Secretary of State for Work and Pensions v YN

This appeal is about entitlement to the childcare costs element in an award of universal credit in circumstances where the claimant reports two monthly payments of childcare charges as being made within the same assessment period.

In this decision I refer to the parties respectively as ‘the Secretary of State’ and ‘the claimant’. This is simply to avoid confusion as they have swopped the roles as Appellant and Respondent respectively in the course of these proceedings before the First-tier Tribunal and now the Upper Tribunal.

The Secretary of State’s appeal to the Upper Tribunal succeeds and so the First-tier Tribunal’s decision on the appeal is set aside. It is not necessary to remit the case to a fresh Tribunal for re-hearing as there is sufficient evidence available for the Upper Tribunal to substitute its own decision for that of the First-tier Tribunal (FTT). I therefore re-make the decision under appeal. The Secretary of State’s original decision dated 7 December 2023 is reinstated.

The underlying facts do not appear to be in dispute. The claimant applied for universal credit (UC) with effect from 1 June 2021. Accordingly, her ‘assessment period’ (AP) ran from the first day of each calendar month until the end of the month in question.

On 20 November 2023 the claimant reported to the DWP that she had made a payment of £1,750 on 1 November 2023 (‘the first payment’) in respect of charges for childcare provided for her two children in the period from 30 September 2023 to 31 October 2023.

On 7 December 2023 the claimant reported that she had made a further payment of £1,350 on 3 November 2023 (‘the second payment’) for childcare charges for her two children in the period from 1 November 2023 to 30 November 2023.

On 7 December 2023 the Secretary of State superseded the claimant’s UC award for the November AP to include a childcare costs element (CCE) in the sum of £1,630.15, being the amount equal to the maximum amount of that element then allowable.

The claimant then queried why her October childcare costs – that is to say, the CCE in respect of any charges attributable to the AP from 1 October 2023 to 31 October 2023 – had not been included in her UC payment for that AP.

The various possible component elements of an award of universal credit are set out in Part 4 of the Universal Credit Regulations 2013 (SI 2013/376). Within Part 4, regulations 31-35 deal with the childcare costs element of an award of UC. The starting point is the basic rule as set out in regulation 31:

The ‘work condition’ is not in issue in this appeal, whereas the ‘childcare costs condition’ is in point. Regulation 33 (as amended) provides as follows:

Regulation 34 then deals with the amount of the CCE:

Finally, for present purposes at least, regulation 34A(1) provides as follows:

Regulation 34A(2) deals with the situation where childcare charges are paid in advance for a future AP and is not relevant to the instant appeal. Likewise, regulation 35, which defines the phrase “relevant childcare” as meaning registered with OFSTED or otherwise approved, is not presently in issue and so that text need not be set out here.

The FTT allowed the claimant’s appeal, finding that while the Secretary of State’s original decision of 7 December 2023 was one they were “legally entitled to make”, it was also “open” to the Secretary of State to make a “retrospective” award including the CCE for the AP 1 October 2023 to 31 October 2023 by “applying regulation 33(2)” to treat at least one of the two November payments in question as attributable to the October AP. The FTT referred to this as a “further legal mechanism”, although it added that there was “nothing wrong legally” in the Secretary of State’s initial decision.

The FTT summarised its reasoning on the Decision Notice as follows:

In its Statement of Reasons, the FTT found the following facts:

The FTT then gave the following explanation for allowing the claimant’s appeal:

The District Tribunal Judge then refused the Secretary of State’s application for permission to appeal.

I subsequently gave the Secretary of State permission to appeal to the Upper Tribunal. I have not set out the Secretary of State’s submissions as they are reflected in my own reasoning for allowing the DWP’s appeal in this case. The claimant has not made any submissions on the Secretary of State’s appeal and did not avail herself of the possibility of being referred by the Upper Tribunal office to the Free Representation Unit for possible assistance. On 11 November 2025 she sent the Upper Tribunal office an e-mail stating “I don’t have to get a representative so will get decision made without me”. In all the circumstances I am satisfied it is fair and just to deal with this appeal ‘on the papers’ and so without holding an oral hearing.

