[2023] UKUT 175 (AAC)

Under the “2012 scheme” (applicable in this case) for calculating child support maintenance under the Child Support Act 1991 (“the 1991 Act”), the calculation is, in broad terms, generally based on “historic income”, which is the non-resident parent’s taxable income in the last tax year for which HMRC has provided an “HMRC figure”, unless that parent’s “current income” from employment is at least 25% lower (see Part 4 of the Child Support Maintenance Calculation Regulations 2012 (SI 2012/2677) (“the 2012 Regulations”). The normal rules for calculating the amount of income are clearly designed with administrative convenience in mind. That is a perfectly proper consideration, but it is recognised that the result may not always accord with practical reality and so the legislation gives the Secretary of State the power to agree to a “variation” in certain circumstances (see Part 5 of the 2012 Regulations), provided that, “in all the circumstances of the case, it would be just and equitable to [do so]” (section 28F(1)(b) of the 1991 Act).

The mother had been receiving maintenance payments from the father without, it appears, the involvement of the Child Maintenance Service (CMS). However, on 4 September 2017, she applied through CMS for an assessment of child support maintenance under the Child Support Act 1991. The initial assessment, effective from 9 September 2017, was based on the father’s taxable income for the 2015/16 tax year, which presumably was the latest year for which HMRC could supply a figure. That figure was £66,319.62 and the decision was made on 13 October 2017. The father applied for “mandatory reconsideration” (technically, a revision under section 16 of the 1991 Act) and, on 6 December 2017, a new assessment effective from 9 September 2017 was made, founded on estimated “current income” of £35,500 (based on his projections of £11,500 earned income and £24,000 unearned income). This time, it was the mother who applied for a revision. When her application for revision was belatedly considered on 1 June 2019, it was to her disadvantage, being an assessment effective from 9 September 2017 based on “current income” from the 2017/18 tax year of £16,500, comprised of earned income of £11,500 and, by way of a variation in respect of unearned income (apparently under regulation 69 of the 2012 Regulations), “historic” unearned income from the 2016/17 tax year of £5,000. The mother appealed against the original decision as so further revised.

While her application for revision and her appeal were pending, there was an annual review, effective from 9 September 2018, that did not result in any change in the assessment, a supersession with effect from 26 September 2018 due solely to a change of care arrangements, and supersessions with effect from 31 January 2019 and 9 September 2019 taking account, respectively, of the father’s unearned income having increased to £50,000 and his earned income having increased to £12,000. It seems likely that those assessments were based on “historic income” in, respectively, 2017/18 and 2018/19. The mother appealed against the decision effective from 31 January 2019, but subsequently withdrew her appeal.

The mother’s outstanding appeal against the decision effective from 9 September 2017, as revised on 1 June 2019 and based on the father having estimated “current income” of £16,500 pa, first came before the First-tier Tribunal on 6 February 2020. The mother’s contention was that the father’s current income in the tax year 2017/18 was £61,500 pa. The Secretary of State submitted that the assessment was correct, but nonetheless raised the question whether it should have been based on the father’s income in the tax year 2017/18, as the mother had contended, and also whether there should be a variation on the ground of diversion of income. The father explained that he had been in employment until he was made redundant in November 2016 and that he then worked as a contractor, through his own company of which he was the sole director, employee and shareholder. The First-tier Tribunal decided to adjourn with directions to the father to provide a number of financial documents and to the Secretary of State to provide a written submission addressing the question whether the redundancy payment fell to be taken into account as income in the light of BB v Secretary of State for Work and Pensions (CSM) [2019] UKUT 314 (AAC) and explaining the apparent use of current earned income alongside historic unearned income It also directed that the panel on the resumed hearing should include a financially-qualified tribunal member. The father complied with the directions addressed to him. The Secretary of State did not. Nor, unfortunately, did the Secretary of State arrange to be represented at the renewed hearing.

