HMRC v IT (CTC)

A Romanian or Bulgarian national subject to the Worker Authorisation Scheme could rely on article 12 only if they had been admitted to the United Kingdom labour market in accordance with the national measures permitted by the Treaty of Accession. Unauthorised employment did not amount to being employed for the purposes of article 12.

Work said to establish a right to reside must also be genuine and effective. Uncorroborated work producing very low earnings may properly be found marginal and ancillary. A tribunal determining a tax-credit appeal must decide whether entitlement is allowed or disallowed; it cannot leave that outcome to HMRC.

HMRC appealed against a First-tier Tribunal decision which had set aside HMRC’s decisions removing the claimant’s awards of working and child tax credit. The claimant, a Romanian national, relied first on self-employment as a seller of the Big Issue, and later on employment as a cleaner.

The First-tier Tribunal found that the later cleaning work was employment, but did not determine the decisive right-to-reside issue or whether the tax-credit awards should be allowed or disallowed. HMRC contended that the claimant’s employment had not been authorised under the Worker Authorisation Scheme and could not found a right under article 12 of Regulation 1612/68. A further issue concerned the effect of the right-to-reside test on child benefit and child tax credit.

1. Appeal allowed. The First-tier Tribunal materially erred in law. Having identified HMRC’s decision as one disallowing tax credits, it had to determine the appeal by deciding whether the awards were allowed or disallowed. It could not set aside HMRC’s decision and require HMRC to make a fresh decision without resolving entitlement.

2. The Upper Tribunal set aside that decision and remade it under Tribunals, Courts and Enforcement Act 2007, section 12. Remittal would serve no useful purpose because the appeal was old, the material facts could be determined, and the claimant had not engaged in the Upper Tribunal proceedings.

3. The claimant’s Big Issue activity was not genuine and effective self-employment. The available evidence did not corroborate the asserted hours, and the net earnings were too low to support a finding that the work was more than marginal and ancillary. It therefore could not establish a right to reside.

4. The claimant’s employment with Paragon was genuine and effective, but it had never been authorised under the Worker Authorisation Scheme. The derogation from articles 1 to 6 of Regulation 1612/68 allowed the United Kingdom to regulate Romanian nationals’ admission to its labour market. A person who did not comply with those national measures had not been admitted to that market and had not been employed in the United Kingdom for article 12 purposes. Article 12 therefore did not confer an educational right on the claimant’s child, or a consequential right to reside on the claimant or his wife.

5. The Tribunal followed HMRC v Aiga Spiridonova [2014] NICA 63. The separate right-to-reside challenge to child benefit, and on HMRC’s concession child tax credit, could not succeed.

6. HMRC’s decisions of 30 November 2010 were upheld.

• Upper Tribunal (Administrative Appeals Chamber): HMRC’s appeal was allowed. The First-tier Tribunal decision was set aside and replaced with a decision upholding HMRC’s decisions.
• First-tier Tribunal, Manchester: By decision of 1 November 2012, reference SC946/12/01073, it allowed the claimant’s appeal in part, set aside HMRC’s decision, and directed HMRC to make a new decision.