The FTT’s decision in this appeal involves a conundrum. The FTT acknowledged that the Secretary of State “was legally entitled to make the decision it did” (Statement of Reasons, paragraph 8) and yet at the same time it allowed the claimant’s appeal on the basis that there was “a more pragmatic legal option for the Respondent to have chosen” (paragraph 8 again). A careful step-by-step analysis will assist in identifying the two essential flaws in the FTT’s approach.

The starting point is the first payment. This payment was reported on 20 November 2023. On that date the claimant reported that she had made a payment of £1,750 on 1 November 2023 for childcare charges incurred in respect of October 2023.

One must then identify the AP to which the first payment is attributed according to the statutory scheme. It is not, as one might reasonably think coming to the matter entirely afresh, simply the month to which the charges relate. This is because regulation 34A(1)(b) provides that “Charges paid for relevant childcare are attributable to an assessment period where—(b) those charges are paid in that assessment period for relevant childcare in respect of a previous assessment period”. On that basis the first payment is attributable to the AP in which it was made (i.e. the AP from 1 to 30 November 2023). Regulation 36 then provides that the CCE for any AP is limited to the lesser of 85% of the attributable charges or the specified maximum amount (that figure being, at the material time, £1,630.15 for two or more children). Applying the percentage of 85% to the first payment produces a figure of £1,487.50, which accordingly is the maximum CCE permissible in respect of the first payment. The figure of £1,487.50 was duly the CCE comprised in the UC award made on 1 December 2023 at the end of the relevant AP.

We must then turn to consider the second payment. This was reported on 7 December 2023. On that date the claimant reported that she had made a further payment of £1,350 on 3 November 2023 for childcare charges incurred in relation to November 2023. It follows this payment was made in the same AP as the first payment.

One must then identify the AP to which the second payment is attributed. This time regulation 34A(1)(a) (rather than regulation 34(1)(b)) applies: “Charges paid for relevant childcare are attributable to an assessment period where—(a) those charges are paid in that assessment period for relevant childcare in respect of that assessment period”. On that basis the second payment is attributable to the same AP as the first payment, being the AP in which it was made (i.e. the AP from 1 to 30 November 2023). Applying the percentage of 85% to the second payment produces a figure of £1,147.50, which (viewed in isolation) is the maximum CCE permissible. However, the claimant had, of course, already been awarded a CCE of £1,487.50 within the AP from 1 to 30 November 2023. Subtracting that figure from the statutory maximum of £1,630.15 generates an underpayment of £142.65 for the AP from 1 to 30 November. On 7 December 2023 the claimant was therefore awarded the balance of £142.65 in CCE, meaning that she had then been paid the statutory maximum of £1,630.15 for the November AP.

It follows that both the first payment and the second payment were properly attributed to the same AP, being the 1 to 30 November 2023 AP, given the definitions in regulation 34A(1)(b) and (a) respectively.

The next step is to consider whether the childcare costs condition is satisfied. The relevant requirement is set out in regulation 33(1)(za):

It follows that the childcare costs condition is met for the 1 to 30 November 2023 AP if three sub-conditions are satisfied. The first is that “the claimant has paid charges for relevant childcare” – which is not in dispute. The second sub-condition is that those charges “are attributable to that assessment period (see regulation 34A)” – which requirement has just been established in the passage above at paragraphs 21 to 25. The third sub-condition is that “those charges have been reported to the Secretary of State before the end of the assessment period that follows the assessment period in which they were paid”. The end of the assessment period following the AP in which they were paid was 31 December 2023. As the two payments were reported on 20 November 2023 and 7 December 2023 respectively this third sub-condition is met as the reporting was in time.

