SM v The Secretary of State for Work and Pensions & Anor

The tribunal must undertake a complete reconsideration of the issues that are raised by the appeal and, subject to the tribunal’s discretion under section 12(8)(a) of the Social Security Act 1998, any other issues that merit consideration.

The reconsideration must be undertaken in accordance with KK v Secretary of State for Work and Pensions [2015] UKUT 417 (AAC).

In particular, the tribunal must investigate and decide whether the (i) the pensions contributions paid by the Second Respondent; and (ii) his Company’s retained profits and any disputed elements of its expenses, amounted to a diversion of income within the meaning of Reg 71 of the Child Support Maintenance Calculation Regulations 2012.

The Panel on remission should include a financially qualified member.

These Directions may be varied or supplemented by a Judge of the First-tier Tribunal.

This is an appeal by the “parent with care” against a decision of the First-tier Tribunal (“the F-tT”) in relation to the calculation of child support (“CS”). Permission to appeal was granted by Upper Tribunal Judge Butler on 19 February 2025. Since that date, the Upper Tribunal has received submissions from all the parties, addressing the matters on which the Judge granted permission.

The Upper Tribunal has a discretion whether or not to hold an oral hearing of a substantive appeal. The test I have to apply is whether: “fairness requires such a hearing in the light of the facts of the case and the importance of what is at stake”: R (Osborn) v Parole Board [2014] AC 1115 at paragraph 2(i). In exercising my discretion, I must have regard to the parties’ views: (see rule 34(2) of the Upper Tribunal’s Procedure Rules). The Appellant and First Respondent have both indicated a preference for the case to be disposed of the papers. The Second Respondent would prefer an oral hearing. This is a request which I have considered carefully. However, I have decided that an oral hearing is unnecessary and that it will not assist in ensuring a fair disposal of this matter. This is because the Upper Tribunal is concerned with issues of law. In this case, the legal issues and the underlying facts are clearly evident from the papers. There is no need to explore them orally and there is a risk that an oral hearing will become a vehicle for supplementing the evidence below, which would not be its function.

The Child Support Act 1991 established a scheme for the calculation, collection and enforcement of periodical maintenance payments by certain parents with respect to their children.

The Appellant, the Second Respondent’s former wife, is the ‘parent with care’, claiming CS in relation to her care of the former couple’s “Qualifying Children.” The Second Respondent has an obligation to pay child support in the sums assessed as due by the First Respondent’s Child Maintenance Service (“CMS”).

In a hearing held over 3 – 5 June 2024, the F-tT heard her appeal in 4 cases (SC142/20/00705, SC142/23/00322, SC142/23/00488 and SC142/21/00282). It issued a decision on 6 June 2024. The Appellant did not include appeal SC142/20/00705 in her request for permission to appeal to the Upper Tribunal and permission was not granted in respect it. This appeal therefore concerns three cases. To summarise, using approximate figures for the sums at issue:

The F-tT noted that the Second Respondent has held various positions of employment over the years. He worked in the police force until 2004 before moving into specialist IT related work. For a number of years, he was a contractor supplying services in support of the Highways Agency which he did through personal service companies. Since 2013, that personal service company has been incorporated and will be referred to as “the Company”. On 10 August 2017 the Second Respondent gifted Mrs B a 40% shareholding in the Company. In April 2019, the Second Respondent became a full-time employee of T. Technology Services Limited (see para 12 of the Statement of Reasons or “SOR”, for this history).

In February 2025, Upper Tribunal Judge Butler gave permission to appeal on the basis that three grounds of appeal were arguable, stating:

The First Respondent, the Secretary of State for Work and Pensions (“the SSWP”) has filed submissions supporting the appeal on the first two grounds, but not the third. The Second Respondent (“R2”) then filed detailed submissions, opposing the appeal. The Appellant has responded, taking issue with their contents. The arguments are considered below.

The calculation of CS is governed, relevantly, by the Child Support Maintenance Regulations 2012 (“the 2012 Regulations”). This appeal concerns Reg. 71, which provides:

Diversion of income

71.

