Taylor v Inland Revenue

Mr Simon Taylor was born on 6th August 1975 and suffers from learning disabilities. He works as an assistant gardener at the Marple Dale Hall Nursing Home, Dale Road, Stockport and has an oral contract of employment negotiated for him with the Nursing Home by his father. This requires him to work 5½ hours on Mondays and Tuesdays and 5 hours on Wednesdays making 16 hours per week in total.

On 8th June 2001 he applied for what used to be known as a disability working allowance pursuant to section 129 of the Social Security Contributions Act 1992 (contained in Part VII of the Act relating to income-related benefits). That allowance was, following the Tax Credits Act 1999, called a disabled person’s tax credit. From April 2003, it was subsumed in a new tax credit called working tax credit. Disabled persons tax credit was given to claimants who work no less than 16 hours per week and provided a weekly cash sum to top up the earned income of the claimant. In order to be entitled to such tax credit, Mr Taylor had to show that he qualified under sub-section (1) of section 129 and, in particular, that:-

Disability working allowance originated in the Disability Living Allowance and Disability Working Allowance Act 1991 to deal with the previous anomaly that in order to qualify for invalidity benefit a person had to be incapable of work. Under that Act, an allowance (or tax credit) could be granted to those disabled persons who were capable of some work, despite the fact that they may not qualify for invalidity benefit. Regulations made under the 1991 Act have been applied to claims under Part VII of the 1992 Act. These regulations are the Disability Working Allowance (General) Regulations 1991 and it is regulation 6 which (in its relevantly amended form) defines engagement “in remunerative work”, for the purposes of section 129 of the 1992 Act, as follows:-

It will be seen that the draftsman of the Regulations has not availed himself of the option (which it may be thought that the parliamentary draftsman of the 1992 Act intended him to use) of defining the terms “engaged in remunerative work” and “normally engaged in remunerative work” separately. He has instead decided to define what he means by “engaged in remunerative work” and then declared that a person so treated as engaged in remunerative work shall also be treated as normally engaged in remunerative work. Nevertheless the requirements of Regulations 6(1)(a) and 6(1)(c) are different and must be intended, in some way, to reflect the statutory difference between “actual engagement” and “normal engagement” in remunerative work. Confusingly it is Regulations 6(1)(a) and (4) which appear to address “normal engagement” (by reference to the work which the disabled person “undertakes”) and Regulations 6(1)(c) and (6) which appears to address the actual work being done (but by reference to hours which the disabled person has “worked”).

Be that as it may on 11th July 2001 the Inland Revenue, which administers the tax credit scheme on behalf of the Government, refused Mr Taylor’s claim because he had not undertaken work for an average of 16 hours per week within Regulation 6(1)(a). Mr Taylor requested the Revenue to look at the matter again but on 26th July 2001 they confirmed their original decision because, after contacting Mr Taylor’s employer to check the hours worked in the previous 5 weeks and the previous 13 weeks to the week in which he made his claim, he had not worked an average of 16 hours per week during that time. Mr Taylor appealed that decision, as he was entitled to do, but his appeal was dismissed by the Stockport North Appeals Tribunal on 15th November 2001 on the basis that he and his father agreed that:-

Mr Taylor was entitled to seek leave to appeal to a Social Security Commissioner on a point of law and on 15th April 2002 Mr Commissioner Henty granted leave to appeal because:-

Mr Birks, a Welfare Rights Officer, acting on Mr Taylor’s behalf submitted to the Commissioner inter alia:-

Mr Commissioner Henty considered these and other arguments and on 11th February 2003 dismissed the appeal. He held that the requirements of Regulation 6(1)(b) and (c) had been satisfied and that the only question was whether Mr Taylor came within 6(1)(a). He held further that the focus of Regulation 6(1)(a) was on the hours that had actually been worked rather than the hours specified in Mr Taylor’s contract. On that basis he applied Regulation 6(4)(c)(ii) to calculate the average number of hours worked per week in the preceding 5 weeks which was less than 16 hours. He held that no decisively better result could be achieved by taking any other period of reasonable length. He could produce no answer to the conundrum posed by Mr Birks that bank holidays were taken into account for the purpose of determining the number of hours being currently worked by the claimant but not in calculating the hours he had actually undertaken to work. He said of Regulation 6(1)(c):-

