IN THE UPPER TRIBUNAL	Case No.  CTC/1918/2013
ADMINISTRATIVE APPEALS CHAMBER

Before:	Mr E Mitchell, Judge of the Upper Tribunal

Decision:	The appeal is allowed.

The Bristol First-tier Tribunal (ref. SC/186/12/02032), sitting on 24th May 2012, made a decision involving an error on a point of law. Under section 12 of the Tribunals, Courts and Enforcement Act 2007, the Upper Tribunal SETS ASIDE the decision and REMITS the appeal to the First-tier Tribunal for re-hearing. Directions for the re-hearing are at the end of these reasons. 

REASONS FOR DECISION

What this appeal is about

1. ‘Passporting’ refers to entitlement criteria for one welfare benefit operating by reference to another benefit. Passporting features in the disability-related aspects of working tax credit, including the criteria for the disability element.

2.  Mistakes are inevitable. Some will receive benefits despite not meeting the entitlement conditions.  Does mistaken receipt of a passporting benefit disentitle a person to the passported benefit?

3. The answer to that question depends on the legislative context. In this case, I decide that the requirement in working tax credit legislation for a person to “have been in receipt of” incapacity benefit is concerned with receipt of benefit payments, not underlying entitlement. Other decisions of the Upper Tribunal with apparently different results can be distinguished. They concerned legislative references to a benefit being “payable”. 

Background 

4. On 8 November 2011, Miss B claimed working tax credit. She was working for 17 hours per week. Previously, Miss B received long-term incapacity benefit but that ended on 6 October 2011. 

5. In fact, Miss B ceased to meet the entitlement conditions for incapacity benefit in November 2010 when she began work that was not approved under the Social Security (Incapacity for Work) (General) Regulations 1995. The Secretary of State for Work & Pensions superseded Miss B’s incapacity benefit award. This resulted in an overpayment between November 2010 and October 2011 but the Secretary of State has decided it is not recoverable from Miss B.

6. I want to make it very clear there is no suggestion whatsoever that Miss B was overpaid incapacity benefit due to dishonesty. 

7. On 21 November 2011, H.M. Revenue & Customs (HMRC) refused to award Miss B working tax credit. HMRC determined that the 30 hour working week condition applied rather than the 16 hour disability-related condition. As Miss B only worked 17 hours per week, that determination was fatal to her claim. 

8. Miss B appealed unsuccessfully to the First-tier Tribunal. Its decision was given on 24th May 2012. Delays have bedevilled her case since then for a number of reasons including missing letters, Miss B’s loss of her representative and the need to recreate appeal papers destroyed by the First-tier Tribunal. 

9. I granted Miss B permission to appeal to the Upper Tribunal. HMRC support her appeal and their representative, Mr Eland, has supplied the Upper Tribunal with a helpful written submission for which I am most grateful. 

The relevant legislation

10. “Entitlement to a tax credit for the whole or part of a tax year is dependent on the making of a claim for it” (section 3(1) of the Tax Credits Act 2002; subsequent references to sections are to sections of that Act). 

11. Unless a tax credit is claimed before a tax year, awards are made for the period beginning with the date of claim and ending at the end of the tax year (section 5(2)). Miss B claimed tax credit mid-year, on 8 November 2011. Had an award been made, it would have ended on 5 April 2012 (the end of the 2011/12 tax year). 

12. There are two tax credits: child tax credit and working tax credit (section 1(1)). This case is about working tax credit entitlement to which is dependent on a person “being engaged in qualifying remunerative work” (section 10(1)). 

13. Regulation 4 of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 (“the 2002 Regulations”) governs when a person is treated as engaged in qualifying remunerative work. A weekly minimum number of hours must be worked. Only 16 hours are required if the person “has a physical or mental disability which puts [him/her] at a disadvantage at getting a job and satisfies regulation 9(1)(c)”. So this requirement incorporates regulation 9(1)(c). 

14. Regulation 9(1) of the 2002 Regulation contains criteria for the disability element of working tax credit. If the criteria are met, a claimant’s maximum rate of working tax credit rises through the addition of a disability element. For a single claimant, the criteria are that s/he:

“(a) undertakes qualifying remunerative work for at least 16 hours per week;

(b) has any of the disabilities listed in Part 1 of Schedule 1, or in the case of an initial claim, satisfies the conditions in Part 2 of Schedule 1; and

(c) is a person who satisfies any of Cases A to G on a day for which the maximum rate is determined in accordance with these Regulations.”

15. Cases A to G are set out in subsequent paragraphs of regulation 9. They all refer to some benefit or advantage related to disability.