—(1) A case is a case for a variation for the purposes of paragraph 4(1) of Schedule 4B to the 1991 Act where—

(a)

the non-resident parent (“P”) has the ability to control, whether directly or indirectly, the amount of income that—

(i)

P receives, or

(ii)

is taken into account as P's gross weekly income; and

(b)

the Secretary of State is satisfied that P has unreasonably reduced the amount of P's income which would otherwise fall to be taken into account as gross weekly income or as unearned income under regulation 69 by diverting it to other persons or for purposes other than the provision of such income for P.

(2)

Where a variation is agreed to under this regulation, the additional income to be taken into account is the whole of the amount by which the Secretary of State is satisfied that P has reduced the amount that would otherwise be taken into account as P's income.

Caselaw on this provision includes DT v SSWP (CSM) [2023] UKUT 175 (AAC). In this, UT Judge Rowland confirmed that his reasoning in AS v Secretary of State for Work and Pensions (CSM) [2018] UKUT 315 (AAC), which concerned the predecessor of regulation 71, regulation 19(4) of the Child Support (Variations) Regulations 2000, applied also to Reg 71 of the 2012 Regulations. In AS, he had said:

“[18]. The question of what is reasonable for the purposes of regulation 19(4) must be considered in the context of the purpose of the provision and, indeed, the purpose of the whole child support regime. It is expected that parents will support their children and regulation 19(4), like much of the rest of the 2000 Regulations, is obviously intended to prevent non-resident parents from avoiding that liability. An action that might be quite reasonable in the absence of any potential liability to support children may, for the purposes of regulation 19(4), be unreasonable if it has the effect of reducing a parent’s ability to pay child support maintenance. Whether a diversion was unreasonable will depend on a number of factors and is likely to be a matter of judgment. In particular, it is necessary to consider the extent to which the action that amounted to a diversion of income was purely voluntary or was forced upon the parent by circumstances and the extent to which the reasons for carrying out the action reflected what can fairly be regarded as a diminution in his ability to pay child support maintenance.

[19]. … I do not consider that gaining a tax advantage can ever contribute to the reasonableness of the diversion for the purposes of regulation 19(4). It would be absurd if a non-resident parent were to be allowed to enrich himself and members of his household at the expense of other children whom he is under an obligation to support, save to the extent that such enrichment is merely the consequence of action taken for some other good reason.”

The facts in DT concerned payment of an income up to the tax allowance only, coupled with receipt of a dividend and the proper treatment of this. Payments into a personal pension were not considered, but the general observations that “Whether a diversion was unreasonable will depend on a number of factors and is likely to be a matter of judgment” applies.

I was also referred to AE v SSWP and PE (CSM) [2025] UKUT 49 (AAC), in which UT Judge Church stated, after considering the case of ‘unreasonable diversion’ under Reg 71, continued:

“[48]. Although this provision [i.e., Reg 71] is applicable where a non-resident parent has arranged their affairs with the intention of reducing their liability to make child support payments, no such skullduggery is required.

[49]. Regulation 71 may also apply where a non-resident parent has arranged their affairs in a way that is perfectly proper, and not designed to avoid or reduce their responsibility to support their children financially, but which just happens to result in them receiving a low income. In those circumstances the scheme operates to ensure that the calculation of the non-resident’s child support liability is adjusted to an appropriate level even though there is nothing “unreasonable” in the arrangements other than in their impact on the child support calculation. For these reasons, the Tribunal was wrong to say that a “more robust approach” was warranted in diversion appeals. The approach is the same, and that approach is informed by the principles set out in the 1991 Act, and especially Section 28E(2)(a)), which says that parents should be responsible for maintaining their children whenever they can afford to do so.”

Pension Payments. The scale of the payments made by R2 into his personal pension were challenged and were said to be unreasonable, within the meaning of Reg 71(1)(b) of the 2012 Regulations.