The documents provided by the father removed most, but not all, doubts as to the basic financial facts in this case. Importantly, they included his tax calculations for 2016/17 and 2017/18. His tax calculation for the year 2016/17 showed taxable pay and benefits amounting to £76,725 and dividends amounting to £5,000, giving a total of £81,725. For 2017/18, his tax calculation and other documents showed taxable pay from his company amounting to £11,500 and dividend income (a single dividend declared on 28 August 2018) amounting to £50,000, giving a total of £61,500 (as the mother had asserted). As is commonly the case, the taxable pay from his company was equal to his personal allowance and, in 2018/19, it increased to £12,000. The mother made a short, written submission, noting that the figure of £81,725 for 2016/17 was much higher than the figure of £16,500 upon which the child maintenance assessment was based and arguing that the former figure should be used rather than the latter.

The resumed hearing before the First-tier Tribunal led to a consent order being made, whereby the Secretary of State’s decision of 13 October 2017, as revised on 1 June 2019 was set aside and the Secretary of State was directed to “recalculate the amount of maintenance payable by [the father] for [his daughter] from the effective date of 09/09/17 on the basis that his gross income (as stated on his tax calculation for 2016/17) for the year 2016/17 was £81,725.00”. It was recorded that the father “agreed that this was the correct gross income figure for that tax year”.

Notwithstanding the consent order, when the father asked for permission to appeal, the First-tier Tribunal issued a statement of reasons, in which it set out the background to the hearing and then continued –

“8.

It was put to [the father] that on the basis of the tax calculation which we had seen, which he had confirmed had been prepared with the assistance and advice of his accountant, that his actual income for the purposes of Child Maintenance Assessment for that year was £81,725.00 and his previously projected income figures were based upon a pessimistic projection of his income for that year. [The father] accepted that and confirmed that he was content for that figure to be inserted in the assessment of maintenance payable for [his daughter] for the tax year 2016/17. [The father] agreed that this was the correct gross income figure to be included.

9.

It was confirmed with both parties that they agreed to the matter being resolved by agreement without the need to explore [the father’s] finances further and without the tribunal adjudicating on the issues raised in the appeal. The decision was therefore mad by the consent of [the parents].

10.

We were content that the First Respondent would have received notice of the hearing, and although not specifically consenting, would not have objected to the resolution agreed by the parties.”

The father’s application for permission to appeal was based on the sole ground that the taxable element of the redundancy payment, which he says was £31,787.17, should have been deducted from his taxable income for 2016/17. The First-tier Tribunal refused permission to appeal on the ground that the father was seeking “to reargue factual issues that were not investigated by the tribunal because of the consent given by both parties to its decision on the appeal”. In a further submission to the Upper Tribunal on his renewed application for permission, the father also said –

“Please also note the original agreement of earnings figure at the First-tier Tribunal was agreed through confusion and a misunderstanding, at the same time I was being denied access to my daughter and going through negotiations at another tribunal to regain access, as you can imagine this was a very stressful period of my life. I can provide evidence if required.”

When Judge Robinson gave permission to appeal, she referred to rule 32(1) of the Tribunal Procedure (First-tier Tribunal) (Social Entitlement Chamber) Rules 2008 (SI 2008/2685), which provides that the First-tier Tribunal may make a consent order “only if it considers it appropriate”, and she decided that it was arguable both that the First-tier Tribunal had failed to consider, or adequately to consider, whether it was “appropriate” to make the consent order when it appeared to be inconsistent with the calculation to be made under the 2012 Regulations. She also considered it arguable that the First-tier Tribunal was not entitled to make a consent order without obtaining the consent of the Secretary of State as well as the other parties.

The Secretary of State supports the appeal on the grounds suggested by Judge Robinson, without actually making any submission as to whether a consent order in the terms made could have been appropriate or making any submissions on the issues on which his predecessor had failed to make submissions to the First-tier Tribunal. He submits that the case should be remitted to the First-tier Tribunal. The mother effectively opposes the appeal on the ground that both parties had agreed that the father’s “actual income for the purposes of the child maintenance assessment was £81,725 and not £11,500 as he had previously reported”. In his reply, the father mentions that, after his redundancy, he had told the mother that he would not be taking any money out of the company and would be living off his redundancy payment.