However, the fact remains that by virtue of this analysis the claimant did not receive reimbursement for the bulk of her October childcare costs (as paid on 1 November 2023 and as reported to the DWP on 20 November 2023). The FTT’s solution to this problem was to rely on regulation 33(2). At paragraph 3 of its Decision Notice, the FTT summarised its approach as follows:

The problem with the FTT’s approach is that on closer inspection regulation 33(2) cannot assist in the circumstances of this case. Regulation 33(2) makes provision for “the late reporting of charges for relevant childcare”. It provides that such late reporting may be accepted in the same circumstances as late notification of a change of circumstances – i.e. by reference to the five conditions in regulation 36 of the Universal Credit etc. (Decisions and Appeals) Regulations 2013 (SI 2013/381 (‘Effective dates for superseding decisions where changes notified late’). In that context, however, “the relevant notification period”, mirroring regulation 33(1)(za), means “a period of time ending on the last day of the assessment period that follows the assessment period in which the charges for relevant childcare were paid” (regulation 33(3)).

It follows that a precondition for the application of regulation 33(2) is that the charges for relevant childcare must have been reported “late”. On a plain English or indeed common sense approach, one might well conclude that the claimant’s first payment was reported late. However, the only permissible way in which charges can be found to have been reported late is by reference to the statutory test laid down in the childcare costs condition in regulation 33(1)(za) and 33(3). For the reasons already identified, both the first payment and the second payment were reported within the relevant notification period (which ended on 31 December 2023). As such, they were both reported in time and were not late. That being so, regulation 33(2), which presupposes late reporting (within the meaning of the UC Regulations), could not assist the claimant.

In summary, it follows there are two problems with the FTT’s decision.

First, the FTT fails to explain how the first payment was attributable to the 1 to 31 October 2023 AP. The proper application of regulation 34A can only lead to the conclusion that both the first and second payments were attributable to the 1 to 30 November 2023 AP.

Second, the FTT misdirected itself in law as to the scope of regulation 33(2), as on the uncontested facts that provision could not apply to assist the claimant, given that her reporting of the first and second payments was not late within the meaning of regulation 33(1)(za) and 33(3).

I am accordingly satisfied that the First-tier Tribunal erred in law for those reasons. I therefore allow the Secretary of State’s appeal to the Upper Tribunal and set aside the FTT’s decision dated 3 December 2024.

I do not consider it necessary to remit the case for re-hearing before a fresh FTT. The facts are not in dispute and the appeal turns on the construction of the complex statutory scheme that makes provision for CCE in awards of UC.

Accordingly, the decision that the FTT should have made, and which is now substituted for the decision of the FTT, is as follows:

The net result is that the claimant is denied the addition of a childcare costs element to her UC award in respect of the bulk of her payment for childcare charges incurred in relation to October 2023. As the FTT observed, this situation has “arisen simply because a lone parent has claimed two months’ worth of CCC in the same AP”. As such, she “had reached her ceiling, she was at fault for reporting two months’ worth of CCC in the same AP. That however is all she did ‘wrong’, she claimed a few weeks later than ideally she should have done”. In those circumstances one can understand why the FTT strived to find an alternative solution to the problem posed by the legislative scheme. However, for the reasons set out above the FTT erred in law in so doing. Even so, it is difficult to discern the policy intention behind such a result. In that context I note that the Explanatory Memorandum to the Universal Credit (Childcare costs and minimum income floor) (Amendment) Regulations 2019 (SI 2019/1249) described amendments to regulation 33 as being “intended to help households with children, giving people more confidence that they will receive support they need in work” (paragraph 7.5). That policy objective is hardly well served by the outcome of the present appeal.

I therefore conclude, with some regret, that the decision of the First-tier Tribunal involves an error of law. I allow the appeal and set aside the decision under section 12(2)(a) of the Tribunals, Courts and Enforcement Act 2007. I also re-make the First-tier Tribunal’s decision under section 12(2)(b)(ii), as set out above. My decision is also as set out above.