The Tribunal first examined the current or anticipated values (on retirement) of all the four pensions held by R2, including those from former employment before starting work on a self-employed basis. After listing their values, it continued:

“[16]. The second respondent is 47 years of age. Taking a broad view of his present pension position the Tribunal did not find that he had made excessive provisions for his future retirement. The sums listed above, the Tribunal finds, can be characterised as modest.

[17]. The allegation of excessive pension contributions centres primarily around a single payment made on 31 March 2017 of £20,765 ... It is not disputed that this single payment was made. The second respondent’s evidence concerning this was that in discussion with both his financial adviser and accountant it was noted that his retirement provisions, at that point, could be seen as deficient or lacking. He had therefore been advised that he could make this payment to try to catch up what was seen as a shortfall in his provisions for retirement. The Tribunal found the respondent’s evidence to be credible on this point. It is of note that no further individual large payments have been made. Pensions (i) and (ii) listed above, the Tribunal finds, are limited and not set to provide more than very modest sums for the second respondent. He was therefore at about the age of 40 starting a pension plan to provide for his future. Although not binding the Tribunal referred to the FSA table concerning the amount of income that should be deposited in a pension fund to make reasonable provision for someone upon retirement. If a pension is started at the age of 40 the table would indicate that annual contributions of approximately 18% - 25% of a person’s salary ought to be paid to make suitable provision for retirement …. The Tribunal accepts that when this payment was made the second respondent’s retirement planning could be seen as being deficient. The Tribunal therefore found that the second respondent had not unreasonably reduced his income. The sums paid into his pension funds were not therefore excessive and do not fall to be considered in the calculation of liability to pay child maintenance.”

Shares in the Company. The involvement of Mrs B was dealt with by the F-tT at paragraphs 18 – 19:

“[18]. On 10 August 2017, the second respondent transferred 40% of the shares of the Company from himself to Mrs [B].

[19]. Again, the Tribunal accepts the second respondent took this course of action having sought advice from his accountant. The Tribunal also accepted the second respondent’s evidence that it was his intention to grow the Company with the assistance of Mrs [B], whose skill set in data protection was complementary to the second respondent’s, and that in time she would leave her third-party employment and work wholly in the couple’s joint business. However, at this time Mrs [B] was working in a full-time job and only able to commit a few hours every week to the Company. The Tribunal again found the second respondent’s evidence to be credible and that there was a genuine involvement of Mrs [B] in the Company. In assessing all of the evidence the Tribunal finds that a 10% shareholding in the Company would, at this early stage in August 2017, more accurately reflect Mrs [B]’s contribution to the business and that a gift of that amount would have been reasonable.”

Diversion of income through retention of profit and other issues. The Tribunal then considered (see paragraphs 22 onwards) issues related to the alleged diversion of income through (i) the retention of profits and (ii) through the payments of dividends instead of salary. It decided that the profit retained was reasonable (para 23). As for dividends, it noted that at the first effective date, 10 December 2017, the income assessment included R2’s dividends received in 2016/17 of £31,940 and on the second effective date, 10 December 2018, the income assessment included R2’s dividends received in 2017/18 of £23,999. These amounts had been included as unearned income variations under Regulation 69. In relation to the calculations concerning the last effective date of 22 May 2019, R2 had not derived any unearned income and the figures used to calculate liability for CSM (derived from his employment) were correct.

At paragraphs 28 – 35, the Tribunal considered and dismissed other challenges to items of expenditure relating to the Company. Apart from a figure of £70 in relation to an expense that should not have been set off against tax (allowed as a diversion under Reg 71, SOR para 31) it held that no variations should be made.

When giving permission, the Upper Tribunal Judge identified that, arguably, portions of the Statement of Reasons do not clearly address the substance of some of the grounds of appeal. The examples given were as follows; I have addressed each in turn.

First, in appeal SC142/22/00488, the grounds of appeal concerning the alleged diversion of income through excessive pension contributions took issue with two forms of pension payments: (i) the monthly pension contributions increasing from £661.25 per month, to £1,000 per month from February 2017; and (ii) an additional lump sum payment of £20,795 being made into the pension in March 2017 (page 24 of appeal ending 488). The concern was that the F-tT’s reasoning clearly addressed the single payment of £20,795 but not the increase in monthly contributions.

