GJ v Revenue and Customs (TC) [2013] UKUT 561 (AAC)

UKUT-AAC
GJ v Revenue and Customs (TC)
[2013] UKUT 561 (AAC) · 2013-11-12
[1]This appeal concerns the application of the ‘normally living with test’ for the purposes of a claim to child tax credit and the evidential basis relied on in making such decisions. The lesson of this appeal more generally is that HMRC and tribunals must look at what is actually happening in practice in terms of the child’s living arrangements, and not simply rely on what a residence order under the Children Act 1989 may happen to say. The actors in this appeal[2]The appeal concerns the question of entitlement to child tax credit (CTC) payable in respect of a young boy born in 1999 (called here simply “J”, in order to protect his anonymity). The other actors in this appeal are J’s mother, his maternal grandmother and her husband, the appellant. The appellant is therefore J’s step-grandfather. However, nothing turns on that (subject to the point mentioned in paragraph 5 below) and so for present purposes I shall describe him as the grandfather. A summary of the factual background[3]The reports and witness statements on file, prepared in relation to proceedings under the Children Act 1989, give some sense of the very troubled childhood experienced by J. Suffice to say that the mother has not been well and has been unable to provide properly for J. Consequently J has been “known to social services”, has been in foster care and has also lived with various other family members. In recent years his grandparents have been instrumental in providing him with both a home and the security he had previously lacked.[4]J moved in with his grandparents in the autumn of 2010. In January 2011, however, the mother obtained a residence order from the county court, requiring J to be returned to her. J duly went to live with his mother but after three weeks, following a particularly distressing incident at her address, “voted with his feet” and moved back to live with his grandparents. It appears that he has stayed with them ever since. The grandmother subsequently regularised the legal position by obtaining a residence order in her name, backdated to J’s return in February 2011.[5]There is one further factual complication. J’s grandparents are estranged, in the sense that they do not live as man and wife. For a while they lived at different addresses. Since early 2010 they have been living again at the same address, but not as a married couple. It is to their great credit that they have provided so well for J during this difficult period. As the grandfather pointed out in correspondence “it is my ex-wife that is taking the matter to court [to obtain the residence order] as she is the maternal grandparent but I deal with all of the financial issues”. The decision-making history[6]The sequence of events relevant to this appeal is not in dispute: 1 October 2010 Date from which HMRC first awarded CTC to grandfather; 16 January 2011 Mother obtains residence order and J returns to live with her – mother claims and is awarded CTC; 11 February 2011 Grandfather makes claim for CTC backdated to 1 October 2010; 13 February 2011 J “votes with his feet” and returns to live with his grandparents; 9 March 2011 Grandfather claims and is awarded CTC again; 21 April 2011 HMRC makes a CTC decision (according to HMRC); 18 July 2011 HMRC makes a further decision stopping payment of CTC on the basis that the grandfather was not entitled to CTC as from 9 March 2011 – grandfather then makes fresh claim to CTC; 11 August 2011 HMRC reinstates award of CTC as from this date; 26 August 2011 Grandfather appeals against HMRC decision of 18 July 2011; 23 March 2012 First-tier Tribunal (FTT1) adjourns initial hearing; 22 June 2012 First-tier Tribunal (FTT2) holds final hearing.[7]This is, inevitably, a somewhat truncated and confused account of what happened. As has been conceded by Mr D P Eland, HMRC’s representative before the Upper Tribunal, the original decision-making history in this case is less than clear. I would say it is at best opaque and at worst shrouded in impenetrable darkness. To take just one example, the HMRC submission to the tribunal referred to a decision dated 21 April 2011 but this alleged decision was not included in the appeal papers and indeed Mr Eland has been unable to locate a record of any such decision. However, what does appear to be clear is that HMRC resisted the grandfather’s appeal on the combined basis that the mother was mainly responsible for J from 16 (or 19) January 2011 and that for the period after 13 February 2011 the grandfather could not be responsible for J in any event, as he was not named on the grandmother’s residence order. The proceedings before the First-tier Tribunal[8]Both grandparents attended the hearing before FTT1. In the record of proceedings, the tribunal judge noted that they had been separated since 2007. He also noted the grandmother’s evidence that she had never applied for tax credits and that she had asked the grandfather to claim CTC. The tribunal judge remarked on the discrepancies in the information produced by HMRC and quite properly adjourned for a supplementary HMRC submission to be provided and so that the mother could be informed of the proceedings and invited to participate.