P.P. v Secretary of State for Work and Pensions

For an unearned-income variation under Child Support Maintenance Calculation Regulations 2012, regulation 69(3) requires the decision-maker and tribunal to determine the amount by reference to the figure supplied by HMRC. Subject to the stated exceptions, they may not substitute their own recalculation merely because they consider that figure mistaken. The proper course is to notify HMRC, whose correction may enable revision.

In a diversion-of-income variation, the statutory question remains whether a variation is just and equitable in all the circumstances. A tribunal may draw adverse inferences from a party’s failure to comply with directions, but must consider the evidence as a whole and any alternative explanation. It must not set a penal or all-or-nothing variation by assuming that all available company profit should have been distributed.

The father appealed against a First-tier Tribunal decision, reference SC904/16/00100, allowing the mother’s appeal against a 2016 child-maintenance calculation. The First-tier Tribunal had increased his unearned income from £30,000 to £34,191 and imposed a diversion-of-income variation on the footing that he could reasonably have taken a substantially larger dividend from his haulage company.

The father advanced five grounds. The Upper Tribunal rejected the complaints of procedural unfairness, relevant-other-child status and shared care. It upheld the challenges to the diversion and unearned-income variations. The central issues were the application of the just-and-equitable requirement and the effect of HMRC information under regulation 69(3) of the Child Support Maintenance Calculation Regulations 2012.

1. Appeal allowed in part. The First-tier Tribunal made errors of law on diversion of income and unearned income. Its decision was set aside under section 12(2)(a) of the Tribunals, Courts and Enforcement Act 2007 and remitted to a differently constituted First-tier Tribunal for a fresh oral hearing under section 12(2)(b)(i).

2. On regulation 71, the First-tier Tribunal was entitled to draw adverse inferences from the father’s failure to comply with directions, provided it fairly considered whether there was another explanation. However, section 28F(1) of the Child Support Act 1991 requires a broad assessment of whether a variation is just and equitable in all the circumstances. The tribunal instead treated the maximum dividend it thought legally available as the proper figure. It failed to consider the business consequences of distributing a dividend significantly exceeding the company’s annual profit, and its reasoning gave the appearance of a penal response to non-compliance. That was not a lawful application of the discretion.

3. On regulation 69(3), the HMRC figure was conclusive for this purpose, unless an exception in regulation 69(5) or (6) applied. The First-tier Tribunal could not itself add declared rental profit to the HMRC figure. If it considered the HMRC figure mistaken, it should identify its concern and arrange for the decision and reasons to be sent to HMRC; an HMRC correction could permit an any-time revision. The father’s unearned income for the relevant tax year was therefore £30,000 on the material then available.

4. The absence of a full statement of reasons did not itself preclude an appeal. It did prevent a challenge founded solely on the alleged inadequacy of summary reasons, absent a timely request, unless an error of law was independently justiciable or apparent from the summary. The procedural-unfairness ground failed on that basis and on the facts found.

5. A court order about contact must be considered under regulation 46(4), but is not conclusive of the expected pattern of overnight shared care. The relevant-other-child and shared-care grounds failed because the necessary evidence had not been before the First-tier Tribunal. Those matters may be raised on the remittal with evidence.

• Upper Tribunal (Administrative Appeals Chamber): Father’s appeal allowed in part; First-tier Tribunal decision set aside and case remitted for a fresh hearing: [2022] UKUT 286 (AAC).
• First-tier Tribunal (Social Entitlement Chamber): On 23 September 2019, allowed the mother’s appeal and imposed unearned-income and diversion-of-income variations. That decision, reference SC904/16/00100, was set aside.