[2023] UKUT 238 (AAC)

When I gave permission to appeal, I made the following observations (among others):

“The words “by reference to” [i.e., in regulation 69(3)] have a number of different possible meanings:

(a)

First, they could mean that the amount of the non-resident parent’s unearned income is to be assessed as being the figure provided by HMRC.

(b)

Second, they could (perhaps) mean that the amount of the non-resident parent’s unearned income is to be assessed as being the figure provided by HMRC in the absence of clear (and [the Father] would say, immediately available) evidence to the contrary.

(c)

Third, they could (perhaps, just) mean that the amount of the non-resident parent’s unearned income is to be assessed under the same rules as are applied by HMRC when assessing unearned income to tax.

(d)

Fourth, they may have nothing to do with the outcome of the assessment at all but, rather, impose a procedural requirement that the decision maker should refer to the HMRC information when reaching a decision and (possibly) should explain why he or she has assessed the non-resident parent’s unearned income at a different figure from HMRC (if that is the case). This interpretation is consistent with the commentary by Upper Tribunal Judge Jacobs (writing extra-judicially) in Child Support: The Legislation (13th ed., Child Poverty Action Group, London, 2018, p.579)”

I shall refer to those possible interpretations respectively as the “First”, “Second”, “Third”, and “Fourth” Interpretations.

The passage from Child Support: The Legislation, referred to in (d) immediately above read as follows:

“This regulation provides for a variation if the non-resident parent has unearned income of at least £2.500 a year.

In applying this regulation it is important to distinguish between the type of income and its amount. It must be of a type that is chargeable to tax under the provisions listed in in para (2). If HMRC does not hold information to show that the parent has any income of that type, the parent has no unearned income para [(3)]. (Footnote: ³) The amount of the unearned income is fixed by reference to information provided under para (3) or by other sufficient evidence under para [(5)]. (Footnote: ⁴) The regulation does not provide that the Secretary of State or the tribunal must accept the calculation of the amount by HMRC, allowing the Secretary of State or the tribunal to make a different assessment of the available evidence. See also reg 21.”

(When a variation under regulation 69 is in place, regulation 21 allows the Secretary of State to request HMRC to provide updated information about the non-resident parent’s unearned income for the purposes of an annual review.)

Although I made it clear that my list of possible interpretations was not prescriptive and the parties were free to submit other possible interpretations, none did so.

The Secretary of State (who had originally opposed the grant of permission to appeal) changed her position and has argued for the First Interpretation, under which the HMRC figure is conclusive: see paragraph 16 above.

The Father has argued that both the First Interpretation and Second Interpretation are possible, but—on balance—prefers the Second, under which the HMRC figure is conclusive in the absence of clear and immediately available evidence to the contrary.

The Mother, who is neither a lawyer nor legally represented, and who has therefore not analysed the words of the law in her submissions, supports the decision made by the FTT and therefore, effectively, favours the Third Interpretation (in which the Secretary of State must apply the same rules as HMRC) or the Fourth Interpretation (in which the words “by reference to” impose a procedural requirement). She emphasises that any interpretation that required the Secretary of State or the Tribunal to accept the HMRC figure without question would give carte blanche to those fathers who wish to evade their responsibility to maintain their children.

For the reasons I will give, I have concluded that the Fourth Interpretation is largely correct and that, in any event, this is a case in which regulation 69(5) applies. The FTT’s decision therefore contains no material error.

It is therefore unnecessary for me to set out further details of the Mother’s submissions, although I will mention them as appropriate in the Discussion section below. I will set out the detail of the Secretary of State’s and the Father’s submissions below.

Before I do so, however, it will be convenient to give an outline of how child support scheme relates to the rules about self-assessment to income tax.