IN THE UPPER TRIBUNAL	Case No. CTC/5600/2014  
ADMINISTRATIVE APPEALS CHAMBER

Before Judge of the Upper Tribunal Miss E. Ovey

Decision:  The decision of the tribunal given on 18th August 2014 contained an error on a point of law.  I set it aside and, in exercise of the power given by s.12(2)(b) of the Tribunals, Courts and Enforcement Act 2007, I make the decision which the tribunal ought to have given, namely, that the Respondent did not discharge the burden of showing that the Appellant did not satisfy the entitlement conditions for tax credits as a single person in the tax year 2010-2011 and that the appeal against the Respondent’s decision of 5th March 2012 is allowed.

REASONS FOR DECISION

1.	The present appeal is supported by H.M. Revenue and Customs (“HMRC”) in a helpful submission dated 2nd July 2015.  I am broadly in agreement with that submission and therefore do not need to give my reasons at length.  There are, however, some points to be noted.

2.	It is not disputed that the claimant originally claimed tax credits jointly with the gentleman referred to as her husband.  The submission by HMRC correctly points out that HMRC have not adduced evidence to show that the claimant and the gentleman concerned are in fact legally husband and wife.  The claimant, however, has chosen the designation “Mrs.” (p.1K of the bundle of documents), HMRC claimed in its submission to the tribunal (Section 3 at p.1B) to hold information that showed that the parties were married and the claimant has not asserted that they are not husband and wife.  I therefore proceed on the footing that that is also an undisputed fact.

3.	Further, it is not disputed that on or about 14th April 2008 the claimant told HMRC that they had split up, or something to that general effect, and that that information was treated as involving a claim by the claimant to tax credits as a single person.  An award was made on that claim for the tax year 2008-2009, which was then in progress and a further award was made for the tax year 2009-2010.  The present appeal does not involve any dispute as to those tax years.

4.	The submission to the tribunal describes the present appeal as an appeal relating to a decision for the tax year 2010-2011 made on 5th March 2012:  see in particular paragraph 11, supported by the screenshot at p.4, which is the only available evidence of the notice of the decision.  The decision was made following an inquiry made under s.19 of the Tax Credits Act 2002 begun by letter dated 20th February 2012, according to the submission, and it follows that a final decision on the claimant’s entitlement for the tax year 2010-2011 had already been made under s.18 of the Act:  see s.19(4), providing that the period for a s.19 enquiry begins immediately after the relevant s.18 decision.   

5.	The structure of the tax credits system means that at the beginning of the year 2011-2012 during which the decision of 5th March 2012 was made, the claimant also had an initial award under s.14 of the Act based on the previous awards in respect of which final entitlement decisions under s.18 had been made.  That initial award was terminated, also on 5th March 2012, by a decision under s.16 of the Act, which permits HMRC to amend or terminate an award during a current tax year if it has reasonable grounds to believe that the rate of an award is wrong or that the claimant has ceased to be, or never was, entitled to the award.  A decision under s.16, however, is of a provisional nature and becomes redundant when a final s.18 decision is made.

6.	In their submission to the Upper Tribunal HMRC proceed on the footing that the claimant’s appeal was against the final decision for the year 2010-2011 following the s.19 enquiry and the initial decision for the year 2011-2012.  Although it is true that the submission to the tribunal contains material relating to decisions under s.16, it seems to me that the submission is referring only to the decision for the year 2010-2011.  No screenshot relating to the 2011-2012 decision was before the tribunal and there is no reference to another decision notice with another right of appeal.  The correspondence on the appeal from HMRC all identifies it as relevant to the year 2010-2011.

7.	In those circumstances, my decision relates only to the decision for that year, although HMRC invite me to make a decision in relation to the s.16 decision also.  In practice, I have no doubt that HMRC will proceed as if an appeal in relation to the s.16 decision was before me and I had allowed that appeal also.
 
8.	It is clear that the award of tax credits to the claimant as a single person was made on the basis that she and her husband could no longer make a joint claim and so the entitlement under the joint claim had ceased, as provided by s.3(4)(a) of the Act.  Under s.3(3)(a) a joint claim may be made by “the members of a couple”.  Conversely a claim as a single person may only be made by someone who is not entitled to make a joint claim:  s.3(3)(b).  

9.	“Couple” is defined in subs. (5A) and, so far as material, means:

“(a)	a man and woman who are married to each other and are neither – 

(i)	separated under a court order, nor

(ii)	separated in circumstances in which the separation is likely to be permanent.”

