creates, it can be vital to assess people’s earnings as accurately as possible.  This case highlights the potential relevance to that of evidence from HMRC going to a claimant’s potential liability for national insurance contributions.  In the present case the point was obscurely presented within the evidence and not highlighted at all by the submissions for either party to the First-tier Tribunal.  Nonetheless, the First-tier Tribunal is a specialist tribunal with an inquisitorial jurisdiction, the point was there to be seen and it is now common ground between the parties that it erred in law by not doing so.  The result was that it declared an inflated sum to be recoverable.

 

2. The claimant had claimed carer’s allowance in 1998 and 2002 (the claim was closed at a point between those years when she was not providing care to the individual concerned.)  Many years later, in 2010, the Secretary of State received information from HMRC showing that the claimant had paid NI contributions in various tax years.

 

3  Subsequent enquiries revealed that:

 

she had been employed by B Ltd in 2000-01 with gross earnings of £3055.11; and

 

she had been employed by A with gross earnings of £1139.68 from the start of the 2007-8 tax year (6 April 2007) to 26 June 2007.

 

4. A decision was taken that she was not entitled to receive carer’s allowance from 17 April 2000 to 8 April 2001 and from 30 April 2007 to 29 July 2007.  (How these dates relate to the dates of her earnings has not been explored in submissions, but will be adequately addressed by para (b) of my Decision above.)  A subsequent decision was taken that she had failed to disclose the level of her earnings at the appropriate times and so that the sums overpaid were recoverable.

 

5. No information was forthcoming from either employer as to the details of wages paid and the claimant’s evidence (not altogether surprisingly given the passage of time) was extremely vague.  One point that she did make was that in 2000/01 she had had a period of time off work after a hysterectomy carried out on 15 January 2001, though she could not say how long her convalescence had lasted.

 

6. A number of points were taken by the claimant’s solicitors as to the decision, all of which I refused permission to appeal on.

 

7. I did however give permission on the tribunal’s apparent failure to engage with the records about potential liability for national insurance contributions.  I deal with each year in turn.

 

2000/01

 

8. The evidence contains at page 20 a screen print of an electronic exchange by which the DWP Carer’s Allowance Unit sought, and HMRC gave, information about the claimant's employment.  One window was partially superimposed on another.  The window on top gave, inter alia, the claimant’s gross pay for 2000/01.  The window underneath had the following table, partially obscured by the window on top and in an odd grey font:

 

Cal	P14 Col.1a	P14 Col.1b	P14 Col 1c	P14 Col 1d	[obscured]
A	£1608.00	£110.00	£9.00	£0.00

 

P14 is the end of year summary form which employers have to complete for (now) HMRC. 

 

9. The key question was what could be inferred from that about the pattern of the claimant’s earnings in that tax year.  To that, one would then have to apply the relevant provisions of the Social Security (Computation of Earnings) Regulations 1996/2745 (“the 1996 Regulations”).  In practical terms, the focus was on the period when the claimant had had the hysterectomy and the associated time for convalescence.  Regulation 10 makes the starting point a person’s gross earnings, from which, as will be seen below, certain deductions fall to be made in order to arrive at net earnings.  There are also certain disregards from net earnings, but there is no suggestion that they apply here.

 

10. The only way to understand the above figures was to establish what they meant in their context on Form P14.  Column 1a refers to earnings equal to or exceeding the lower earnings limit (LEL).  Column 1b is for earnings above the LEL up to and including the Primary Threshold (PT) and column 1c for earnings above the PT up to and including what is now the Upper Accrual Point (UAP) . I rather doubt there was such a thing as the UAP in 2000/01 but it does not matter in the circumstances of this case.

 

11. In the tax year 2000/01 the LEL was £67, and the PT was £76.  One can (and, it seems to me, the tribunal ought to have done so) back-calculate from that.  The £1608 figure shows that there were 24 weeks in which the £67 LEL was reached (24x67=1608).  Precisely how and when the figures – of £110 and £9 – were earned in 2000/01 is not important.  It is impossible to earn figures in columns 1b and 1c without also earning a figure that would fall in column 1a for the same week.