We were informed that Mr Taylor had begun his employment on 16th October 2000 and was in receipt of disability tax credit for a period up to June 2001 but had to make a new application at the end of the 6 month period for which the tax credit had been first granted. In March 2001 he had been sick suffering from Krohn’s disease and had been off work; in April 2001 he had a major operation but returned to work thereafter. The hours worked during the 13 weeks (or quarter of the year) before 8th June were therefore as follows:-

Mr Fullwood appeared for Mr Taylor on this appeal and submitted that, while the Commissioner was correct (1) to proceed under Regulation 6(4) in determining whether Mr Taylor had undertaken work of not less than 16 hours per week, (2) to apply Regulation 6(4)(c)(ii) because no recognised cycle or working had been established at the date of claim and (3) to conclude that the hours worked by Mr Taylor did not average 16 hours during the 5 weeks immediately preceding the week in which the claim was made, the Commissioner should nevertheless have held that the Inland Revenue ought to have adopted the second alterative given in Regulation 6(4)(c)(ii) and calculated the hours worked by Mr Taylor by reference to

Mr Fullwood accepted that, since Mr Taylor only had an appeal on a point of law, he had to go so far as to say that the Commissioner ought to have held that the Inland Revenue were perverse in not so calculating the hours worked by Mr Taylor. He submitted that the perversity lay in the fact that it was only by adopting that period that the Bank Holiday “trap” could be avoided.

This is an impossible argument. The “other length of time” contemplated by Regulation 6(4)(c)(ii) has to be such other length of time as will enable the weekly average hours to be “determined more accurately”. Selecting the 3 mid-May weeks in fact distorts the weekly average hours rather than enables the average to be determined more accurately. The Commissioner was alive to the point saying:-

That leaves the conundrum of the bank holiday being expressly taken into account for the purposes of Regulation 6(1)(c) and 6(5)(c) but not for the purpose of Regulation 6(1)(a) and 6(4). In an effort to resolve this conundrum, we explored with counsel the possibility that the statutory requirements of section 129(1) of the Act that the claimant be “engaged and normally engaged” in remunerative work looked to both the factual position and the contractual position and that, reflecting this, Regulation 6(1)(a) in requiring the work which the claimant undertakes to be “for not less than 16 hours per week” looked to the contractual position and Regulation 6(1)(c) and 6(5) looked to the actual hours worked. Mr Fullwood did not support this approach and we were quickly persuaded by Mr Coppel for the Inland Revenue that that was indeed not the statutory approach. Mr Commissioner Henty had said in terms that Regulation 6(1)(a) focuses on the hours actually worked and the language of Regulation 6(4)(a), (b) and (c) can bear no other interpretation. This was also decided by Mr Commissioner Jacobs in Linda Case v IRC, 23rd January 2002, CTC/3593/2001. Regulations 6(1)(c) and 6(5) are necessary so as to ensure that the current position at the date of claim is that the claimant has actually worked 16 hours in the week of claim or just before, as well as (pursuant to Regulations 6(1)(a) and (4)) having worked an average of 16 hours across previous weeks. That is understandable and it is in that context that it is necessary to disregard bank holidays.

It would, of course, have been preferable if it had been provided that bank holidays should be disregarded for the purpose of calculating the average weekly hours undertaken by Mr Taylor for the purpose of Regulation 6(1)(a). Unfortunately for Mr Taylor it was not so provided. We were assured that this problem would be unlikely to arise in the future since the disabled persons tax credit has been replaced by working tax credit in respect of which the Regulations are in different terms. As it is, I would reluctantly dismiss this appeal.

I agree.

I also agree.