[9]FTT2 then held a final hearing. HMRC did not send a representative. The mother did not respond to the invitation to be a party and to attend. Neither grandparent attended; unfortunately it seems that they had been upset by the manner adopted by the judge at the FTT1 hearing and had at the last moment decided not to go to the new hearing.[10]FTT2 dismissed the appeal in the absence of all the parties. The FTT’s decision notice purported to confirm the mysterious HMRC decision of 21 April 2011. The decision notice further declared that(i) the award of CTC to the grandfather from 1 October 2010 “was correctly terminated because J was no longer residing with them from 16/01/2011”; and(ii) the grandfather was not entitled to an award of CTC on the 9 March 2011 claim as he and the grandmother were living in separate households and J was normally residing with his grandmother. I should add here that although the grandparents were not living as husband and wife, the basis for FTT2’s finding that they were living in different households at the same address is unclear.[11]FTT2 later issued a more detailed statement of reasons. This set out the tribunal’s decision, its explanation for going ahead with the hearing and devoted 11 detailed paragraphs to the factual background, which it said “did not appear to be in dispute”. The tribunal then summarised the relevant law and set out its reasons in three further paragraphs.[12]In brief, FTT2’s reasons were as follows:(1) J’s mother was entitled to CTC from 16 January 2011;(2) when J “voted with his feet” three weeks later, the grandfather was not entitled to CTC on the new claim. This was, the FTT stated, because “according to the Court proceedings it was the grandmother not the grandfather with whom J was normally living. The grandparents had separated, albeit they were at the same address. The court proceedings were all about J returning to the grandmother, a named party in the proceedings, which the grandfather was not... J was normally residing with his grandmother, who had no tax credits claim.” I reiterate that the tribunal failed to explain the basis for its finding that the couple were not just estranged, but also living in separate households at the same address. The proceedings before the Upper Tribunal[13]I subsequently gave the grandfather permission to appeal. Mr Eland, for HMRC, has provided an extremely comprehensive and helpful submission, supporting the grandfather’s appeal to the Upper Tribunal and recommending that I set aside FTT2’s decision as involving an error of law. He also suggests that it is appropriate for me to re-make the decision under appeal in favour of the grandfather. I agree for the following reasons. The Upper Tribunal’s analysis The relevant law[14]The basic rule for entitlement to CTC is set out in section 8(1) of the Tax Credits Act 2002, and turns on the issue of responsibility:
“(1) The entitlement of the person or persons by whom a claim for child tax credit has been made is dependent on him, or either or both of them, being responsible for one or more children or qualifying young persons.”
[15]Regulation 3 of the Child Tax Credit Regulations 2002 (SI 2002/2007) specifies the “Circumstances in which a person is or is not responsible for a child or qualifying young person”. Rule 1 of regulation 3 declares as a starting point that “A person shall be treated as responsible for a child or qualifying young person who is normally living with him (the ‘normally living with test’).”[16]Rule 2 of regulation 3 then deals with competing claims (the procedure for the resolution of which is dealt with in rule 3):
“2.1 This Rule applies where— (a) a child or qualifying young person normally lives with two or more persons in— (i) different households, or (ii) the same household, where those persons are not limited to the members of a married couple or unmarried couple, or (iii) a combination of (i) and (ii), and (b) two or more of those persons make separate claims (that is, not a single joint claim made by a married couple or unmarried couple) for child tax credit in respect of the child or qualifying young person.” 2.2. The child or qualifying young person shall be treated as the responsibility of— (a) only one of those persons making such claims, and (b) whichever of them has (comparing between them) the main responsibility for him (the “main responsibility test”), subject to Rules 3 and 4.”