 

12. In 2000/01 the earnings limit for carer’s allowance was £50 per week.  If one accepts (as I do) HMRC’s evidence that overall gross pay in that year was £3055.11, the 24 weeks in which the LEL was reached account for the total of the figures in columns 1a, 1b ad 1c, i.e. £1727, leaving £1328.11 to have been earned in the rest of the tax year.  We know that in January 2001 the claimant underwent a hysterectomy and was unable to work for a while.  As it is less rather than more likely on the evidence that her pay fluctuated substantially, in my view the correct approach (bearing in mind that the burden is on the respondent in an overpayment case) is to take the highest possible figure that could have been earned in a week without reaching the LEL (i.e. £66.99).  This would have taken 19.83 weeks. The 24 plus 19.83 weeks (call it in all 43 weeks 6 days) thus accounted for leave a period of 58 days, not inherently improbable, for the convalescence period, starting from the date of the operation (15 January 2001).  It is correct that there was no firm evidence as to the amount of time the claimant had had off work: SOR, para 21.  No doubt she had some: see e.g. http://www.nhs.uk/Conditions/Hysterectomy/Pages/Recovery.aspx.  In respect of the convalescence period, the claimant had no earnings at all.

 

13. I record that although as noted in [9] certain deductions fall to be made from gross earnings (a) the evidence is that no income tax was deducted; (b) there is no evidence of any pension deductions; and (c) there is no direct evidence in the papers of the level of employee’s NI contributions deducted.  However, such deductions would only have been payable on earnings above the PT which, from the table above, amounted to £9 only.  The level of NI contributions could not therefore overcome the substantial margin by which – otherwise than in the recuperation period – the claimant’s earnings (using a gross figure) exceeded the earnings limit for carer’s allowance.

 

2007/08

 

14. Turning to 2007/08, in that year the LEL was £87 and the PT was £100.  the earnings limit for carer’s allowance until September 2007 was also £87.  A further screen print (p 28) shows the relevant figures.

 

NIC Table Letter	Earnings at the LEL	Earnings above the LEL, up to & including the ET	Earnings above ET, up to & including the UEL	[not material]	[not material]
A	£348	£51.00	£89.00

 

The period in issue was from the start of the tax year 6/4/07 to 26/6/07 when the business of A was transferred to a new employer (11 weeks 4 days). We can see that earnings at the LEL were £348. That equates to 4 weeks at £87.  As before, whenever the £51 (for earnings between the LEL and the ET= Earnings Threshold) and £89 (for earnings above the ET) were earned, it must have been in those 4 weeks.  It follows that for the remainder of the period (7 weeks and 4 days) the claimant earned a weekly sum which (if each week stood alone) was under the earnings limit for carer’s allowance.  The total earnings with the then proprietor of A were £1139.68.  If one takes away  £348 + £41 +£89 = £488, one gets left with £651.68 attributable to the remaining 7 weeks and 4 days.  A division sum then produces the weekly sum of £86.10, thus rather confirming this view.  These sums therefore suggest that the claimant did occasional extra hours or hours at premium rates, but was otherwise under the earnings limit if each week stood alone. 

 

15. Subject to one point, these findings, which I had put to the parties for their comment when I granted permission, are accepted.  The reservation comes from the solicitors for the claimant, who submitted that:

 

“it has not been taken into account[...] that the [claimant] was accredited with National Insurance Contributions by virtue of the fact that she was in receipt of carers allowance in the relevant period.  As such, her national insurance level for the overpayment period may be inflated because of the amount credited to her by virtue of the carers allowance credits.”

 

16. I am unable to agree.  Quite often one does see evidence of a person’s contribution record in which details of both contributions and credits are given, but here the evidence is of something different.  The two screen prints from which the above evidence is taken reflect actual earnings which might be subject to national insurance contributions.  It may be the case that, having not reached the minimum contribution condition in e.g. 2000/01 because of the break in her work, the claimant was entitled to be awarded sufficient credits to take her to the minimum contribution condition.  But such credits only ever operate by way of top up – deductions based on actual salary, as shown in the evidence in this case, come first.

