Upper Tribunal (Administrative Appeals Chamber)

DECISION ON THE APPEAL OF THE UPPER TRIBUNAL

(ADMINISTRATIVE APPEALS CHAMBER)

The DECISION of the Upper Tribunal is to allow the appeal by the Appellant.

The decision of the Huddersfield First-tier Tribunal dated 28 August 2014 under file reference SC008/14/01036 involves an error on a point of law. The Tribunal’s decision is therefore set aside.

The Upper Tribunal is in a position to re-make the decision under appeal. The decision that the First-tier Tribunal should have made is as follows. The Upper Tribunal re-makes the decision accordingly:

“The Appellant’s appeal is allowed.

HMRC has not shown that, as at the date of its decision under appeal, there were grounds for holding that the Appellant did not satisfy the entitlement conditions for tax credits as a single person in 2013/14. Accordingly HMRC’s decision to the contrary dated 3 February 2014 is set aside.”

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

REASONS FOR DECISION

The wider context of this appeal

1. Well, here we go again.

2. This is another case in which HMRC has stopped a female claimant’s tax credits award on the basis that she was not, as she said, a lone parent, but rather was living with the father of her children.

3. This is also another case where, regrettably, the First-tier Tribunal has failed to interrogate the case put by HMRC with sufficient rigour.

4. This is by no means the first such case to come to the attention of the Upper Tribunal; see e.g. SS v HMRC (TC) [2014] UKUT 383 (AAC) (Judge Rowley), SB v HMRC (TC) [2014] UKUT 543 (AAC) (Judge Wright), SW v HMRC (TC) [2015] UKUT 394 (AAC) (Judge Wikeley) and now CS v HMRC (TC) [2015] UKUT 407 (AAC) (Judge Hemmingway). These are merely some examples from an extensive catalogue of such cases.

5. I doubt it will be any consolation to the Appellant in the present case to know that she has not been alone in her experience.

Summary of Upper Tribunal’s decision

6. I allow the Appellant’s appeal. The First-tier Tribunal (FTT)’s decision involves an error on a point of law. That tribunal’s decision is set aside. Fortunately I can make the decision that the FTT should have made and do so.

The proceedings before the First-tier Tribunal

7. The Appellant had been in receipt of tax credits for 10 years or so as a single parent. Having initially made an award of both WTC and CTC for the 2013/14 tax year, HMRC reassessed those tax credit awards and in effect made a nil award for that year (or at least bar one day for technical reasons) on that reassessment. HMRC said it had information that a man (Mr X) had financial links with her household which cast doubt over her entitlement to claim as a single person. HMRC stopped her tax credits award. The Appellant appealed. In her letter of appeal she explained her rather unusual circumstances:

“I do not agree with the decision that I was living with a partner. I live in my children’s father’s house (instead of maintenance). He does not live with me or financially support me. Once my children have finished their education, I will have to move out or pay him rent for the property… I know I can’t give you another address for [Mr X] but he doesn’t live with me, he works all round the UK sleeping in B&Bs and caravans …”

8. The FTT dismissed the Appellant’s appeal and confirmed HMRC’s decision to withdraw her tax credits. As part of its reasoning, the FTT stated as follows:

“The claimant admits that [Mr X] is the father of the two children. She has not supplied any evidence re contact arrangements, care arrangements or maintenance of the children. In the absence of any evidence to the contrary, there is a presumption that [the Appellant and Mr X] have shared responsibility for the children.”

9. The Appellant then applied for permission to appeal to the Upper Tribunal, which was refused by the First-tier Tribunal District Tribunal Judge.

The proceedings before the Upper Tribunal

10. I gave the Appellant permission to appeal. In doing so I made the following three observations when giving directions:

“First, did the FTT need to see the original awarding decision and the evidence that decision was based on? Related to this is the issue of the burden of proof. It may be arguable, on reading the statement of reasons, that the FTT assumed that it was for the Appellant to prove her case. That of course would be the case on an original claim for tax credits, but not on the termination of an existing award.

