CK v Secretary of State for Work and Pensions & Anor (CSM)

The father’s income should have been calculated as follows:

£9,480 earned income

£10,500 unearned income (dividend payment from the father’s groundworks company in the tax year ending 2023)

£10,500 variation (diversion of income by way of paying his new partner who in our view had no substantive role in the groundworks company)

Total: £30,480 income

The background

The Appellant ... and the Second Respondent … are the parents of three qualifying children, born in 2010, 2013 and 2015. The children reside with the Second Respondent. The effective date for the child maintenance assessment is 25.06.22. The Appellant is employed by the … groundworks company of which he is a director.

The Secretary of State, on a review of the child maintenance calculation, accepted that the Appellant’s current income was £9,480 at the relevant date (namely 25.06.22) – see the Secretary of State’s response, the decision letter dated 27.06.22 (pp.2-8), and the mandatory reconsideration (MR) decision dated 05.10.22 (pp.30-36) – which the First-tier Tribunal (FTT) considered as the decision under appeal. The Second Respondent appealed against the review decision – the appeal is on pp.82-Addition G. The FTT held an oral hearing; the Second Respondent gave evidence. The Appellant did not attend the FTT hearing – in his grounds of appeal to the Upper Tribunal he said that he could not attend due to adverse weather conditions.

The decision now under challenge: the FTT decision dated 26 September 2024

The FTT has accepted that the current income figure should be used (figures from 2022/2023 tax return, the tax year ending on 05/04/23 – see paragraph 16 of the statement of reasons [SoR]) and that this is in total £39,960 (paragraph 3 of the Decision Notice, and paragraphs 20-21 of the SoR), including diverted income.

In doing so, the FTT has found that the Appellant’s income comprised three elements, totalling £39,960:

the Appellant’s yearly salary of £9,480 at 05.04.23 (this figure is given in the document “Personal Tax Computation” on Addition K, page 3, repeated at Addition O, page 6; also see P-60 at Addition O, page 5); and

a dividend of £10,500 paid to the Appellant in the tax year ending on 05.04.23 (Addition K, page 3, repeated at Addition O, page 4); and

a dividend paid to the Appellant’s new partner Miss W in the sum of £19,980 for the tax year ending on 05.04.23.

The test for giving permission to appeal to the Upper Tribunal

A further appeal to the Upper Tribunal lies only on “any point of law arising from a decision” of the First-tier Tribunal (FTT): see section 11(1) of the Tribunals, Courts and Enforcement Act 2007. A disagreement of opinion or over factual findings or conclusions is insufficient. The Upper Tribunal has a discretion whether to give permission to appeal. It will be exercised to give permission only if there is a realistic prospect of an appeal succeeding, unless there is exceptionally some other good reason to do so.

The grounds of appeal

The Appellant’s grounds are in his letter dated 17.03.25. He appears to accept that the variation by way of diversion of income had taken place, but he argues that the FTT erred in that the figure of dividends paid to his partner was incorrect; he says Miss W was paid £10,500 as a dividend in the tax year ending 05.04.23. This figure is provided on Addition K, page 5 (repeated at Addition O, page 4). He also argues that FTT Judge was biased against him and in favour of the Second Respondent, but this claim is not supported by any evidence.

However, it is indeed arguable that the FTT erred as to the amount of the dividend paid to the Appellant’s partner - see Addition K, page 5 (repeated at Addition O, page 4). The figure of £19,980 is on Addition K, page 3 as the income of the Appellant (employment £9,480 plus dividend £10,500). Unless I am mistaken, there is no other document in the appeal bundle which would provide this figure as a sum diverted to Miss W. This mistake, if that is what it is, has been perpetuated in paragraphs 23, 24 & 26 of the SoR. This is not simply a disagreement over the facts – if there was no evidence to support a finding that Miss W received £19,980 in dividend payments then that would amount to an error of law.

I submit that the FtT have erred in law by making a perverse finding of fact when determining that the NRP had diverted income through his partner, totalling £19,980.

Case law confirms that a finding of fact is perverse if it is ““so wildly wrong” that it can be set aside” (CI/535/2005 at paragraph 34), that “A finding might only be set aside for error of law on the grounds of perversity if it was irrational or unreasonable in the Wednesbury sense, or one that was wholly unsupported by the evidence” (R (Iran) v Secretary of State for the Home Department [2005] EWCA Civ 982 at paragraph 90), or “if the finding of fact is perverse in the sense that no reasonable Tribunal could have reached that conclusion.” (Braintree DC v Thompson [2005] EWCA Civ 178 at paragraph19).

Applying the above case law to the matter at hand, the FtT erred in law by finding that the NRP had diverted income through his partner by way of £19,980 dividend payment in the 22/23 tax year (paragraph 4, addition N, FtT bundle). This could be considered to be a perverse finding of fact as there was evidence before the FtT to show that the true figure of diverted income by way of a dividend payment to the NRP’s partner was £10,500 (addition K, page 5 of the FtT bundle).

The figure of £19,980 is on Addition K, page 3 as the income of the NRP in the 22/23 tax year (earnings from employment £9,480 plus a dividend £10,500). There does not appear to be any other evidence in FtT bundle that would lead the FtT to the figure of £19,980. As such, it appears that the FtT misdirected itself and referred to the wrong piece of evidence when considering the amount of income diverted through a dividend payment to the NRP’s partner. Furthermore, this error has been perpetuated in the SOR at paragraphs 23, 24 and 26.

As explained by the case law above, this mistake has led to a perverse finding because it is wholly unsupported by the evidence that was before the FtT. This is a material error in this case because had the FtT made the finding that is clearly supported by the evidence, the NRP’s income at the relevant date would have been £30,480 rather than £39,960 (made up of £9,480 in of his salary, £10,500 in a dividend paid to himself, and £10,500 in a dividend paid to his partner.

There does not appear to be any further errors of law in the FtT’s decision.

The mother’s appeal to the First-tier Tribunal is allowed.

The decision made by the Secretary of State on 5 October 2022 is set aside.

The Secretary of State’s decision to revise the father’s income to £9,480 (current income) on the basis of three payslips is incorrect.

Nicholas Wikeley

Judge of the Upper Tribunal