The reason why the First-tier Tribunal erred in law[17]The main reason why the FTT2 erred in law is that it applied the wrong legal test. Once J had voted with his feet, he was back living at his grandparents’ house. At that stage the grandfather was entitled to CTC if he was responsible for J, in the sense that J was normally living with him within the meaning of Rule 1 of regulation 3. The tribunal’s error was to prioritise the wording of the residence order over what was actually happening in practice. There was ample evidence of the factual circumstances, both from the written evidence and the grandparents’ oral evidence to FTT1. For example, the grandfather told FTT1 that “I did all the cooking for him, took him to football, I went to school meetings, helped with the washing and ensuring that he got himself a sensible bedtime”. The grandmother, who had also supported the grandfather’s case in writing to HMRC, agreed with this account, stating “He (J) needs both of us. I have never applied [for CTC] because my husband is more organised.”[18]The case law demonstrates that “living with” should bear its ordinary and natural meaning (see Commissioner’s reported decision R(F) 2/79 at paragraph 14), and the same principle applies to the ‘normally living with test’. It is well established in other spheres of law (e.g. child support law) that it is not the terms of a residence order that matter but what actually happens in practice, irrespective of what a court may have ordered. For example, as I held in PB v CMEC [2010] AACR 22 at paragraph 24:
“The task of a tribunal is ‘to deal with what the situation actually is rather than what the situation ought to have been’ (Northern Ireland Commissioner’s decision CSC 4/98, at paragraph 20). So the test when looking at contact over a past period is not what a court has ordered or what the parties have agreed. It is what actually happened. That has to be determined on the balance of probabilities, on the best evidence available.”
[19]The same principle applies in the tax credits context. The application of the ‘normally living with test’ is ultimately a question of fact. It cannot be conclusively determined by the wording of a court order; what matters is what is actually happening on the ground. As Mr Eland argues, this was not a case which needed to be resolved by the application of rule 2 of regulation 3, concerning competing claims and the application of the ‘main responsibility test’. There may have been two extant claims for CTC (from the grandfather and the mother respectively), but after 13 February 2011 there was no question of J “normally living” with his mother. On that basis rule 1 pointed to only one possible conclusion, namely that J was normally living with his grandfather (as well as with his grandmother).[20]It is unfortunate that FTT2 did not pay more attention to the grandfather’s evidence that the only reason he was not named on the residence order was their solicitor’s advice that it would make matters simpler if the grandmother was the sole applicant.[21]As I noted when giving permission to appeal, there are also some difficulties with some of the fact-finding by FTT2, given the evidence that was before it, but those matters need not be pursued any further in the light of the above conclusion. The Upper Tribunal’s options for the disposal of the appeal[22]Mr Eland proposes that I allow the grandfather’s appeal, set aside the decision of FTT2 and re-make that decision, rather than send it back for re-hearing. He gives a number of reasons for suggesting that manner of disposal, not least that this case concerns a limited closed period and there has been a series of subsequent decisions confirming that the grandfather is entitled to CTC for J. I agree that that approach is sensible. The decision that the First-tier Tribunal should have made[23]FTT2 should have made the following decision:
“This appeal succeeds. The grandfather’s appeal against the decision of HMRC dated 21 April 2011, and as confirmed on 18 July 2011, is allowed. The award of child tax credit to the grandfather with effect from 13 February 2011 was properly made, reflecting the factual arrangements in place at that time, and should not have been changed. The question of whether there are any arrears of child tax credit due for the period down to 10 August 2011 is remitted to HMRC for calculation.”
The consequences of this decision[24]Mr Eland advises that by his reckoning about three weeks’ arrears of CTC are due to the grandfather, covering the period from 18 July 2011 (when payments were stopped) to 10 August 2011 (when they restarted again). The matter is remitted to HMRC to finalise those details. A further positive effect of this decision is that it confirms that there is no question of any CTC having been overpaid for the period from 13 February 2011. Conclusion[25]I conclude that the decision of the First-tier Tribunal involves an error of law for the reason set out above. I therefore allow the appeal and set aside the decision of the tribunal (Tribunals, Courts and Enforcement Act 2007, section 12(2)(a)). The decision that the FTT should have made is as set out at paragraph 23 above (section 12(2)(b)(ii) . Signed on the original Nicholas Wikeley on 12 November 2013 Judge of the Upper Tribunal

Cited in 1 later judgment