 

17. I further find that in 2007-8 the claimant was paid weekly by A. There is evidence on file saying as much, recording that her terms changed when the business was subsequently taken over.  The claimant says (p136) she was also paid weekly by B Ltd and I proceed on that basis.

 

18. In 2007-8 once again no tax was deducted and there was no evidence of any pension deductions. The level of employee’s NI contributions is in evidence (£9.94 across the period).

 

Computation of Earnings

 

19. Having found the tribunal to have been in error of law for the reason in [1] and made the above findings of fact, it is then necessary to apply the relevant provisions of the 1996 Regulations, regulation 8 of which provides:

 

“(1) For the purposes of regulation 6 (calculation of earnings of employed earners), subject to paragraphs (2) to (4), where the period in respect of which a payment is made—

(a) does not exceed a week, the weekly amount shall be the amount of that payment;

(b) exceeds a week, the weekly amount shall be determined—

(i) in a case where that period is a month, by multiplying the amount of that payment by 12 and dividing the product by 52;

(ii) in a case where that period is three months, by multiplying the amount of the payment by 4 and dividing the product by 52;

(iii) in a case where that period is a year, by dividing the amount of the payment by 52;

(iv) in any other case, by multiplying the amount of the payment by 7 and dividing the product by the number equal to the number of days in the period in respect of which it is made.

(2)....

(3) Where the amount of the claimant's net earnings fluctuates and has changed more than once, or a claimant's regular pattern of work is such that he does not work every week, the application of the foregoing paragraphs may be modified so that the weekly amount of his earnings is determined by reference to his average weekly earnings—

(a) if there is a recognisable cycle of work, over the period of one complete cycle (including, where the cycle involves periods in which the claimant does no work, those periods but disregarding any other absences);

(b) in any other case, over a period of five weeks or such other period as may, in the particular case, enable the claimant's average weekly earnings to be determined more accurately.

(4) ....”

 

20. For the reasons given in [12], the claimant is to be taken to have earned more than the earnings limit at all times during the year, save for the period of 58 days commencing on 15 January 2001.  During the 58 day period, she is to be taken as having earned nothing.  I previously suggested, and the parties agree, that reg 8(1)(a) can be applied in the 2000/01 period. 

 

21. For the tax year 2007/08, on the available evidence, while the claimant was clearly paid more in 4 weeks than in the other 7 weeks 4 daysand so her earnings fluctuated, it is not possible to discern any cycle of work.  In particular, it is impossible to conclude that the 4 weeks of higher earnings fell together, so as to leave the 7 weeks 4 days of lower earnings together or indeed in which weeks the higher earnings were achieved at all.  If one were to apply reg 8(1)(a) there is no alternative but to determine the “weekly amount” through a process of averaging across the 11 week 4 day period.  There is alternatively a discretion whether to apply regulation 8(3)(b) instead of reg 8(1).  If one as a result does end up applying reg 8(3)(b), one can only determine the weekly rate applicable for the five weeks to be taken into account for the period referred to in reg 8(3)(b) by a process of averaging.  Alternatively, one could adopt an alternative period consisting of the entire 11 week 4 day period in that tax year she was employed by the then proprietor.  All these routes have the consequence that the four weeks when the claimant was over the limit have the effect of raising the overall average above the allowable earnings limit, notwithstanding the 7 weeks 4 days when she was just below it.  It is impossible to identify any period, other than the whole period, which would enable the claimant’s earnings to be determined more accurately.  

 

22. By reason of the matters in [18], this conclusion is equally valid if the minimal NI deductions are taken into account.

 

23. I indicated my proposed approach to applying reg 8 in my grant of permission: the Secretary of State supports this approach and the claimant’s representative has not indicated any dissent from it.

 

 

 

 

 

 

 

CG Ward

Judge of the Upper Tribunal

29 April 2015