Upper Tribunal (Administrative Appeals Chamber)

DECISION OF THE UPPER TRIBUNAL

(ADMINISTRATIVE APPEALS CHAMBER)

The DECISION of the Upper Tribunal is to dismiss the appeal by the Appellant (“the mother”).

The decision of the Birmingham First-tier Tribunal dated 12 August 2014 under file reference SC002/13/00118 does not involve an error on a point of law. The tribunal’s decision therefore stands.

This decision is given under section 11 of the Tribunals, Courts and Enforcement Act 2007.

REASONS FOR DECISION

The parties to this appeal

1. The Appellant is the parent with care (“the mother”). The Second Respondent is the non-resident parent (“the father”). They are the parents of Charlotte, who was their youngest “qualifying child” for the purposes of the Child Support Act 1991 but is now herself aged 21, a fact which tells its own story (in fact the child support case was closed with effect from 31 August 2012, when child benefit payments for Charlotte stopped). The Second Respondent is the Secretary of State for Work and Pensions (for practical purposes the Child Support Agency, or CSA).

The nub of the case now

2. There have been a number of difficulties with the proper assessment of the father’s liability for child support. Both parents feel aggrieved at the way that the CSA has handled the case over the years. However, the Upper Tribunal is concerned only with appeals on points of law. The nub of this case is whether the First-tier Tribunal (District Tribunal Judge [DTJ] Ennals) was correct in law in ruling that the father was entitled to have his additional voluntary contributions (AVCs) towards his pension deducted in full from his income when calculating his child support liability.

The mother’s main argument

3. The mother’s main argument is straightforward. The couple were married for 18 years. She says that throughout that time the father was paying 8% in compulsory occupational pension contributions and a further 6% on his gross pay by way of AVCs. After they separated, the father substantially increased his AVCs to 25%. She further argues that these were at an unreasonably high level and amounted to a “diversion of income” under the Child Support (Variations) Regulations 2000 (SI 2001/156).

The father’s main argument

4. The father’s case is equally simple. He argues that the CSA has persistently made incorrect maintenance calculations despite being provided with the correct information about his earnings and relevant deductions. On 14 August 2012 the CSA sent him a series of assessments going back to 20 November 2008. In his letter of appeal to the First-tier Tribunal, the father complained that “on more than 4 separate occasions, I have given the CSA details of my pension payments which should have been taken into consideration on my assessments but have never been reflected.”

The First-tier Tribunal’s decision

5. At the First-tier Tribunal hearing on 12 August 2014 DTJ Ennals decided on the balance of probabilities that the father had informed the CSA at all material times as to the level of AVCs he was paying. He also considered that the relevant legislation governing the child support formula assessment gave him no discretion to consider whether the payments of AVCs were set at a reasonable level (or indeed to take account of the fact that the deductions were voluntary in nature). He therefore concluded that the CSA should re-assess the August 2012 maintenance calculations to take account of the full amount of the AVCs going back to November 2008. DTJ Ennals subsequently gave the mother permission to appeal to the Upper Tribunal.

The Upper Tribunal proceedings

6. The mother’s appeal is not supported by the Secretary of State’s representative, Mr Kevin O’Kane, who argues that the tribunal’s decision discloses no error of law. The father (inevitably) opposes the mother’s appeal. He also asks for an oral hearing, but does not give any reason for that request. Neither the mother nor the Secretary of State seeks a hearing. I consider the issues are straightforward and there is no added value to be gained from holding an oral hearing.

The Upper Tribunal’s analysis

7. The law governing the assessment of a non-resident parent’s income and in particular any deductions from that income is clear. Under a 2003 Scheme case the CSA must work on the basis of the non-resident parent’s “net weekly income” (Child Support Act 1991, Schedule 1, paragraph 2). Regulations then provide that the net weekly income of an employed earner shall be “his earnings provided for in paragraph 4 less the deductions provided for in paragraph 5 and calculated or estimated by reference to the relevant week as provided for in paragraph 6” (paragraph 3(1)(a) of the Schedule to the Child Support (Maintenance Calculations and Special Cases) Regulations 2000 (SI 2001/155; “the CS(MCSC) Regulations 2000”)).

8. In the present case there was no issue over the level of the father’s gross earnings. Rather, the question was the proper level of deductions from those earnings. According to paragraph 5 of the CS(MCSC) Regulations 2000:

“Deductions

5.—(1) The deductions to be taken from gross earnings to calculate net income for the purposes of this Part of the Schedule are any amount deducted from those earnings by way of—

(a) income tax;

(b) primary Class 1 contributions under the Contributions and Benefits Act or under the Contributions and Benefits (Northern Ireland) Act; or

(c) any sums paid by the non-resident parent towards an occupational pension scheme or personal pension scheme or, where that scheme is intended partly to provide a capital sum to discharge a mortgage secured upon that parent’s home, 75 per centum of any such sums.

(2) For the purposes of sub-paragraph (1)(a), amounts deducted by way of income tax shall be the amounts actually deducted, including in respect of payments which are not included as earnings in paragraph 4.”

9. The opening phrase in paragraph 5(1) makes it clear that, providing the sums in question fall within any of sub-paragraphs (a) to (c), then they are to be deducted from gross earnings in order to arrive at net earnings. It does not say “any amount as is considered fair and reasonable deducted from those earnings”. There is no discretion in the matter. It is true, of course, that individuals have no direct control over the amount of income tax or the rate of National Insurance contributions that are deducted from their gross earnings (sub-paragraphs (a) and (b)). They may, on the other hand, have a degree of choice over sums paid out of gross earnings “towards an occupational pension scheme or personal pension scheme”, most obviously as regards AVCs. However, the legislation makes no provision (here at least) for questioning the level of such contributions.

