CA v Hastings Borough Council

For Housing Benefit purposes, a claimant’s shareholding in a company may be treated under regulations 49(5) and 49(6) of the Housing Benefit Regulations 2006 where the claimant stands in a position analogous to that of a sole owner or partner in the company’s business. Whether the claimant should be so treated is discretionary. If so treated, the value of the shareholding is disregarded and the claimant is instead treated as possessing their share of the company’s capital. That deemed capital is disregarded while the claimant undertakes activities in the company’s business. A tribunal errs in law by failing to consider those provisions where its findings raise a realistic issue under them.

The appellant appealed against a First-tier Tribunal decision dismissing his Housing Benefit appeal. The tribunal had accepted that his 40 per cent shareholding in a small company was worth £40,000 and that he therefore exceeded the £16,000 capital limit under regulation 43 of the Housing Benefit Regulations 2006. It did not consider regulations 49(5) and 49(6), which had not been drawn to its attention.

The Upper Tribunal granted permission after the appellant produced a Valuation Tribunal decision concerning Council Tax Reduction, which had identified materially similar provisions. The central issues were whether the appellant occupied a position analogous to that of a partner, whether the discretionary treatment under regulation 49(5) should be applied, how any deemed capital should be calculated, and whether it was disregarded under regulation 49(6).

1. Appeal allowed. The First-tier Tribunal materially erred in law by failing to consider regulations 49(5) and 49(6) of the Housing Benefit Regulations 2006. The provisions were highly material on the tribunal’s findings that the appellant was a director and substantial shareholder of a small company and worked extensively in its business.
2. The question under regulation 49(5) is whether the claimant stands in relation to the company in a position analogous to that of a sole owner or partner. This is a question of fact. Relevant considerations include the size of the business, the claimant’s role as a director or shareholder, the extent of the claimant’s involvement, and the claimant’s influence over the conduct of the business. The appellant’s position was capable of being analogous to that of a partner. A shareholder in a large publicly quoted company who merely worked for it would not ordinarily satisfy that description.
3. The word “may” in regulation 49(5) confers a discretion. Even if the claimant is in an analogous position, the tribunal must decide whether the claimant ought to be treated as a sole owner or partner for the purpose of calculating capital. This differs from materially similar provisions in regulation 51(4) of the Income Support (General) Regulations 1987 and regulation 115(6) of the Employment and Support Allowance Regulations 2008, which use mandatory language.
4. If regulation 49(5) applies, the value of the claimant’s shareholding is disregarded under regulation 49(5)(a). The claimant is instead treated as possessing their share of the value of the company’s capital under regulation 49(5)(b), assessed by reference to the net value of the company’s assets after liabilities, rather than the value of individual assets. Under regulation 49(6), that deemed capital is disregarded for so long as the claimant undertakes activities in the company’s business.
5. The Upper Tribunal could not remake the decision. The discretion under regulation 49(5) had not been addressed, the appropriate valuation had not been determined, and the tribunal had made no findings about income. The decision was set aside and the appeal remitted for a complete rehearing before a differently constituted First-tier Tribunal, which was not bound by the previous findings.
6. The discussion of ordinary share valuation, including the willing buyer and willing seller approach, was additional guidance. It did not displace the distinct statutory method required where regulation 49(5) applies.

• Upper Tribunal (Administrative Appeals Chamber): allowed the appeal, set aside the First-tier Tribunal’s decision of 5 November 2020, and remitted the case for a complete rehearing by a differently constituted tribunal.
• First-tier Tribunal (Social Entitlement Chamber): dismissed the appellant’s Housing Benefit appeal and found that his shareholding exceeded the applicable capital limit. Permission to appeal was refused on 15 March 2021.
• Upper Tribunal: permission to appeal was initially refused on 11 May 2021, but that decision was set aside under rule 43 of the Tribunal Procedure (Upper Tribunal) Rules 2008 and permission was granted on 7 July 2021.