Second, has the FTT made sufficient findings of fact and given adequate reasons for its decision, especially as regards the finding that the (alleged) couple lived in the same household? The Appellant’s account of how she came to be living in her alleged partner’s house has been consistent throughout. The whole thrust of her argument was that he let her live in the property in lieu of child maintenance, and he worked round the country in construction – e.g. when he was not working, she went to live with her parents (p.60). The matters referred to by the FTT in the statement of reasons at para 12(d) as suggesting they share a common household are surely equally consistent with her account of the arrangement? That arrangement may not be evidenced in writing but that is hardly unusual in informal situations. The FTT also appears to have been heavily influenced by the Appellant’s failure to produce documentary evidence that the alleged partner lived elsewhere (see para 12(a),12(d) and 12(e)). There may be at least two answers to this. First, the Appellant had described his lifestyle as being nomadic, so he was unlikely to leave a documentary footprint elsewhere. Second, she was not asked for any such evidence of his other addresses in the original HMRC letter of 22 October 2013 (p.4). The later post-appeals letter of 20 March 2014 suggests a tenancy agreement or utility bill from another address he used, but this was hardly likely given his stated lifestyle (which is hardly unusual in that industry).

Third, what is the basis in law for the assertion (statement of reasons at 12(c)) that there is a presumption that a couple have shared responsibility for the children in the absence of evidence to the contrary?

The HMRC response to the appeal before the Upper Tribunal

11. I am indebted to the HMRC representative (Mr S Sweeney) who supports the Appellant’s appeal to the Upper Tribunal.

12. First, Mr Sweeney concedes that the FTT failed to appreciate it was dealing with a decision by HMRC under section 16(1) of the Tax Credits Act 2002, a failure to some extent mitigated by the poor quality of the original HMRC submission to the tribunal. As such the FTT failed to apply the correct burden of proof – the onus under section 16(1) is on HMRC to show that its decision was correct. However, HMRC had failed to put in place the evidential basis for that decision. Instead, the FTT had proceeded on the erroneous assumption that it was for the Appellant to prove her case, i.e. to provide the necessary information to displace the HMRC reassessment decision.

13. Second, Mr Sweeney accepts that the FTT misdirected itself as to the law relating to responsibility for children. This relates to the passage in the FTT decision cited at [8] above and to my third observation when giving permission to appeal. The FTT’s statement amounts to a proposition unknown to family law. There was no dispute in this case but that the man I have referred to as Mr X was the father of the Appellant’s two children. However, she was not married to him at any stage. There was no evidence that he had ever acquired formal parental responsibility for the children (e.g. under section 4 of the Children Act 1989). Even the HMRC submission did not put the point in the way adopted by the FTT. That submission simply stated that where two people have shared responsibility for the child(ren) of their union, then there is a strong presumption they are living together as husband and wife. That may well be right, but it is not what the FTT said in this case. The FTT thus misdirected itself in law on this point too. Recent amendments to the Children Act 1989 (see the new section 1(2A), inserted by section 11 of the Children and Families Act 2014) are irrelevant in this context.

The Upper Tribunal’s analysis

14. I can keep this short. The FTT’s decision involves the two key errors of law identified above. I therefore allow the Appellant’s appeal and set aside the FTT’s decision.

Conclusion

15.  The Appellant’s appeal to the Upper Tribunal is allowed. I conclude that the decision of the First-tier Tribunal involves an error of law. I allow the appeal and set aside the decision of that tribunal (Tribunals, Courts and Enforcement Act 2007, section 12(2)(a)). The FTT’s decision is now of no effect. I re-make the FTT’s decision in the terms as set out above (section 12(2)(b)(ii)).

Signed on the original Nicholas Wikeley

on 3 September 2015 Judge of the Upper Tribunal