10. True, there is a special caveat as regards only allowing 75% of the amount paid in contributions towards a pension scheme “intended partly to provide a capital sum to discharge a mortgage secured upon that parent’s home”. This specific legislative provision is designed to provide some broad-brush equity between the competing claims of personal pension provision and child support responsibilities. Crucially, no other mechanism is provided within paragraph 5 for reducing the otherwise complete disregard of occupational or personal pension contributions. Indeed, the existence of this special exceptional rule simply reinforces the conclusion that the deduction for pension contributions is mandatory and absolute in nature.

11. The mother seeks to marshal a number of arguments against this interpretation of the legislation. First, she argues that DTJ Ennals had a discretion to consider the reasonableness of the level of AVCs in payment. For the reasons above, that argument cannot stand against the plain words of the legislation.

12. Second, she relies on the decision of Judge Gray in JW v Secretary of State for Work and Pensions & MC & JC (CSM) [2013] UKUT 407 (AAC); [2014] AACR 8. Judge Gray referred there (e.g. at [33]) to the inquisitorial duty of the First-tier Tribunal to enquire into the accuracy of non-resident parent’s declared income. However, the two cases are not on a par. Judge Gray was dealing in her case with a rather different issue. The question there was the true level of the father’s earnings – whereas in the present appeal that was a known and undisputed figure. The issue was rather the proper level of deductions from that known figure for his pension contributions (and whether that included AVCs). So I do not doubt the correctness of Judge Gray’s decision; it just does not assist the mother in the context of the circumstances of this case.

13. Third, the mother refers to the possibility of a variation based on diversion of income. She reports that she has since been advised by the CSA that had she made a variation application on the facts as now known she “would, almost certainly, have been granted a variation based on the Child Support (Variations) Regulations 2000, reg.19(4)”. This would have been on the basis that the father was unreasonably diverting his income by making excessive AVC payments. However, the problem, as the mother correctly recognises, is that the effect of DTJ Ennals’s decision works to her disadvantage as the case is now closed, and so no variation application can now be made. Furthermore, and in any event, as Mr O’Kane points out, a variation application is (in broad terms) effective from the date of the application and cannot be backdated.

14. In my initial Observations on this appeal, I made the following comment:

“If it is the case – and I am not suggesting that it is, merely putting a hypothesis – that (a) the CSA was put on notice at the relevant time as to the full amount of the father’s pension contributions, including AVCs, but (b) wrongly omitted to allow them in full, and so (c) making it unnecessary for the mother to put in a variation application on the basis of diversion in good time, then there may be an argument that the mother has now suffered loss as a result of CSA maladministration. However, that is a matter that would have to be pursued through other channels than the tribunal system. The Secretary of State’s representative may wish to comment on that possibility.”

15. Mr O’Kane’s response is simply to note that just because an application for a variation could have been made does not mean that the application would necessarily have been successful. He suggests it is a moot point when considering whether or not the mother has suffered any financial loss.

16. Mr O’Kane is, of course, correct in saying there is no guarantee that a variation application, if made by the mother, would have been successful on the facts of this case. The father would obviously have been asked for his comments on any such application. He would almost certainly have argued that he was unlikely to work until the standard pensionable age and would not have been able to make proper provision for his retirement in the absence of this level of AVCs. That argument may, or may not, have been persuasive. It would require careful consideration of a range of factors, most notably those itemised by Judge Williams in DW v Child Maintenance and Enforcement Commission (CSM) [2010] UKUT 196 (AAC) at [37] (and also considered by Judge Wright in the unreported decision CCS/1663/2014).

17. On the other hand the mother’s potential variation argument was plainly arguable, as has been informally conceded by the CSA in its telephone advice. The CSA’s failure to make the necessary adjustments in good time to the maintenance calculations to reflect the father’s AVCs has effectively deprived her of at least the chance of such a variation application succeeding. That may be a matter which she wishes to take up with the CSA as a maladministration complaint, but it falls outside the jurisdiction of the tribunals.

18. In conclusion, I can only repeat the helpful summary by Judge Williams in DW v Child Maintenance and Enforcement Commission (CSM) at [34]:

‘34. I conclude that the relevant legislation is to be interpreted as providing:

(a) An employee is entitled to claim a deduction in the calculation of her or his net income under paragraph 5 of the Schedule for all actual pension contributions made by him from his gross earnings to any occupational pension scheme or personal pension scheme. If there is any doubt, a decision must be made whether the contributions are to a tax-approved scheme of a kind defined in regulation 1 of the MCSC Regulations 2000. What contributions have actually been made is a question of fact. Where, as appears to be the case here, the contributor can change the levels of contribution from one month to another at will, then careful account may need to be taken of what was actually paid. In some cases there may be an argument that a sum paid as a contribution was paid as capital and not from gross earnings (for example where the contribution exceeds the gross earnings).

(b) A recipient of child support maintenance is entitled to ask for a variation under regulation 19(4) if she or he contends that because of the pension contributions actually paid the employee has unreasonably reduced the amount of her or his income after account is taken of those pension contributions. It is for the Child Maintenance and Enforcement Commission, and on appeal the tribunal, to decide whether on all the evidence the reduction, or part of it, is unreasonable. If so, they are required by regulation 19(5)(c) to decide “the whole of the amount by which … the non-resident parent had unreasonably reduced his income”.’

Conclusion

19. For the reasons above DTJ Ennals of the First-tier Tribunal came to the correct decision and so the mother’s appeal to the Upper Tribunal is dismissed (Tribunals, Courts and Enforcement Act 2007, section 11). The decision of the First-tier Tribunal therefore stands. 

Signed on the original Nicholas Wikeley

on 10 June 2015 Judge of the Upper Tribunal