HM Revenue and Customs v Ruas

A person may be an employed person for the purposes of Article 1(a)(ii) of Council Regulation (EEC) No 1408/71 despite not being in current employment. It is sufficient that the person is compulsorily insured, even for one social-security risk, under a relevant scheme. Entitlement to the family benefit claimed need not be linked to past employment or contributions.

The United Kingdom entry in Annex 1 clarifies the domestic application of Article 1(a)(ii); it does not restrict that definition to current employed earners. Accordingly, Article 73 requires family benefits to be paid for qualifying family members resident in another member state as though they were resident in the competent state.

Mr Ruas, a Portuguese national, had worked and paid national insurance contributions in the United Kingdom. He became incapable of work in 2004 but remained resident in the United Kingdom and received incapacity-related national insurance credits. In 2006 he claimed United Kingdom child benefit for two daughters living in Portugal.

HMRC refused the claim because the children were not in Great Britain, as ordinarily required by section 146(1) of the Social Security Contributions and Benefits Act 1992. The Boston Appeal Tribunal upheld that refusal. Judge Mesher, sitting in the Upper Tribunal, allowed Mr Ruas’s appeal in decision CF/2266/2007.

HMRC appealed, contending that an incapacitated former worker could not rely on Article 73 of Council Regulation (EEC) No 1408/71 unless the claimed benefit was linked to prior employment or contributions. The central issue was whether Mr Ruas remained an employed person within Article 1(a)(ii).

1. Appeal dismissed. Etherton LJ, with whom Moore-Bick and Carnwath LJJ agreed, held that Mr Ruas was an employed person within Article 1(a)(ii) of Council Regulation (EEC) No 1408/71. He was compulsorily insured under the United Kingdom social-security system, including for old-age benefits through credited earnings. Current employment was not required.

2. The definition of employed person in Article 1(a) has general application throughout the Regulation, subject to any express special provision. The reasoning in Martinez Sala v Freistaat Bayern [1998] ECR I-2691, confirmed by Bestuur van het Algemeen Ziekenfonds Drenthe-Platteland v G Pierik [1979] ECR 1977, established that cover under a relevant social-security scheme, even for one risk, may suffice irrespective of an existing employment relationship. It was unnecessary that the non-contributory family benefit claimed should be linked to prior employment or contributions.

3. The earlier authorities relied upon by HMRC did not clearly require the contrary result. Brack v Insurance Officer [1976] ECR 1450 showed that the United Kingdom Annex entry was clarificatory and that Article 1(a) was not confined to persons currently employed. Middleburgh v Chief Adjudication Officer [1992] ECR 1-1823 and Stöber and Piosa Pereira v Bundesanstalt für Arbeit [1997] ECR 1-1511 were confined to their particular statutory and factual contexts.

4. Article 73 consequently entitled Mr Ruas to child benefit for his children in Portugal as if they were resident in the United Kingdom. It displaced the child-residence condition in section 146(1) of the Social Security Contributions and Benefits Act 1992. Article 74 did not narrow the defined meaning of employed person in Article 73, since it addressed a different situation involving a claimant drawing unemployment benefit.

5. It was unnecessary to decide the alternative grounds based on indirect discrimination.

• Court of Appeal (Civil Division) HMRC’s appeal was dismissed: [2010] EWCA Civ 291.
• Upper Tribunal (Administrative Appeals Chamber) Judge Mesher allowed Mr Ruas’s appeal from the Boston Appeal Tribunal and held that Article 73 of Council Regulation (EEC) No 1408/71 entitled him in principle to United Kingdom child benefit: CF/2266/2007.
• Boston Appeal Tribunal The tribunal had dismissed Mr Ruas’s appeal from HMRC’s refusal to pay child benefit for his two daughters resident in Portugal.