ASD v Secretary of State for Work and Pensions & Anor

I am satisfied on the arguments before me that that the First-Tier Tribunal (“FTT”) erred materially in law in the decision to which it came on 12 June 2024 and that the decision should be set aside as a result.

The appellant in these Upper Tribunal proceedings was (and is) the second respondent in the FTT proceedings. I will refer to him in this decision as ASD. The appellant before the FTT is the second respondent in these Upper Tribunal proceedings, and I shall refer to her as AWD.

For the reasons more fully explained by the Secretary of State in his submission on this appeal to the Upper Tribunal (a submission with which I agree), the FTT erred in law in not considering fixing a later effective date on the appeal before it; that (second) effective date being the date on (and from) which the 2021/2022 tax return showed ASD’s income for the next most recently completed tax year.

ASD accepts that the FTT was correct to find the tax year 2020/2021 to be, per regulation 39(2) and (4) of the Child Support Maintenance Calculation Regulations 2012, the most recently completed tax year as at the effective date of 7 March 2022. That need not therefore be in issue before the new FTT.

However, as the Secretary of State’s decision under appeal to the FTT was dated 20 April 2022 (i.e., after the start of the next tax year), in my judgement the FTT should also have considered fixing a second and later effective date based on the date on which the 2021/2022 tax return showed ASD’s income for the (next) most recently completed tax year.

The Secretary of State’s submission reads as follows (the submission sometimes refers to ASD as either the appellant or the NRP):

“10…. the FTT have erred in law when setting aside the Secretary of States decision made 13/05/2022. The appellant made an application for supersession on their maintenance liability on 07/03/2022 following a change in their income. Regulation 39(2) of the Child Support Maintenance Calculations 2012 dictates that when calculating the Non-Resident Parents (NRP) current income the most recently completed relevant period is to be used.

11.

The appellant in their grounds accepts that at the time they reported the change in their circumstances the most recently completed relevant period was the 20/21 tax year. However, when the Secretary of State made their refusal to supersede on 20/04/2022 a new tax return (21/22) had already been received on 14/04/2022 (Pages 18-19, FTT Bundle). As this evidence in relation to the appellants income was received prior to the decision being made, it should have been used when making the decision on 20/04/2022. Although this evidence was not considered in the 20/04/2022 decision it was when the Secretary of State looked at the decision again on 13/05/2022.

12.

At the hearing, the FTT have erred by failing to consider the 21/22 tax return as the most recently completed tax year for the purpose of regulation 39(2) of the Child Support Maintenance Calculations regulations 2012. The SOR is inadequate on this matter, it is unclear whether the FTT considered this evidence at all when making their decision. In its reasoning the FTT should address the principal arguments advanced by the losing party as a matter of fairness and showing they have given proper consideration to the arguments raised (paragraph 6 of CI/747/2011). If they had considered this evidence, there is a possibility the test set out by regulation 23(2) may have been satisfied, as the profits received by [ASD] had differed by over 25%, resulting in a different maintenance liability outcome.

13.

Additionally, if it was decided that the NRP’s income had changed by 25%, the effective date would not be the date that the change was notified to the CMS, but the date the change occurred. Regulation 18(4) sets out the following:

“18(4) Where the ground for the supersession decision is that a relevant change of circumstances affecting the non-resident parent's current income has occurred and the non-resident parent was required to report that change in accordance with regulations under section 14(1) of the 1991 Act, the decision takes effect from the date on which the change occurred.”

14.

This is supported by regulation 39(1) which states that the non-resident parents current income is to be determined by the profits of any trade, profession or vacation at the effective date of the relevant calculation decision. The FTT failed to reference this in their decision, there is nothing within the SOR to show that the FTT have taken this into consideration, this amounts to a material error of law.

15.

As such, I submit that the FTT have erred in law….I request that the decision made by the FTT is set aside and remitted to the FTT so they can properly consider whether the 21/22 tax year return can be considered in line with regulation 39 when determining the maintenance liability.”

AWD argues in a submission to the Upper Tribunal that:

“I wish to question “How can [ASD]’s earnings of £41,856.00 for tax year 2020/2021 potentially not end up being used for the CMS calculation at all?” . It would seem that the CMS system allows [ASD] to pick and choose which tax returns he wishes to base the CMS payments on as the annual review is on the 17th March. Potentially allowing [ASD] to pay 2 years based on lower earnings and zero payments of higher earnings. This would seem to have been aggravated by the CMS’s ability to accurately calculate either  a 25% increase or a 25% decrease in earnings.”

These are issue for the new FTT to consider and, if necessary, determine when the appeal is redecided. They do not affect the legal error I have found the FTT made in not considering whether a second effective arose on the evidence. That is not a matter of any party ‘picking and choosing’ which income falls to be taken into account, but rather involves the application of the statutory rules to the evidence.

For the reasons set out above, the appeal succeeds. The Upper Tribunal is not able to re-decide the first instance appeal. That appeal will therefore have to be re-decided afresh by a completely differently constituted FTT, after an oral hearing.

ASD’s success on this appeal to the Upper Tribunal on error of law says nothing one way or the other about whether AWD will succeed on her appeal before the new FTT. That will be for the new FTT to assess in accordance with the law and once it has properly considered all the relevant evidence.