The SSWP has accepted this, submitting that the: “FtT fails to mention the monthly pension contributions, which clearly forms part of the PWC’s arguments in their grounds of appeal (paragraph 7(d) and (e) and paragraphs 16-18, pages 12-14, UT bundle). Even if this was discussed at the hearing, it is not clear from the SOR if the FtT made any comment or determination on the perceived excessiveness of the NRPs monthly pension contributions.” In other words, the narrowing of the arguments required explanation. The Appellant also agrees.

I have set out the relevant part of the Tribunal’s reasoning (its paras 16 and 17) above. Despite the submissions of the Appellant and the SSWP, I do not accept that the Tribunal failed to consider the monthly payments, as well as the large lump sum payment, in reaching its conclusions. R2 points out that he “provided a full table of monthly contributions between April 2016 and December 2017 alongside the lump sum of £20,765 paid on 31 March 2017, all of which were supported by statements and explained as catch-up payments after years of underfunding.” The heading given to the topic by the F-tT was “Diversion of income through excessive pension contributions”, i.e., referring to a number of “contributions”. More significantly, its summary of the funds held, and their overall nature (“modest”) was a discussion and conclusion about of the sum total of all the pension contributions made, including the monthly ones (before the start of paid employment). In addition, the logic of the case for increased contributions, set out in para 17, applied equally to all the pension payments. The reasoning, although not explicit, is adequate to explain the Tribunal’s approach to all the payments and not merely the lump sum.

Second, there was a concern that the evidence of the figures in relation to the personal pension managed by St James’ Place was inadequate or wrong. The F-tT summarised its future value as £8,141 per annum, projected to be payable from March 2052; but there were a number of different projections of its value, and some significantly larger.

The various projections for the future values of the St James’ Place pensions are at pp99 – 103 of the appeal bundle in No.488. Whilst it is correct that there are a number of varying projections, the key difference is that the larger ones (e.g. at pp100, p101) assume that payments “into your regular contributions plan will continue on the current terms until the date shown”. The figure quoted by the F-tT was based on the value of the fund as at December 2019, and assumed that no further contributions would be paid. This was the more appropriate approach, in my view, for an assessment of whether the contributions paid up to and in the years under scrutiny were reasonable, for the purposes of assessing liabilities to pay CS.

Third, when dealing with arguments about diversion of income through unearned income payments to Mrs B, the Tribunal stated that it found a genuine involvement of Mrs B in the Company (paragraph 19). However, the Tribunal did not make findings about the exact nature and amount of work Mrs B carried out for the Company. In the absence of those findings, it is argued that is it more difficult to understand how the Tribunal evaluated that work as reflecting a 10% shareholding in the Company; and the reasons were inadequate.

The relevant reasoning from the Tribunal (paras 16 – 17) is set out above. It is clear that the Tribunal accepted R2’s evidence that Mrs B made a genuine contribution to the Company. It rejected the Appellant’s case that Mrs B was actually doing nothing, because (e.g.) she was working full-time elsewhere. However, it found that (since she was working fulltime elsewhere), the work was in the order of “a few hours every week to the Company.” Against that background, it is apparent that it made a broadbrush calculation of what would be a reasonable gift of company shares – reducing it from 40% to 10%. This, it seems to me, was an evaluative judgment for the Tribunal to make. It was, further, consistent with R2’s evidence at p46 of the Bundle in [488], where he outlined Mrs B’s role and stated: “It would amount to approximately 2 – 3 hours per week yearly, in addition to other general administration.” This is not a case in which it can be said that there was no evidential basis for the factual finding made or it was perverse.

