KD-v-HMRC (TC) [2016] NICom 56

Decision No:  C1/16-17(TC)

SOCIAL SECURITY ADMINISTRATION (NORTHERN IRELAND) ACT 1992

SOCIAL SECURITY (NORTHERN IRELAND) ORDER 1998

TAX  CREDIT

Appeal to a Social Security Commissioner
on a question of law from a Tribunal's decision
dated 19 June 2015

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	The decision of the appeal tribunal dated 19 June 2015 is in error of law.  The error of law identified will be explained in more detail below.  Pursuant to the powers conferred on me by Article 15(8) of the Social Security (Northern Ireland) Order 1998, I set aside the decision appealed against.

2.	In correspondence dated 4 March 2016 the appellant has exhorted me to exercise the power conferred on me by Article 15(8)(a)(i) of the Social Security (Northern Ireland) Order 1998 to give the decision which the appeal tribunal should have given.  She has submitted that the matter has been ongoing since July 2013 and has caused her anxiety and stress and financial hardship.  I empathise with the appellant in this regard but I am unable to exercise the Article 15(8)(a)(i) power.  This is because there is evidence relevant to the issues arising in the appeal to which I have not had access.  Further, there will be further findings of fact which require to be made and I do not consider it expedient to make such findings, at this stage of the proceedings.  It is important to note the appeal tribunal is the primary fact-finding body.  Accordingly, I refer the case to a differently constituted appeal tribunal for re-determination.

3.	It is imperative that the appellant notes that while the decision of the appeal tribunal has been set aside, the issue of her entitlement to Tax Credits (TC) remains to be determined by another appeal tribunal.  In accordance with the guidance set out below, the newly constituted appeal tribunal will be undertaking its own determination of the legal and factual issues which arise in the appeal.

	Background

4.	In her written observations on the application for leave to appeal, Ms Collins, for the Commissioners for HM Revenue and Customs (HMRC) has set out the following relevant background:

‘A background to this case is set out in HMRC’s written response to the Tribunal at pages A to I of the bundle.

In essence, for the 2012-13 tax year, the claimant had claimed tax credits in the single capacity in respect of herself and her two children, C and G.

HMRC, on 18 July 2013, made a decision that the claimant was not entitled to tax credits, for the 2012-13 tax year.  HMRC notified the claimant of this decision on 22 July 2013.  HMRC’s position was, the claimant was living with a partner and thus, not entitled to claim as a single person from 6 April 2012.

Given the date of the decision, I submit that this was a decision made under section 18(1) of the Tax Credits Act 2002, hereafter known as the Act.

Section 18 of the Act gives HMRC the authority to establish whether entitlement exists to the tax credits already paid.

Both HMRC and the claimant have their parts to play in this. HMRC, in knowing the conditions of entitlement, particularly in light of contradictory evidence, ask questions it deems relevant.  The onus is on the claimant to then reply to those questions.

HMRC, prompted by Equifax credit reference agency reports and information from government databases, wrote to the claimant on 10 July 2013 and asked her to provide evidence to show that she was entitled to claim tax credits as a single person.  Those aforementioned records indicated that a Mr GD was living at the claimant’s address.

The claimant telephoned HMRC, in response to this letter, on 18 July 2013.  HMRC report that “Mrs D advised that Mr D had lived here and there since their separation, but was unable to provide an alternative address for him.  Mrs D confirmed that the household bills have always remained in Mr D’s name because she never changed them over, and advised that she still has a credit card in Mr D’s name and that he is registered at her address with his employer.  Mrs D confirmed that she has not tried to make the separation legal or permanent and has not told the mortgage company that Mr D no longer lives at her address.” (paragraph 6, Doc B)

On 18 July 2013, HMRC made the decision that, from 6 April 2012, the claimant was not entitled to claim tax credits as a single person.

HMRC notified the claimant of this decision, and resultant overpayment, on 22 July 2013.

The claimant appealed this decision, with HMRC receiving the appeal on 24 September 2013.

