DECISION OF THE CHILD SUPPORT COMMISSIONER
1.	My decision is as follows. It is given under section 14(8)(a)(i) of the Social Security Act 1998.
2.	The decision of the Bournemouth appeal tribunal, held on 30th May 2001 under reference U/03/185/2001/00416, is wrong in law.
3.	I set it aside and give the decision that the appeal tribunal should have given without making fresh or further findings of fact.
4.	My decision is the same as the decision of the appeal tribunal, except in so far as it is inconsistent with my decision. In particular: (a) overpayments of pension after the absent parent was reinstated in the army were repaid as a lump sum and are irrelevant; the remuneration or profit from the absent parent’s employment does NOT include the amount of the reductions in respect of either the life commutation or the resettlement commutation; (c) the repayment of arrears that arose because of the failure to implement Article 395 of the Army Pensions Warrant 1977 timeously must be dealt with in accordance with my decision in CCS/4378/2001.
The appeal to the Commissioner
5.	This case concerns the child support maintenance payable with respect to Harry. In the terminology of the child support legislation, the appellant is his absent parent and the second respondent is his parent with care. I shall refer to them in those terms.
6.	This is an appeal to a Commissioner against the decision of the appeal tribunal brought with the leave of a district chairman of tribunals. 
7.	In view of the nature of the issues that arose, I directed an oral hearing of the appeal. It took place before me in London on 1st July 2002. The absent parent attended and gave evidence clarifying the payments he had received. The parent with care did not attend and was not represented. The Secretary of State was represented by Mr L Scoon of the Office of the Solicitor to the Department for Work and Pensions. I am grateful to him for obtaining a copy of the relevant provisions of the Army Pensions Warrant 1977.
The issues
8.	This case concerns the calculation of the absent parent’s assessable income. Specifically, it concerns the treatment of certain amounts as a result of his reinstatement in the army.
The position at the absent parent’s retirement
9.	The absent parent left the army in 1996 well before his normal retirement age. At that time, he received payments that can be classified into four categories.
10.	He was entitled to a pension. He commuted part of his pension entitlement into two lump sums: a life commutation and a resettlement commutation. He was able to decide for himself by how much to commute his pension, subject to a limit. 
11.	He received the remainder of his pension in monthly instalments.
12.	Finally, he received a termination grant. No issue arises on this grant.
13.	If the absent parent had not been reinstated, his financial position would have been as follows. He would have continued to receive his monthly payments of pension. The amount he received would, for the rest of his life, have reflected the amount of the life commutation. The amount would also, until he reached 55, have reflected the amount of the resettlement commutation. 55 is the normal retirement age for officers.
14.	As I understand it, the commutations were capitalisations of future pension entitlement. The life commutation was a capitalisation of the pension for the rest of his life. The resettlement commutation was a capitalisation of the pension for the period until his normal retirement age of 55. 
The position on the absent parent’s reinstatement
15.	In 1997, the absent parent was reinstated in the army. That had an affect on his financial position. The position should have been as follows. Payments of his monthly pension should have been suspended under Article 384 of the Army Pensions Warrant 1977. As regards his salary, he should have been paid a salary consisting of the normal salary for an officer of his rank, less the amounts in respect of the commutations under Article 395 of the Warrant. 
16.	To complicate matters, the Army failed to implement the provisions of the Warrant. It failed to suspend payment of pension and failed to reduce his pay to reflect the commutations.  That has led to arrears. The absent parent repaid the arrears of pension in a lump sum; that  is irrelevant to this case. The reductions in pay to reflect the commutations were not implemented for 3 years with the result that the absent parent is now subject to (a) a reduction in pay under Article 395 and (b) a deduction from salary to recover the overpayments that arose as a result of the failure to implement Article 395. I deal first with the reductions in pay under Article 395 and deal later with the arrears.
17.	As I understand the justification for the reduction in his salary, it is this. The commutations were capitalisations of future salary. Payments of pension and salary are incompatible. Therefore, the salary must be reduced as the pension would have been if it were not suspended. To put it another way, the reduction in respect of the commutations reflects the fact that the lump sums represented capitalised income for the period covered by the salary, and the salary has to be reduced in order to prevent double payment for the period. 
18.	The relevant provision is Article 395 of the Army Pensions Warrant 1977. The relevant part provides:
	‘Where an officer or soldier who has commuted a part of his pension is re-employed and his pension is suspended in whole or in part under Article 384, a reduction equal to the annual amount of pension commuted will be made in his pay.’
19.	The issues for me are these. Does the amount of the reduction in pay in respect of the commutations form part of the ‘remuneration or profit derived from’ the absent parent’s employment for the purposes of paragraph 1(1) of Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992? If it does, is it deductible when assessing his net earnings? My answer to the first question is: no. That renders the second question irrelevant.
20.	I note that Article 395 provides for a ‘reduction … in … pay’. That suggest to me that the effect of the Article is to reduce the gross amount of pay to which he is entitled. If he were entitled to the ‘normal’ salary for his rank subject to recovery, I would have expected the Article to provide for a ‘deduction .. from … pay’. On that basis, the amount of the reductions in respect of the commutations were not part of the ‘remuneration or profit’ that the absent parent derived from his employment. They did not form part of his income and have to be disregarded in calculating his liability to child support maintenance. 
21.	The absent parent’s pay slip shows the normal pay for an officer of his rank and the reductions as deductions from that. That is a matter of presentation and cannot affect the underlying legal analysis of his entitlement to earnings, whether for income tax or child support.
22.	As far as the deductions from salary to recover the overpayments are concerned, these must be dealt with in accordance with my decision in CCS/4378/2001. A copy of that decision is in the papers at pages 81 to 85. The effect of that decision is that no allowance can be made for those amounts. 
The tribunal’s decision
23.	The tribunal distinguished between the life commutation and the resettlement commutation. It decided that the reduction for the life commutation took effect by way of a deduction from the absent parent’s pay for which no allowance was made under paragraph 1()2) or (3) of the Schedule 1 to the 1992 Regulations. However, the reduction for the resettlement commutation took effect as a pension contribution, for which an allowance of 50% was authorised by paragraph 1(3)(b) of Schedule 1. 
24.	The Secretary of State’s written observations supported that analysis. So did Mr Scoon at the start of the oral hearing before me. By the end of the hearing, he was not so convinced that there was a distinction between the two commutations and suggested that neither was an allowable deduction under the Schedule. 
25.	I am unable to identify any relevant distinction between the two commutations. I am also at a loss to understand how either can be treated as a contribution to a pension. 
Other issues
26.	The absent parent had raised two other issues.
27.	One related to the calculation of the maintenance requirement. That has now been dealt with. The other related to the parent with care’s income. At the oral hearing he told me that time had now moved on and that he did not want to pursue that issue. In view of that, I make no further comment on it.  
Summary
28.	I allow the appeal. The tribunal went wrong in law in its analysis of the absent parent’s income. I make no criticism of the tribunal for that. It had to decide a difficult issue without the benefit of the terms of the Army Pensions Warrant before it. However, the decision must still be set aside. A rehearing is not necessary. I substitute the decision that the tribunal should have given. It is in paragraph 1.3.

Signed on original	Edward Jacobs
Commissioner
1st July 2002