I accept that more detailed reasoning was possible, but the issue is whether the reasons were adequate, or whether they left the parties genuinely uncertain about the basis on which the Tribunal’s conclusions were reached, taking into account all the evidence that was filed and heard (which can be assumed to be known to the parties). The Tribunal was entitled to accept as genuine R2’s evidence that Mrs B carried out work for the company. Effectively, the value of the 10% share allowed by the Tribunal to Mrs B for what it accepted amounted to “a few hours every week to the Company” was £2,333.33p (see paragraph 20 of the Statement of Reasons). The remaining element of the payment made to her (£6,999.98p) was treated by the Tribunal as a diversion of income. £2,333.33p represents a payment of just under £45/week (assuming a 52-week year) or just over £58/week (assuming a 40-week year). It is hard to see that as anything other than a reasonable sum for a “few hours of work” every week, and I do not accept that a more detailed explanation of that approach was needed by the Tribunal.

I therefore dismiss Ground 1.

The concern expressed here is that the wording in Regulation 71(1)(b) (set out above) requires consideration of whether a person has unreasonably reduced the amount of their income that would otherwise fall to be taken into account as income that is available for the purpose of child support. Thus the issue of whether a payment is “unreasonable” has to take account of the context of the parental duty to support children, and the rationale of the Child Support Act and Regulation 71, which give effect to that duty.

The Appellant argues, first, that the Tribunal has focused on whether steps taken by R2 were reasonably needed to fund adequate retirement provision, rather than whether those steps would unreasonably reduce the amount of his income that would be taken into account for child support purposes. The Tribunal may have applied the incorrect legal test, it is argued. She further submits that the F-tT appears to have placed reliance on the Second Respondent’s oral evidence that he sought advice from a financial planner and accountant, but this is not the issue for the purpose of Regulation 71(1)(b). She notes that when R2 moved into employment, his pension contributions, on a salary of £72,000-odd, amounted to some £720 pcm or £8640 pa, and suggests that this is a more reasonable benchmark. She also says that using the FSA table was not a reasonable comparator. The F-fT noted that “if a pension is started at the age of 40 the table would indicate that annual contributions of approximately 18% - 25% of a person’s salary ought to be paid to make suitable provision for retirement”; but R2 was not starting a pension from scratch at that point in his life.

The SSWP supports this Ground, stating: “However, the F-tT appear to have focused on whether steps taken by the NRP were reasonable, rather than whether those steps would unreasonably reduce the amount of his income that would be taken into account for child support purposes.” He thus submits that the F-fT did not demonstrate that it had applied the right test.

R2 does not agree. He points out that not only evidence, but also the correct legal approach, was fully ventilated before the F-tT over the course of a lengthy hearing. He draws attention to the approach of the F-tT in an earlier decision between the parties which looked at (relevantly) pension contributions made in 2014/2015 and 2015/206 (see SC142/17/0085, a F-tT decision placed before the Tribunal in this case). Again, this set out or embodied the correct legal approach.

I note that the Tribunal in SC142/17/0085 noted the need to look at R2’s dividends and pension contributions in the round (when one was high, the other was low) and stated: “The Tribunal is only looking at a variation based on 2015-2016 under Reg. 71 and in that year, the pension payments were about £9,000 as against an income of salary and dividends amount to some £65,000. That is 13.74% of total income being spent on pension contributions. The Tribunal did not make a further variation in respect of the pension payments.” It continued:

“The Tribunal allowed a variation in respect of the dividends as set out above. We did not give a variation in respect of the pension contributions because, in the year we were looking at, we were not satisfied that a diversion had occurred. The pension contributions [of £9,000] were not so excessive as to amount to a diversion as defined by Reg 71. [Mr B] can make sensible and appropriate provision for his retirement. As an employee, he could reasonably expect his employer to make some contribution. The law requires an employer's contribution of at least 1% of salary. Had we been looking at the previous year as detailed in paragraph 29 above, we would have seen grounds for a diversion though the variation would have taken account only of the excess pension above that reasonably allowed. If, in another financial year being considered, a variation in respect of the pension was appropriate then, it would be considered. That is not the case in 2015 -2016.”

Thus, in a year in which a variation was allowed to bring dividend income of £63,889 gross (£57,000 net) into the calculation of CS, the pension payments of £9,000 were not varied. However, the Tribunal indicated that in another year – if dividend payments were low but pension payments higher - another approach might be taken.

