KM v Secretary of State for Work and Pensions & Anor (CSM)

Where an employer makes a company car available to an employed earner, the provision of the car generates no earnings under the Child Support (Maintenance Assessments and Special Cases) Regulations 1992. A notional taxable value assigned to that benefit for income-tax purposes must therefore be left out of the maintenance calculation.

The analysis applicable to a cash car allowance, including an apportionment of business and private use, does not apply where there is no evidence of such an allowance and the employer has instead provided a car. A later child-support scheme cannot alter the meaning of the earlier Regulations, which form a self-contained statutory scheme.

Mr M, a non-resident parent, appealed against a First-tier Tribunal decision concerning his child-maintenance liability. The calculation was governed by the Child Support (Maintenance Assessments and Special Cases) Regulations 1992.

The First-tier Tribunal treated the taxable value of a company car and fuel, shown on Mr M’s tax return, as earnings. Mr M accepted the inclusion of the fuel charge but contended that the taxable value of the car itself was not earnings. The Secretary of State submitted that the car should be analysed as though Mr M had received a car allowance, requiring an apportionment between business and private use.

The issue was whether the employer’s provision of the company car, and its notional tax valuation, could be included in Mr M’s earnings for the purposes of the 1992 Regulations.

1. Appeal allowed. The First-tier Tribunal erred in law by including £10,928, the taxable benefit attributed to Mr M’s company car, in his earnings. Its decision was set aside under section 12(2) of the Tribunals, Courts and Enforcement Act 2007 and remade.

2. The evidence showed that Mr M’s employer had made a car available to him. It did not show that he had received a cash car allowance. The Secretary of State’s reliance on R(CS) 4/08 was therefore based on a misreading of that decision. That authority concerned an allowance paid to an employee who incurred car-leasing costs; it did not concern an employer-provided company car.

3. Under Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992, the provision of a company car for an employee’s use is not a payment in kind and generates no earnings. Accordingly, the notional income attributed to the car for tax purposes had to be disregarded in fixing Mr M’s earnings. The accepted fuel charge remained included.

4. The Upper Tribunal remade the calculation on annual earnings of £11,113, effective from 20 January 2011, and directed the Secretary of State to make the corresponding maintenance calculation within 28 days.

5. The Child Support Maintenance Calculation Regulations 2012 could not affect that construction. Although both schemes derived from the same parent Act, each had to be interpreted on its own terms.

• Upper Tribunal (Administrative Appeals Chamber): Allowed Mr M’s appeal, set aside the First-tier Tribunal decision of 31 March 2015, and remade the maintenance calculation.
• First-tier Tribunal: Included £15,346 relating to the company car and fuel as earnings, while accepting that repayments from the director’s loan account were not taxable income.