On 31 October 2013, HMRC wrote to the claimant, in relation to her appeal, and invited her to provide further evidence.

The claimant replied and provided a copy of her home insurance policy, a rates bill, a letter from her gas supplier, a bank statement and an electric bill. The claimant also indicated that she wished for her appeal to continue.

On 2 January 2014, HMRC wrote to the claimant and advised her, after looking at her evidence, they would not be changing their decision.  Her appeal would therefore proceed to the Tribunal.’

	Proceedings before the appeal tribunal

5.	Following an earlier postponement, the substantive oral hearing of the appeal took place on 19 June 2015.  The appellant was present and was represented.  HMRC were represented by a Presenting Officer.  The appeal tribunal disallowed the appeal and issued a Decision Notice to the following effect:

‘Appeal disallowed.  The appellant is not entitled to tax credits as a single claimant in the tax year 2012/13 because on the balance of probabilities she was living together as husband and wife with (Mr GD).’

6.	On 23 October 2015 an application for leave to appeal was received in the Appeals Service (TAS).  On 19 November 2015 the application for leave to appeal was refused by the Legally Qualified Panel Member (LQPM).

	Proceedings before the Social Security Commissioner

7.	On 21 December 2015 a further application for leave to appeal was received in the Office of the Social Security Commissioners.  On 15 January 2016 observations on the application were requested from HMRC.  In written observations received on 4 February 2016, Ms Collins, for HMRC, supported the application for leave to appeal.  Written observations were shared with the appellant and her representative on 9 February 2016.  Further correspondence was received from the appellant on 8 March 2016.

8.	On 4 May 2016 I granted leave to appeal.  In granting leave to appeal I gave, as a reason, that it was arguable that the appeal tribunal had applied the wrong legal test to the issues arising in the appeal.  On the same date I directed that an oral hearing of the appeal would not be required.

	Errors of law

9.	A decision of an appeal tribunal may only be set aside by a Social Security Commissioner on the basis that it is in error of law.  What is an error of law?

10.	In R(I) 2/06 and CSDLA/500/2007, Tribunals of Commissioners in Great Britain have referred to the judgment of the Court of Appeal for England and Wales in R(Iran) v Secretary of State for the Home Department ([2005] EWCA Civ 982), outlining examples of commonly encountered errors of law in terms that can apply equally to appellate legal tribunals.  As set out at paragraph 30 of R(I) 2/06 these are:

“(i)	making perverse or irrational findings on a matter or matters that were material to the outcome (‘material matters’);

(ii)	failing to give reasons or any adequate reasons for findings on material matters;

(iii)	failing to take into account and/or resolve conflicts of fact or opinion on material matters;

(iv)	giving weight to immaterial matters;

(v)	making a material misdirection of law on any material matter;

(vi)	committing or permitting a procedural or other irregularity capable of making a material difference to the outcome or the fairness of proceedings; …

Each of these grounds for detecting any error of law contains the word ‘material’ (or ‘immaterial’).  Errors of law of which it can be said that they would have made no difference to the outcome do not matter.”

	Analysis

11.	In her carefully prepared and analytical written observations, Ms Collins made the following submissions:

‘HMRC, in their response to the Tribunal relied upon the reports contained at documents 3 – 12 of the bundle which indicated that the claimant’s husband, Mr GD, was also living at the claimant’s address.

These documents detailed Mr D’s financial associations to the claimant’s address.

The Act, when defining a ‘couple’ provides that they

3(5A)(a) “…are married to each other and are neither-

(i)	separated under a court order, nor

(ii)	separated in circumstances in which the separation is likely to be permanent.

(b)	A man and woman who are not married to each other but are living together as husband and wife…

The claimant and Mr D were married.  The legal test that therefore should be applied is that they;

3(5A)(a) “…are married to each other and are neither-

(i)	separated under a court order, nor

(ii)	separated in circumstances in which the separation is likely to be permanent. 