I have set out the relevant parts of the F-tT decision at paragraph 14 above. The caselaw establishes that what amounts to reasonable provision for (here) retirement has to be judged in the context of the obligations that parents owe to children. The assessment of pension income would also, as the Tribunal in SC142/17/0085 noted, need to take account of the size of other sources of income and the extent of their use to support the children. All the income – potential and available - has to be considered in the round.

It is fair to say that there is no reference to this ‘balancing act’ in the F-tT’s decision. The F-tT’s discussion focuses on R2’s need to make provision for his retirement, including the issue of historic under-provision. I accept that any such under-provision or a need for ‘catch-up’, if established, forms part of the factual matrix that a tribunal may reasonably take into account – after all, under-provision could have served to increase the resources available to support the children in the past, and was certainly relevant to what R2 might reasonably look to do, for his retirement. I also accept that the F-tT was entitled to make an assessment of the scale or adequacy of the provision to date, which is an exercise of judgement.

However, this did not remove the need to assess R2’s decision-making in the context of the resources available to support his children. The sums paid into the pension, at least in 2016/27, were considerable and there was a need to stand back and consider whether their impact on the resources available for the children was reasonable.

There is nothing in the reasons which engages with this point. I accept that this amounted to a material error of law.

I have also considered the Appellant’s further submissions (contained, for example, in her submissions dated 26 July 2025, paras 9 - 10), that the same error of approach infected (or may have infected) the Tribunal’s conclusions regarding the business expenses allowed – she says that they too were not properly considered through the lens of Reg. 71. I note that when giving permission, UT Judge Butler noted that this error was suggested to be apparent in, for example, para 23 of the Statement of Reasons, where the F-tT said: “As at 31 March 2017 there was a retained profit in the Company of £2,699 (322) [48]. As at 31 March 2018 the retained profit was £4,800 (488)[108]. The Tribunal found neither of these figures to be excessive given the nature of the second respondent’s business.”

There were material differences between the considerations governing the pension contributions (which were plainly for Mr B’s sole benefit) and the treatment of the company’s expenses and retained profit, addressed from paragraph 22 onwards. The Company was (at that point) the source of R2’s income and needed to be properly run and financed.

The Tribunal considered the justification for the retained profits in 2017 and 2018 (SOR para 23). It accepted the evidence that there was a legitimate business need for the sums retained and that “The amounts retained in the Company were entirely proportionate to the anticipated business expenses.” It also gave careful consideration to whether or not the expenses were properly claimable as business expenses (disallowing, and treating as a diversion under Reg 71 a figure of £70 when it was not), and also considering whether any errors would have impacted in the final profit figures (see para 30 SOR, for example). The Appellant, in her application for permission to appeal, disputes the legitimacy of these expenses and said that they were for personal use (e.g. Apple products) or excessive (£22,000 on training expenses). However, these would appear to be findings of fact on matters that were ventilated at the hearing, and there is no error of law demonstrated in the characterisation of the nature of these expenses, from the perspective of whether they were reasonably incurred by the Company.

However, I accept that the Tribunal’s conclusions that (i) retained profit was not disproportionate and (ii) these were legitimate and properly incurred business expenses, does not as a matter of law dispose of the argument that such expenses or retained profit should still have been treated (in whole or in part) as income potentially available for the maintenance of the children, and the issue considered against the background of the sums available for this. Given my conclusions on the treatment of the pension contributions, this element too of the determination must be reconsidered, for the same reasons.

Ground 3:Potential error of law regarding the Tribunal’s calculation of the size of the diversion of income through dividends to Mrs B. It is argued that the F-tT erred in its calculation of the dividends paid to Mrs B, by not including a later payment of £1,333.33p made to her in early May 2018.