10.	It has never been suggested that the claimant and her husband are separated under a court order.  What happened was that the information given by the claimant to HMRC in 2008 was construed as a notification that she and her husband were separated in circumstances in which the separation was likely to be permanent.  The question relevant to the claimant’s entitlement in the tax year 2010-2011 was simply whether the claimant and her husband were then so separated.

11.	HMRC’s submission to the tribunal makes clear that during the course of that year their checks showed that the husband had the same address as the claimant for PAYE, tax and social security purposes, had applied for credit from that address and was jointly liable with her on the mortgage over the property.  Paragraph 14 of the submission refers to this material and then states that:

“as a consequence HMRC had to consider whether [the claimant and her husband] were living together as husband and wife”.

That was a misstatement of the issue.  The “living together as husband and wife” test applies under s.3(5A)(b) in relation to a man and woman who are not married to each other.  It does not apply to husbands and wives.  

12.	I do not need to consider the separation test in detail, given HMRC’s support for this appeal.  It has recently been considered by the Upper Tribunal in HMRC v. PD [2012] UKUT 230 (AAC) and DG v. HMRC (TC) [2013] UKUT 0631 (AAC), in both of which cases it was decided that a married couple living in the same house were separated for the purposes of s.3(3) and (5A).  I do, however, comment that some caution should be exercised as to reliance on the “financial footprint” where the question concerns separation between a husband and wife.  Financial support may be significant when considering whether an unmarried couple have a relationship akin to that of husband and wife living together.  In the converse case of separation between husband and wife, it is very likely that there will have been financial support and dependence, or interdependence, taking such forms as a joint mortgage, joint bank accounts, joint names on utility bills and so on.  The fact that names may not have been changed may be attributable as much to inertia as to lack of separation, at least where there is no immediate practical consequence.  In the case of a joint mortgage it may well not readily be possible to remove one party from the mortgage.  The continued use of the former matrimonial home as an address for official correspondence and other postal purposes may also be explained by practical convenience, especially if, as the claimant says is the case here, one party has no convenient alternative permanent address.

13.	In the statement of reasons, the tribunal said:

“9.	In cases of this nature the onus is very definitely on the appellant to satisfy the revenue and the tribunal that she was likely to be permanently separated from her husband in order to be able to claim tax credits in a single capacity.  A mere written statement that her husband was living in a caravan or staying with friends is insufficient to discharge the burden that rests with her.  She was given the opportunity to present information to show her financial independence which would have persisted (sic) the revenue in reaching a decision.  She did not avail herself of that opportunity.

…

12.	The tribunal had to make the decision based upon the balance of probabilities.  The appellant had not produced any evidence to support her claim that she and her husband were separated.  She had not produced any documentation or any supporting evidence from anyone that could persuade me to be satisfied on the balance of probabilities that the appellant and her husband were not living together as husband and wife during the course of the tax year 2010-2011.  Accordingly I determined that the decision-maker was correct.”

14.	In giving permission to appeal Judge Mitchell raised the question whether the onus was indeed on the claimant given that the decision was to terminate an award of tax credits and was not a decision on a new claim.  The answer given in HMRC’s submission to the Upper Tribunal is that the onus was not on the claimant.  The decision for the tax year 2010-2011 was a decision under s.19(3) and the question the tribunal ought to have considered in relation to that decision was whether there was a basis for revising the entitlement previously determined by HMRC:  see paragraph 14.  On appeal, it is submitted, the burden is on HMRC to prove that a s.19 decision is correct:  see paragraph 16.  This is consistent with general principle and it has been decided by the Upper Tribunal in SB v. HMRC (TC) [2014] UKUT 0543 that in the analogous situation of an in-year change under s.16 of the Tax Credits Act the onus is on HMRC to show evidence establishing that there are reasonable grounds for amending or terminating an award already made.  A similar view was taken by Judge Wikeley in DG v. HMRC (TC) at paragraph 43.  Since HMRC’s submission in the present case was prepared, Judge Hemingway has taken this view in relation to s.19(3) itself in CS v. HMRC (TC) [2015] UKUT 0407 (AAC).  I regard it as clearly correct.

15.	It follows that I agree that the tribunal did misdirect itself on where the onus lay, an error which may indeed be attributable, as HMRC suggest, to the fact that the information that the crucial decision was made under s.19(3) was somewhat buried in the submission to the tribunal.  The tribunal clearly attached great weight to the onus.  In those circumstances, it is inevitable that I set aside the tribunal’s decision.

15.	It seems to me clear that, in the light of the decisions I have referred to in paragraph 12 above and the additional considerations there referred to, HMRC did not discharge the burden of proof which lay on it.  The appeal is therefore allowed and the previous decision as to the claimant’s entitlement stands.

E. Ovey
Judge of the Upper Tribunal
10th September 2015