Michael Allen v The Secretary of State for Work and Pensions

For income-related employment and support allowance, “work” and “income” are not confined to lawful activity or lawfully acquired receipts. An activity capable of being characterised as work remains work despite its criminality. Work done for payment or in expectation of payment may therefore be remunerative work. Receipts from a criminal trade may constitute self-employed earnings or income other than earnings. The statutory scheme must be construed from its language, context and purpose. High-level policy statements cannot displace the specific wording of the regulations. A construction which allowed profitable criminal trading while retaining benefit would produce perverse consequences and was not intended by Parliament.

Michael Allen received income-related employment and support allowance while buying and selling stolen bicycles. The Secretary of State decided that he was not entitled to the benefit and was liable to repay £9,842.15. The First-tier Tribunal allowed his appeals, holding that criminal activity was not “work” and that the receipts were not “income”.

The Upper Tribunal, in [2024] UKUT 131 (AAC), allowed the Secretary of State’s appeal, set aside the First-tier Tribunal’s decision and remitted the matter for rehearing. The central issues before the Court of Appeal were whether criminality excluded the activities from “work” or the receipts from “income”, and whether the Upper Tribunal had lawfully interfered with the First-tier Tribunal’s findings.

Appeal dismissed. Miles LJ gave the leading judgment, with Coulson and Moylan LJJ agreeing.

1. Regulation 40 of the Employment and Support Alliance Regulations 2008 No. 794 uses “work” broadly as an activity which a claimant does or undertakes. The specified exceptions do not include criminal conduct. Buying and selling bicycles was capable of being work, and when done for payment or in expectation of payment it was capable of being remunerative work under regulation 41. Criminality did not require the activity to be disregarded.
2. The relevant question is the nature of the activity. A tribunal must consider the claimant’s conduct in the round and need not divide partly lawful and partly unlawful activities into separate components. The appellant’s proposed approach would create difficult questions about the nature of criminality, proximity to criminal conduct and mens rea, contrary to the need for straightforward administration of the scheme.
3. The income and means-testing provisions were equally broad. The receipts could fall within earnings from employment as a self-employed earner or income other than earnings. Regulation 91 addressed two separate categories, and income other than earnings was not confined to employed earners. Nothing in the statutory language excluded receipts merely because the underlying activity was unlawful.
4. The court construed the regulations by reference to their text, context and purpose, treating the statutory language as primary and comparing the consequences of rival constructions. The high-level aspirations in the explanatory memorandum did not materially assist. [2016] EWCA Civ 395 confirmed that facilitating entry into work was only one purpose of the scheme. Best v Chief Land Registrar was distinguished because it concerned a materially different statutory scheme. Inland Revenue Commissioners v Aken did not assist; the question whether illegal profits were taxable was left open in that case.
5. The First-tier Tribunal’s conclusions that the appellant had sold approximately £30,000 of bicycles but was not fit to work, and that the receipts were not income, were infected by errors of law. The Upper Tribunal was entitled, and right, to set the decision aside. The factual question of entitlement remained for a differently constituted First-tier Tribunal on a week-by-week basis.

• Court of Appeal (Civil Division) dismissed the appeal and upheld the Upper Tribunal’s legal conclusions.
• Upper Tribunal (Administrative Appeals Chamber), [2024] UKUT 131 (AAC), allowed the Secretary of State’s appeal, set aside the First-tier Tribunal’s decision and remitted the case for rehearing.
• First-tier Tribunal allowed the appellant’s appeals against the decisions removing entitlement to employment and support allowance and requiring repayment.