This Ground is not supported by the SSWP. He draws attention to the outcome of the Correction Application issued by the Tribunal Judge on 5 November 2024, in response to an application by the Appellant. In short, the Judge states that this payment was not made until May 2018. The payments to Mrs B were considered in the context of the decision with an effective date of 18 December 2018. This in turn was based on R2’s historic income during the tax year 2017/2018, and the dividends paid during that year (ending on 5 April 2018). A payment made in May 2018 did not form part of the historic income for the tax year 2017/2018. The application for a correction was refused. The SSWP says that it is arguable that the F-tT did not adequately explain this point in the first instance (paragraph 20, SOR). However, if there was any failing in this regard, it was corrected in the response of the Tribunal Judge to the correction application.

I agree. If there was any error to explain this issue correctly, it was dealt with subsequently by the F-tT and is therefore not material.

However, the Appellant argues that there is a residual issue as to whether or not there was a dividend payment to Mrs B which should have been considered with regards to the financial year of 2018/2019 (the year in which payment was made).

It is not necessary to determine that issue. It may be considered on remission (see below).

I therefore accept that the Tribunal made an error of law, in failing to show, by its reasons, that it had addressed the legal test under Regulation 71(1)(b) appropriately and, most pertinently, that it had considered the reasonableness of the pension contributions in the context of R2’s obligations of support to his Ground.

Whilst I note that the Appellant asks the Upper Tribunal for further guidance on the application of Reg 71 in the context of Personal Service Companies, it seems to me that the caselaw cited by her and by the SSWP already gives a clear outline of the test to be applied by the Tribunal.

For this reason, these appeals must be remitted back for further consideration by the F-tT, by a differently constituted Panel, as the SSWP suggests. The Appellant would prefer the appeals to be determined by the Upper Tribunal, but the First-tier Tribunal has the benefit of being able to sit with a financial member and is the usual forum for making further findings of fact.

Under s12 of the Tribunals, Courts and Enforcement Act 2007, the Upper Tribunal must give directions on remitting a case for rehearing. Those Directions may include a Direction that the Tribunal, on remission, should consider only specified issues. See the observations of Upper Tribunal Judge Jacobs in KK v Secretary of State for Work and Pensions [2015] UKUT 417 (AAC):

“[14]. Judges sometimes limit the scope of their remittal. This is authorised by section 12(2)(b)(i), which provides for the Upper Tribunal to give directions for reconsideration. There are two approaches. One approach is to impose a legal limit on the issues that the tribunal may consider. For example: the judge might direct that only the mobility component is in issue at the rehearing. This is a permissible approach, which has been approved in a variety of contexts…”

I have considered whether this approach would be appropriate here. The Ground on which I have concluded that the Tribunal fell into legal error is a reasonably narrow one. There is an interest in finality of litigation, i.e., in not reopening matters that have been determined according to law (e.g., the size of the appropriate share of the Company for Mrs B, or the legitimacy of the business expenses and retained profit, at least from a tax perspective). Appropriate narrowing of the issues on remittal might also assist in bringing these appeals to a final conclusion as soon as reasonably possible – which is in the interests of the children for whom the CSM system exists.

But on balance, I have decided that such an approach may only serve to increase argument and thus potential confusion about what is, or is not, open for reconsideration, particularly in relation to the Company’s expenses. The appeals must therefore be reconsidered afresh. However, the F-tT will have well in mind that, as set out by UT Jacobs in KK, that although:

“[16] ….The tribunal must come to its own conclusions on issues of both fact and law that it considers. Neither the Upper Tribunal’s decision itself nor anything in the judge’s reasons for decision is an indication of the likely outcome of the rehearing. Nor will the tribunal be bound by any conclusions of fact or law reached by the previous tribunal in the decision that the Upper Tribunal has set aside.”

Still:

“[17] In making its decision at a rehearing, the First-tier Tribunal may adopt, or incorporate by reference, the findings made by the previous tribunal as a way of recording its conclusions. That is merely a matter of convenience. It must also take account of the evidence that was before that tribunal, whether or not given orally, and may find it more reliable as being more contemporaneous. That is part of its duty to take account of the evidence as a whole. But what the tribunal must not do is to regard itself as bound by the earlier tribunal’s conclusions or to treat them as effectively approved by the Upper Tribunal’s decision directing the rehearing.”

Eleanor Grey KC

Judge of the Upper Tribunal