[2024] UKUT 259 (AAC)

I agree with the FtT that the guidance and other information provided to members of the public by the CMS was incorrect or misleading. However, the task of the tribunal was to apply the law as set out in the legislation.

The mortgage was a debt incurred before NM became a non-resident parent and at a time when NM and LM were a couple – regulation 65(1).

The mortgage was incurred for the joint benefit of NM and LM. It was a joint mortgage to enable them jointly to purchase the property to live in. Accordingly, unless excluded under regulation 65(3), it was a special expense within regulation 65(2).

The FtT decided that the property was retained for NM’s benefit because he retained a legal and beneficial interest, but found that it was not retained for his own use because he did not live there. Therefore the debt was not excluded by regulation 65(3)(a).

LM’s approach to “use and benefit” in effect elides the meaning of the two words because she treats the benefit (NM’s legal and equitable interest) as also amounting to his use. Parliament has used two words deliberately and they are plainly intended to denote different things.

There are two other important features of the provision. First, it requires a finding as to the purpose for which the asset was retained and this may be different to the purpose for which it was acquired. Second, the sub-paragraph requires a finding as to the purpose for which the asset was retained by the non-resident parent: “the non-resident parent has retained [the asset] for the non-resident parent’s own use and benefit”.

The same phrase in the predecessor to regulation 65 (regulation 2 of the Child Support (Variations) Regulations 2000) was addressed by Commissioner Williams in CCS/3674/2007. He said this at paragraph 19:

“The second area of contention is whether A retained the assets for his own use and benefit. To be caught by this test, it is not enough that A has retained the assets. That may be simply because – as was one contention here – someone must retain them until they are sold, but they are retained solely to ensure an orderly sale. It must be considered whether that retention was, at the time of the retention, for the retainer’s own use and benefit (emphasis mine). That is a question of fact, but it involves forming a view on the facts about the retainer’s intention at the relevant time. It is not enough that the retainer has some use and benefit at some later time. Nor is it enough the other way to show that someone else has some use and benefit at some later time.”

In that case A (the non-resident parent) was still living at the property, but that did not of itself mean that the asset was retained for his use and benefit.

In the present, case, as the FtT found, the property was acquired in 2018 for the purpose of providing a home for LM and NM. But after LM and NM separated, the property was lived in by LM and the child, and not by NM. It is implicit in the FtT’s conclusion that the purpose for which it was retained was for LM and the child to live in. It was not retained for NM’s use.

It is also arguable that the property was not retained for NM’s benefit. By analogy with the reasoning set out above in CCS/3674/2007, the property had to be retained for as long as LM and the child were living there. The asset was retained to enable them to live there. The fact that NM would ultimately have a share in the proceeds of sale does not mean that that was the purpose of retaining the asset. However, in the light of my decision that the FtT was correct in concluding that the asset was not retained for NM’s use, I do not need to decide that matter.

Dealing with the other submissions by LM regarding regulation 65: a) The submission that the benefit in this case was the special expense variation is a circular argument without merit; and b) The submission that the mortgage was not a “Prior Debt” is also without merit. “Prior Debts” are defined by regulation 65. If the debt falls within the statutory definition, it is a special expense.

Finally and for completeness, the FtT was correct to conclude that the debt was not excluded by regulation 65(3)(h). I cannot detect an argument by LM to the contrary. The wording of the provision is clear and its application on the facts was without doubt. The mortgage was taken out to purchase the property which was and continued to be the home of LM and the child.

LM’s position is that regulation 67(2)(a)(i) does not preclude a joint mortgage. That is not supported by the statutory wording. If LM was correct, the regulation would provide that “the mortgage was taken out …by the non-resident parent and a person other than the non-resident parent”. The plain meaning of the words used is that the non-resident parent should not have been involved in taking out the mortgage. That meaning is compatible with subparagraph (ii). The FtT did not add a gloss to the statutory words. It had to decide whether the mortgage was taken out by a person other than the non-resident parent, and the FtT found that it had not been. In any event, LM’s submissions on regulation 67(2)(a)(i) do not advance her case because a) the mortgage was excluded from regulation 67 by virtue of subparagraph (iv) and b) this is the result for which LM contends, ie that the debt was not a special expense.

LM submits that the FtT should not have considered regulation 65 as mortgage debts should be considered only under regulation 67. There is nothing in the statutory provisions to support that submission. The statutory wording of each regulation is clear and it was the tribunal’s task to apply those regulations to the facts. Indeed LM’s submission is contradicted by regulation 65(3)(h) which makes express provision for the application of regulation 65 to mortgages.

Regulations 65 and 67 address different situations in regard to mortgages. Regulation 65 is capable of including a joint mortgage held by the two parents whereas I have found that regulation 67 is not (see above). In addition and in any event, regulation 67 does not apply where the non-resident parent has a legal or equitable interest in the property but regulation 65 may do so.

For the above reasons I dismiss LM’s appeal