16. When Miss B’s claim was decided, Case A read:

“(2) Case A is where the person has, for at least one day in the preceding 182 days (“the qualifying day”), been in receipt of—

(a) higher rate short-term incapacity benefit;

(b) long-term incapacity benefit;

(c) severe disablement allowance; or

(d) employment and support allowance where entitlement to employment and support allowance or statutory sick pay has existed for a period of 28 weeks immediately preceding the qualifying day comprising one continuous period or two or more periods which are linked together.”

17. For Miss B, the relevant Case A benefit was long-term incapacity benefit. HMRC accepted Miss B received benefit payments within that 182 day period but thought, of itself, that was insufficient. Before the First-tier Tribunal, HMRC argued that Miss B needed to be entitled to long-term incapacity benefit as well. 

18. Case C, in contrast to Case A, refers to passporting benefits being “payable”. At the relevant time it read:

“(4) Case C is where the person is a person to whom at least one of the following is payable—

(a) a disability living allowance;

(b) an attendance allowance;

(c) a mobility supplement or a constant attendance allowance which is paid, in either case, in conjunction with a war pension or industrial injuries disablement benefit.”

19. Both Case A and Case C have since been amended to take account of universal credit (Case A) and personal independence payments and armed forces independence payment (Case C). 

The issue – what does it mean to be “in receipt” of incapacity benefit

20. The First-tier Tribunal decided Miss B could not be “in receipt” of incapacity benefit for a period during which she was not entitled to it. The Tribunal said it applied by analogy the decision of Social Security Commissioner (now Upper Tribunal Judge) Levenson in R (TC) 1/06 about the meaning of “payable” in Case C. The Tribunal said the Commissioner “clearly equated ‘payability’ and ‘entitlement’”. I do not think that accurately describes R (TC) 1/06. The reported decision suggests the claimant’s payments of DLA ceased when her entitlement did in August 2003. The issue was whether that affected entitlement to working tax credit for the rest of the 2003/04 tax year. I cannot see that the Commissioner offered any view about the meaning of “payable”. However, there are other decisions which link payability with entitlement.

21. Recently, in SMcH v Perth & Kinross council [2015] UKUT 126 (AAC) Upper Tribunal Judge Mesher held that “payable”, used in regulation 2(3A) of the Housing Benefit Regulations 2006 to define when a person is “on an income-related employment and support allowance”, means “properly or lawfully paid”. And Upper Tribunal Judge Wikeley in the child support case of JF v Secretary of State for Work & Pensions and DB (CSM) [2014] AACR 3 held that a legislative reference to child benefit being “payable” meant “properly or lawfully payable”. Judge Wikeley also analysed the jurisprudence on the meaning of “payable”, an analysis which showed “payable” has tended to be interpreted as “properly or lawfully payable” although the particular legislative context might lead to a different result.

22. Those decisions can be distinguished. The relevant term here is “has been…in receipt of” rather than “payable”. The literal meaning is simply that benefit payments have been received. Departing from this meaning would only be legitimate if the legislative context demanded it. HMRC do not say it does and I cannot see how applying “has been in receipt of” literally creates an unworkable scheme. In fact, the selection of different terms in different Cases to describe the relationship between a claimant and a passporting benefit strongly suggests a deliberate decision to treat different passporting benefits differently. Moreover, the differences extend beyond Cases A and C and can even be discerned within Case A itself. 

23. Might, however, a literal interpretation of “has been in receipt of” be objectionable because it helps a person for whom the advantage in question (relaxation of the working hours condition) was never intended? I think the First-tier Tribunal was concerned about this because it said a “purposive interpretation” was called for. I agree with HMRC that a literal interpretation would not subvert the disability-related aims of the tax credits scheme. Case A is not the sole condition. There remains the requirement for a claimant to have a disability that puts him/her at a disadvantage in getting a job. A non-disabled person cannot slip through the net. 

24. The First-tier Tribunal therefore erred in law by deciding that Miss B could not satisfy Case A because she had not been entitled to incapacity benefit. On the undisputed facts, the only conclusion open to the Tribunal was that Miss B satisfied Case A. She stopped receiving incapacity benefit 32 days before her tax credit claim, and 45 days before her claim was decided. Miss B clearly satisfied Case A.

What happens next?

25. HMRC submit Miss B’s appeal should go back to the First-tier Tribunal for re-hearing. Mr Eland explains that, normally, HMRC do not dispute a claimant’s “self assessment of their disabilities”, for the purposes of regulation 9(1)(b) of the 2002 Regulations, where one of the Cases applies. Here, though, he submitted there was a live unresolved issue as to whether regulation 9(1)(b) applied. Disinclined as I am, given the age of this case, I nevertheless accept that submission. Miss B did not object and, as Mr Eland says, there are outstanding entitlement questions. I do not have the evidential material on which to make the necessary findings of fact and, in any event, the First-tier Tribunal is better placed to do so. 

