“The Respondent [the PWC] has stated she refuses decision without reason yet will not engage in the process. The Respondent Secretary of State wants decision without reason. I have no desire for oral hearing but all parties are not in agreement”
“4(1) In these Regulations “latest available tax year” means the tax year which, on the date on which the Secretary of State requests information from HMRC for the purposes of regulation 35 (historic income) or regulation 69 (non-resident parent with unearned income), is the most recent relevant tax year for which HMRC have received the information required to be provided in relation to the non-resident parent under the PAYE Regulations or in a self-assessment return. (2) In this regulation a “relevant tax year” is any one of the 6 tax years immediately preceding the date of the request for information referred to in paragraph (1).”
“The calculation of income tax liability 23. To find the liability of a person (“the taxpayer”) to income tax for a tax year, take the following steps. Step 1 Identify the amounts of income on which the taxpayer is charged to income tax for the tax year. The sum of those amounts is “total income”
“5. I have given permission because there is a realistic prospect that the decision involved the making of an error on a point of law. Specifically, I am concerned about the following element of the tribunal’s decision: “23. The appellant’s case is that any losses arising from his self-employed status should be taken into account in calculating his income for the purposes of child maintenance. He provides evidence to suggest losses in the 20/2021 and 21/2022 tax years, that should be taken into account and off set against earned income, to achieve his correct income. His argument is set out in the appeal grounds and addition E in particular 24. The DWP argued that the regulations dealing with employed income and self-employed income are separate regulations and that they cannot simply be offset against each other, for the purposes of the CSCMR 2012 in particular. They argue the losses within self-employment cannot be offset against earned income and indeed that the assessment was made solely on the basis of earned income anyway. There are grounds for this are set out within the DWP response and addition D in particular. 25. The tribunal considered both lines of arguments and preferred the view of the DWP. It considered the appellant’s argument did appear to attract a level of internal logic and was well developed but it did not find it as persuasive as the reason and specific information put forward by the Respondent. 26. To prefer the appellant’s suggestion would create a potentially significant gap, whereby persons in the appellant’s position could manipulate income figures by making choices of how to present self-employed income so as to offset employed income. 27. The tribunal considered this interpretation would create too much inconsistency and was not in accordance with the natural reading of the CSCMR 2012. On both issues of historic and current income the tribunal accepts the approach put forward by the DWP and determined it was bound to proceed in accordance with that conclusion.” 6. In short, the appellant submits: ‘If the self-employed loss is to be ignored and not included in the sum for total income then surely conversely if there is a profit then this will also be ignored…, I cannot be at a detriment both ways.’ 7. I am not necessarily persuaded by that, but do have other reservations, that can be summarised as follows: a. The appellant argued that the losses arising from his self-employment for the tax years 2020/2021 and 2021/2022 should be offset from his income from employment for the purpose of child support maintenance. His arguments are set out in Addition E of the FTT bundle (and the grounds of appeal to the Upper Tribunal) – see paragraphs 23, 52, 53. The offset figure in the appellant’s submission was that of£12,449.81 , which would bring his income to£32,444.26 for the tax year 2021/2022 – paragraph 53 of the FTT decision. b. The tribunal at first-instance did not agree to offset any loss from the appellant’s self-employment income – paragraphs 38, 52, 54, 56. The FTT found that any property income had to be disregarded and would only fall for any variation – paragraph 52. c. Regulation 36 of theChild Support Maintenance Regulations 2012 explains the Historic Income figure. d. On one view, the CMS appear to have assessed the non-resident parent’s income based on the gross taxable income as reported to HMRC. Regulation 36(4) provides that the amount identified as income for the purpose of paragraph 1(d) – trading income, is to be taken after deduction of any relief undersection 83 of the Income Tax Act 2007 (carry forward trade loss relief against trade profits). e. Section 83(3) refers to relief that maybe deducted and provides that a deduction of a loss from trading could be made only from profits of the trade. f. It is arguable that the loss from self-employment (trading) should therefore be offset against the profits from self-employment (but not against any income from employment,) if that adjustment has not already taken place.” 8. Without deciding the matter, the appellant is therefore entitled to argue that the FTT erred in law in that they should have accepted the appellant’s overall lower income resulting from offsetting the loss brought by his self-employment against his income from employment. 9. By way of balance, I note, but no more, that the rules about offsetting loss against profit are HMRC (tax) rules not the CMS/DWP rules (see DWP response and addition D.) Regulations 39(1) and (2) refer to taxable profits that are used to determine current income for the non-resident parent who is self-employed. “Profits” means the profits of the non-resident parent’s trade, profession or vocation as determined by HMRC for the most recently completed relevant period, or if no such period has been completed, the estimated profits. 10. For these purposes, I remind myself and the reader of paragraphs 8-11 of FQ v SSWP [2017] AACR 24 where, Upper Tribunal Judge Jacobs summarises the law of how the non-resident parent’s liability is calculated; and DT v SSWP (CSM)[2023] UKUT 175 (AAC) where at paragraph 22 and onwards, Upper Tribunal Judge Roland has also provided an analysis on determining a person’s gross weekly income for the purpose of making a child support assessment, (see also the decision of Judge Jacobs in SH v SSWP and HMRC [2019] AACR1, paragraphs 2 to 12, in which Judge explained the law on a non-resident parents’ liability to calculate child support (in particular, paragraph 11.))” “23. The appellant’s case is that any losses arising from his self-employed status should be taken into account in calculating his income for the purposes of child maintenance. He provides evidence to suggest losses in the 20/2021 and 21/2022 tax years, that should be taken into account and off set against earned income, to achieve his correct income. His argument is set out in the appeal grounds and addition E in particular a. The appellant argued that the losses arising from his self-employment for the tax years 2020/2021 and 2021/2022 should be offset from his income from employment for the purpose of child support maintenance. His arguments are set out in Addition E of the FTT bundle (and the grounds of appeal to the Upper Tribunal) – see paragraphs 23, 52, 53. The offset figure in the appellant’s submission was that of£12,449.81 , which would bring his income to£32,444.26 for the tax year 2021/2022 – paragraph 53 of the FTT decision. b. The tribunal at first-instance did not agree to offset any loss from the appellant’s self-employment income – paragraphs 38, 52, 54, 56. The FTT found that any property income had to be disregarded and would only fall for any variation – paragraph 52. c. Regulation 36 of theChild Support Maintenance Regulations 2012 explains the Historic Income figure. d. On one view, the CMS appear to have assessed the non-resident parent’s income based on the gross taxable income as reported to HMRC. Regulation 36(4) provides that the amount identified as income for the purpose of paragraph 1(d) – trading income, is to be taken after deduction of any relief undersection 83 of the Income Tax Act 2007 (carry forward trade loss relief against trade profits). e. Section 83(3) refers to relief that maybe deducted and provides that a deduction of a loss from trading could be made only from profits of the trade. f. It is arguable that the loss from self-employment (trading) should therefore be offset against the profits from self-employment (but not against any income from employment,) if that adjustment has not already taken place.”