[2024] UKUT 222 (AAC)

The Appellant in this appeal is “ZA”. The Respondent in this appeal is the London Borough of Barnet (“Barnet”). It administers housing benefit where claimants are eligible to claim it. ZA first claimed housing benefit with Barnet on 26 January 2004.

References to “JA” are to ZA’s husband. He is the director and a full shareholder in two companies, and a director and partial shareholder in the other company. Barnet took JA’s income into account when calculating ZA’s housing benefit entitlement. Barnet also took account of his position in the companies when making its decisions.

This appeal is about whether ZA was entitled to housing benefit under the Housing Benefit Regulations 2006 (“the 2006 regulations”) or had, or should be treated as having, capital in excess of the prescribed limit for entitlement to it.

Section 134(1) of the Social Security Contributions and Benefits Act 1992 prevents a person being entitled to housing benefit if their capital or a prescribed part of it exceeds the prescribed amount.

Section 6 of the 2006 regulations deals with capital. Regulation 46 prescribes the amount of capital as £16,000 for the purpose of section 134(1). If a person has, or is treated as having, capital exceeding £16,000, they will not be entitled to housing benefit.

The detailed circumstances of ZA’s appeal are set out in paragraphs 2 to 9 of Upper Tribunal Judge Ovey’s decision dated 23 September 2023 granting permission to appeal to the Upper Tribunal.

In summary, at some point before Barnet made its decision to end ZA’s entitlement to housing benefit, ZA became a shareholder of 15 shares in a company (“CG”). Her husband JA held 50 shares out of the 100 in that company. The other 35 were held by their children. JA was the sole director of CG. ZA was the secretary. Both were paid an hourly wage for working in the company. JA was not paid a director’s salary and no dividends were paid to any of the shareholders. That remained the position at the date of Barnet’s decision.

Two further companies were incorporated before the date of Barnet’s decisions (“BV” and “WE”). JA held, and continues to hold, all the shares in these companies. He is the sole director of BV, and he and ZA are both directors of WE. Again, no directors’ salaries have been paid to JA or ZA and the companies have paid no dividends to JA.

It appears Barnet did not ask ZA to provide any information about companies or shareholdings. Having become aware of CG and its ownership, Barnet states that on 23 March 2021 it made two decisions about ZA’s housing benefit. Barnet communicated those decisions to ZA in two letters dated 24 March 2021. Barnet decided:

The basis of Barnet’s entitlement decision was that there was retained profit in the shareholder funds of CG, which exceeded £16,000 throughout the period between April 2017 and March 2021.

On 12 April 2021, ZA made written representations to Barnet, which it treated as an appeal. On 17 December 2021, Barnet wrote to ZA stating it would not change its entitlement decision. Barnet stated it would write separately to ZA about the overpayment decision. On 27 December 2021, ZA wrote to Barnet stating she wished to continue her appeal to the First-tier Tribunal in relation to Barnet’s entitlement decision (pages 1093-5 of bundle).

On 17 February 2022, Barnet wrote again to ZA (page 1098 of bundle). It headed the letter “Housing Benefit Overpayment”. The letter stated that Barnet had reviewed the overpayment decision. It stated there were no grounds to revise an earlier entitlement decision from 03 April 2017, and even if there had been, the overpayment would amount to official error. The letter stated that ZA had therefore not been overpaid for the period 03 April 2017 to 21 March 2021 and “the decision dated 24 March 2021 was revised”. The letter ended by stating:

“The Council has decided that you are still to be treated as having capital in excess of the prescribed limit of £16,000 for the reasons given in its letter dated 17/12/21, effective from 22/03/21.”

On 14 April 2022, Barnet forwarded ZA’s letter dated 27 December 2021 to HM Courts and Tribunals Service, where it was registered as an appeal. ZA argued that Barnet had applied regulation 49(5) of the 2006 Regulations to calculate her capital by reference to the capital held in the three companies but should also have applied regulation 49(6) and disregarded that capital for as long as ZA and JA were undertaking activities in the course of the businesses.

In its Response to the appeal, Barnet stated it had revised its original decision on 17 February 2022 and that ZA’s housing benefit was then superseded in accordance with regulations 7 and 8 of the Housing Benefit and Council Tax Benefit (Decisions and Appeals) Regulations 2001 (“the 2001 regulations”) with effect from 22 March 2021, to treat ZA as having capital over the prescribed limit from that point.

Section 7 of Barnet’s Response to the appeal set out submissions for the tribunal. Barnet stated it had decided to use its discretion and treat ZA and JA as not analogous to a sole owner under regulation 49(5) and therefore regulation 49(6) did not apply. Barnet stated at paragraph 10 of its submissions:

“The appellant and partner are therefore treated as possessing their share of the capital value of the company. That capital is treated as actual capital under regulation 43.”

Barnet proceeded to raise alternative arguments for the tribunal to consider as other grounds to uphold its decision. These were: