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Reconciling the two parts of regulation 69(3)
Reconciling the two parts of regulation 69(3)
I come, finally, to the apparent inconsistency between the two parts of regulation 69(3), that has created so much difficulty in this case.
The regulation states unambiguously that if the HMRC Information is to the effect that the non-resident parent has no unearned income, then “the amount of the non-resident parent’s unearned income is to be treated as nil”. Why, it is asked, would the HMRC Information not be similarly conclusive for all other levels of unearned income? But, it is also asked, if the HMRC Information is conclusive for all purposes, does that not make the “is to be treated as nil” provision otiose?
This was factor that weighed heavily with Judge Wikeley in PP. He decided that the HMRC Information must be conclusive because, in part, he accepted the submission that:
“… it would be both bizarre and illogical if the Secretary of State and the First-tier Tribunal could go behind a positive non-nil unearned income figure but not go behind a nil figure. Such an approach would mean that the taxpayer who fraudulently failed to declare any unearned income at all would actually be in a better position in the child support scheme than the negligent taxpayer who had carelessly under-stated the amount of their unearned income.”
I regret I do not find that persuasive. To begin with, treating the information from HMRC as conclusive would mean that all non-resident parents who under-declare their income—by whatever amount, in any circumstances, and whether fraudulently or not—receive an illegitimate benefit at the expense of their children.
Moreover, I do not agree that it is correct to regard the two parts of regulation 69(3) as inconsistent or the regulation as a whole as ambiguous. In my judgment, the correct word is “puzzling”.
For the reasons given above (and particularly in paragraph 136), the natural meaning of regulation 69(3) is to create a general rule and an exception. Subject to regulation 69(5) and (6):
the Secretary of State must generally treat the information from HMRC as a factor in the determination of—but not necessarily as conclusive of—the non-resident parent’s unearned income; but,
where HMRC says that the non-resident parent has no unearned income, the Secretary of State must treat that information as conclusive.
- 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