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In short, the Father’s income from property management cannot be neither earned nor unearned
In short, the Father’s income from property management cannot be neither earned nor unearned.
There is no evidence to suggest that this mischaracterisation was anything other than an innocent error. It nevertheless affected the figures reported by HMRC to the Secretary of State and would have done so even if—which the FTT decided was not the case—those figures were correct. HMRC did not treat the property management income as earned income: had it done so, the reported figure for earned income would have been higher than £12,208. If they had treated it as unearned income, the unearned income should not have been nil. And if the income really had been “other UK income”, it would have been chargeable to tax under section 687 of ITTOIA, which is in Part 5 of that Act. It would therefore have fallen within the definition of unearned income in regulation 69(2) and HMRC should informed the Secretary of State accordingly.
The point is that, for anyone with income that is not taxed under PAYE, the completion of a tax return can seem complex and difficult. The information provided to the Secretary of State by HMRC may be incorrect not merely because the non-resident parent has—for whatever reason—misstated the total amount of his income, or because HMRC has either misread the return or entered the figures on its computer system incorrectly. The non-resident parent’s allocation of his income between the various categories under which income tax is chargeable may also be incorrect.
- Heading
- Section 1
- Background and procedural history
- Regulation 69
- The possible interpretations of regulation 69(3)
- Self-assessment and child support
- Assessment of income for the purposes of income tax
- Under section 8 TMA 1970 , HMRC may require a person to make a tax return Under section 9, that return must include a self-assessment of the amount the person is chargeable to income tax and the amount payable by him ( i.e. , the amount so chargeable
- Under section 9ZB, HMRC may amend a return
- How self-assessment operated in this case
- other UK income not otherwise declared (described as property management income) of (£17,020 less expenses of £1,201)
- The maintenance calculation
- UK income not otherwise declared
- if the properties managed belonged to another person or company and were managed by him as a business—or if he carried out the management as an employee or as the officer of a limited company—then the
- In short, the Father’s income from property management cannot be neither earned nor unearned
- The Secretary of State’s submissions
- The decision in SB
- The decision in Gray
- Criteria for assessment
- The Explanatory Memorandum
- Interpretation of regulation 69(3)
- Relationship between regulation 69(3) and (5)
- Inconsistency
- The Father’s submissions
- The decision in PP
- Discussion
- Interpretation of regulation 69
- is to be determined by reference to
- The decision in SB
- Criteria for assessment
- Inconsistency
- “Doing HMRC’s job for them”
- In performing the latter task, the Secretary of State is doing her own job, not HMRC’s. Even if she decides that the figure in the non-resident parent’s self-assessment return is incorrect, that decis
- Incentivising fraud
- Alternative remedies
- has diverted income
- an “unearned income” variation is only available where the non-resident parent has actually received unearned income: see MQB v Secretary of State for Work and Pensions & SRB (CSM) [2021] UKUT 263 (AA
- it is of the essence of a “diversion” variation, that the diverted income has been diverted at source to another person or for another purpose and that the non-resident parent has therefore not receiv
- Reconciling the two parts of regulation 69(3)
- In short, the regulation unambiguously means what Judge Jacobs—with considerably greater concision than I have been able to manage—says it means in Child Support: The Legislation: see paragraph 17 abo
- Conclusion
- That, however, is subject to regulation 69(5)
- Conclusions