The claimant maintains that, having been separated since 2002, the separation is permanent.  She and Mr D have not started divorce proceedings because of their religious beliefs and the associated financial costs.  The claimant did however send in evidence by way of an estate agent’s particular’s in relation to her address.  The property had been on the market, according to the claimant, since May 2014.

The claimant does not dispute that Mr D continues to use her address for his financial matters.  She maintains that, whilst they have a joint mortgage, he is perfectly entitled to do so.  They jointly mortgaged the property in 2005 as the claimant could not afford a sole mortgage; they then jointly re-mortgaged the property in 2008.

However, from paragraph 18 of HMRC’s response to the Tribunal, HMRC turned their attention to the test confirmed by Commissioner Rice in R(SB) 17/81.  This test set out the ‘admirable signposts’ when deciding if a couple are living together as husband and wife (LTAHAW).  These admirable signposts are: living in the same household, stability of the relationship, financial support, sexual relationship, dependent children, public acknowledgement.

As the claimant and Mr D are undeniably still married, I submit that HMRC failed to fully appreciate the distinction between the tests applied to married and unmarried couples and as such, their reasoning and subsequent response is flawed.

In addition HMRC have commented that “…it would be expected that Mr D would have some of documentary evidence showing he lived at an address other than [the claimant’s address]…” (Paragraph 42, Doc H)

The Equifax reports do record Mr D at another address, albeit in 2005.

The response to the Tribunal also draws a negative inference from the claimant failing to provide evidence that she receives the single person discount for Council Tax.

The Tribunal are respectfully asked to bear in mind that the Council Tax scheme is not applicable to Northern Ireland.  The claimant could not provide this evidence as it cannot exist.

The decision of the Tribunal

The Tribunal heard, by way of an oral hearing, the appeal on 19 June 2015.  On 22 June 2015 they notified the parties of their decision to disallow the appeal.

In the Statement of Reasons, dated 19 June 2015, the Tribunal considered that,

“The basis for the decision was that the appellant was in fact not entitled to tax credits as a single claimant as she was living as husband and wife…when she made her claim and that therefore a joint claim should have been made.”

and,

“The Tribunal also had regard to the Commissioner’s Decision R(SB) 17/81 which sets out the criteria to be considered in deciding the question of living together as husband and wife…”

“Accordingly the appeal was disallowed and the decision dated 22/07/13 awarding no entitlement to Tax Credits for the period from 6/04/12 on the basis that the appellant was not entitled to tax credits as a single claimant as she was living together as husband and wife with Mr GD.”

Did the Tribunal err in law

I respectfully submit that it did, by virtue of applying undue consideration to the wrong legal test.

I reiterate that the claimant and Mr Dy are not living together in circumstances akin to those of a husband and wife; upon the claimant’s evidence, they are husband and wife.

As noted above, at paragraphs 19 and 20 of this response, it is section 3(5A)(a) rather than section 3(5A)(b) of the Tax Credits Act 2002 that should have been applied in this case.

Although the Tribunal were, I concede, led by HMRC in their approach I consider that they made a material misdirection of law on a material matter.

On that basis, I invite the Social Security Commissioner to set aside the decision of the Tribunal and remit the case for rehearing to a newly constituted Tribunal for their determination upon the correct legal test.’

12.	I agree with Ms Collins’ analysis and, for the reasons which she has set out, agree that the decision of the appeal tribunal is in error of law.

	Disposal

13.	The decision of the appeal tribunal dated 19 June 2015 is in error of law.  Pursuant to the powers conferred on me by Article 15(8) of the Social Security (Northern Ireland) Order 1998, I set aside the decision appealed against.

14.	I direct that HMRC prepare a new submission for the appeal tribunal hearing.  The submission should draw on the analysis undertaken by Ms Collins for the proceedings before the Social Security Commissioner and as outlined above.  On receipt of the submission from HMRC the appellant and her representative may wish to prepare their own submission in response.  The appeal should be listed for oral hearing.

(signed):  K Mullan

Chief Commissioner

16 August 2016