26. The First-tier Tribunal must decide whether in November 2011 Miss B was in “qualifying remunerative work” within the meaning of regulation 4 of the 2002 Regulations. That will involve working through the conditions in regulation 4 although the only contested issue may be whether Miss B had a physical or mental disability which put her at a disadvantage in getting a job. If she did not have such a disadvantage, her claim is bound to fail. The 30 hour working week requirement would apply which she cannot meet.

27. Since 6th April 2012 (i.e. after Miss B’s claim was decided), regulation 4(1A)(g) of the 2002 Regulations has provided that “for the purposes of interpretation of [regulation 4(1), that is the qualifying remunerative work conditions]…regulation 9 prescribes the conditions which must be satisfied by, or exist in relation to, a person so that he is to be treated as having a physical or mental disability which puts him at a disadvantage in getting a job” (amendment made by S.I. 2012/848). But that does not apply to Miss B’s claim because it was decided in November 2011. Unless I have overlooked some provision (and I may have since I have not had submissions on the point), it is therefore open to Miss B to argue that she meets the regulation 4 conditions even if she does not meet the criteria for the disability element. HMRC are to address this in their submission for the rehearing which must include a version of the 2002 Regulations as they stood on 21 November 2011. 

28. The First-tier Tribunal will also need to consider whether, if Miss B was in qualifying remunerative work, her maximum rate of working tax credit includes the disability element. If what I said in paragraph 27 is correct, when Miss B’s claim was decided the criteria for the disability element were not coterminous with the regulation 4 disability-related conditions. The extra requirement was in regulation 9(1)(b) of the 2002 Regulations: the person “has any of the disabilities listed in Part 1 of Schedule 1, or in the case of an initial claim, satisfies the conditions in Part 2 of Schedule 1”. But it may be simplest all round to start here because regulation 9(9) (then and now) deems a person who satisfies regulation 9(1)(b) to have, for the purposes of the Tax Credits Act 2002 and thus regulation 4, a physical or mental disability which puts him/her at a disadvantage in getting a job. My reading of regulation 9(9) is that it did not, by declaring that a person satisfying regulation 9(1)(b) has a disability putting him/her at a disadvantage at getting a job, preclude that disadvantage from being established in any other way. But it seems that, since 6th April 2012, regulation 4(1A)(g) has operated to achieve that result.

29. The papers suggest that in November 2011 Miss B made an initial claim for working tax credit, in which case Part 2 of Schedule 1 applies. Part 2 simply refers to a person who “as a result of an illness or accident…is undergoing a period of habilitation or rehabilitation”. I direct H.M.R.C. to confirm whether they dispute that Miss B’s November 2011 claim was an initial claim. 

30. Tax credit appeals are normally decided by a First-tier Tribunal judge sitting alone. However, the Tribunal can include a registered medical practitioner where “the complexity of the medical issues in the appeal so demands” (para. 7(b) of the Senior President of Tribunals’ practice statement on the composition of tribunals in social security and child support cases in the social entitlement chamber). That may be desirable in this case but it is something I leave to the First-tier Tribunal to address. 

Directions

Subject to any later Directions by a District Tribunal Judge of the First-tier Tribunal, I direct as follows:

(1)	The First-tier Tribunal must hold a rehearing of Miss B’s appeal. The Tribunal must not include the tribunal judge who presided over the Tribunal whose decision I have set aside. It is in Miss B’s interests to attend the hearing.

(2)	Miss B is reminded that the law prevents the Tribunal from taking into account circumstances not obtaining at 21 November 2011, when the decision under appeal was taken.

(3)	Within one month of the date on which this Decision is issued, HMRC must supply the First-tier Tribunal with a supplementary submission setting out their arguments in relation to (a) whether Miss B was in qualifying remunerative work within the meaning of regulation 4 of the 2002 Regulations, (b) Miss B’s entitlement to the disability element of working tax credit, including whether the claim she made in November 2011 was an “initial claim” under the Regulations, and (c) any other aspect of the entitlement conditions for working tax credit with which they argue Miss B did not comply.

(4)	Together with the submission required by direction 3, HMRC must supply the First-tier Tribunal with a copy of the 2002 Regulations as they stood on 21 November 2011. 

				(Signed on the Original)
								E Mitchell
								Judge of the Upper Tribunal 
                                                                                                14th May 2015