ZA v London Borough of Barnet

Housing benefit capital must be calculated using the complete statutory scheme in Section 6 of the Housing Benefit Regulations 2006. A claimant may be treated as possessing capital only under an applicable provision, including regulations 46 or 49.

For an ordinary shareholder, actual capital is ordinarily the value of the shareholding, assessed by the price a willing buyer would pay a willing seller. Where regulation 49(5) is exercised, both paragraphs (5)(a) and (b) must be applied, and the resulting capital must be disregarded under regulation 49(6) while the claimant undertakes activities in the company’s business.

A tribunal must identify the decision under appeal, explain whether capital is actually held or notional, and give adequate reasons for its calculation.

ZA appealed against a decision of the First-tier Tribunal dated 16 January 2023 concerning her entitlement to housing benefit. Her husband held interests in three companies, and ZA was a shareholder, secretary or director of some of them.

The London Borough of Barnet treated retained profits or company assets as capital exceeding the £16,000 limit. The First-tier Tribunal dismissed ZA’s appeal, relying principally on regulations 43 and 49(5) of the Housing Benefit Regulations 2006.

The Upper Tribunal considered whether the First-tier Tribunal had identified the correct decision under appeal, applied the statutory provisions governing actual and notional capital, calculated the relevant capital correctly, and dealt adequately with Barnet’s alternative arguments.

1. Appeal allowed. The First-tier Tribunal’s decision involved material errors of law and was set aside under section 12(2)(a) of the Tribunals, Courts and Enforcement Act 2007.
2. The tribunal incorrectly treated Barnet’s decision of 17 February 2022 as changing ZA’s ongoing entitlement. The relevant appeal concerned Barnet’s continuing decision that ZA was not entitled to housing benefit from 22 March 2021. Misidentifying the decision-making process and the decision under appeal was a material error of law.
3. Section 6 of the Housing Benefit Regulations 2006 provides an exhaustive statutory scheme for calculating actual and notional capital. Regulations 46 and 49 provide the routes for treating a claimant as possessing capital. The tribunal treated ZA as possessing capital without applying an applicable provision, and failed to explain how her capital had been calculated.
4. For actual capital, the ordinary approach for a shareholder in a limited company is to value the shareholding by reference to the price a willing buyer would pay a willing seller. The value of the company’s net assets or retained profits is not thereby treated as the shareholder’s actual capital.
5. Regulation 49(5) is discretionary. If exercised, however, its mandatory consequences must follow: the shareholding is disregarded under paragraph (5)(a); the claimant is treated as possessing the relevant share of the company’s capital under paragraph (5)(b); and that amount is disregarded under regulation 49(6) while the claimant undertakes activities in the company’s business. The First-tier Tribunal adopted Barnet’s calculation but failed to apply regulation 49(6).
6. The tribunal also placed weight on matters connected with deprivation of capital or notional income after expressly stating that it had not considered those grounds. That was a further material error.
7. The decision in Prest v Petrodel Resources Limited and others [2013] UKSC 34 did not provide a basis for creating an additional category of capital outside the statutory scheme. The appeal was remitted to a fresh First-tier Tribunal for an oral rehearing, with no finding made on ZA’s ultimate entitlement.

• Upper Tribunal (Administrative Appeals Chamber): the First-tier Tribunal decision dated 16 January 2023 was set aside for material errors of law and the appeal was remitted for rehearing by a fresh tribunal.