CCS 3542 1998
|Judge J. Mesher
|01 December 1999
|Upper Tribunal (Administrative Appeals Chamber)
|CCS 3542 1998
Mr. J. Mesher CCS/3542/1998
Maintenance assessment - calculation of net income - whether contributions under a retirement annuity contract deductible as an expense - whether use of capital to make lump sum pension scheme contributions capable of constituting deprivation - whether the rule in CAO v. Hogg can be applied to income from rented property
The parent with care of the qualifying child appealed to a child support appeal tribunal against the amount of child support maintenance which the child support officer, in a decision of 13 June 1997, had found the absent parent was liable to pay with effect from 27 February 1997. The tribunal allowed the appeal and gave directions to the child support officer for reassessment. The parent with care appealed to the Commissioner
Some of the issues raised on the appeal concerned payments which the absent parent, who was in employed earner’s employment but not a member of an occupational pension scheme, was making to provide for his retirement under both a retirement annuity contract and a personal pension policy. During the course of 1996, in addition to the regular payments due, he made additional lump sum payments into both schemes. The tribunal held that all these payments were to be taken into account in the calculation of the absent parent’s net income as allowable deductions from earnings. The parent with care contended that (a) the payments under the retirement annuity contract should not have been allowed as a deduction; and (b) the tribunal should have considered whether, in making the additional lump sum payments under both schemes, the absent parent had deprived himself of capital which would otherwise be a source of income
Another issue concerned house property owned by the absent parent from which he obtained a rental income. The tribunal held that, in taking this into account in the calculation of his net income, deductions should be made in respect of the cost of water rates, buildings insurance premiums and maintenance expenses relating to the property. The parent with care contended that only the water rates were properly allowable as a deduction.
Held, allowing the appeal, that:
1. contributions under a retirement annuity scheme can be deducted from the earnings of an employed earner under paragraph 1(3)(c) of Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (‘the MASC Regulations’). The definition of ‘personal pension scheme’ in Regulation 1(2) of the MASC Regulations adopts, in relation to employed earners, the definition in section 1 of the Pensions Schemes Act 1993, i.e. a scheme which provides ‘benefits in the form of pensions or otherwise payable on death or retirement’. An annuity payable under a retirement annuity contract constitutes a pension for the purpose of this definition (para. 13);
2. the tribunal erred in law in failing to consider whether the lump sum pension contributions additional to those required under the terms of the schemes constituted a deprivation of capital for the purpose of paragraph 27 of Schedule 1 to the MASC Regulations. The use of capital on a form of expenditure which is allowable as a deduction in the calculation of net income may constitute a deprivation of capital (para. 18);
3. in considering whether income from capital should be taken into account under paragraph 27 of Schedule 1 to the MASC Regulations, the intention which has to shown is one to reduce income which might be relevant to a child support assessment which is being made or is reasonably expected to be made. In the interpretation of the phrase ‘with a view to reducing the amount’ it might be relevant that cases on the phrase ‘with a view of’ in the now repealed section 44 of the Bankruptcy Act 1914 have held that that phrase required it to be established what the person’s dominant intention was (para. 19);
4. the only items deductible from rental income in the calculation of a parent’s net income are those specified in paragraph 23 of Schedule 2 to the MASC Regulations. In calculating income (such as rental income) which falls to be taken into account under paragraph 15 of Schedule 1 to the MASC Regulations, it is not possible to apply any principle analogous to that applied in the context of a different provision by the Court of Appeal in CAO v. Hogg  1 WLR 1100 i.e. that any expenditure necessarily incurred in the obtaining of an income can be deducted in calculating the amount to be taken into account. The use in paragraph 15 of the phrase ‘payments or other amounts received’ indicates that it is the gross receipts that are to be taken into account, subject to any disregard provided for in Schedule 2. The suggestion to the contrary in decision CCS/5310/1995 disapproved (para. 23).
The Commissioner remitted the case to an appeal tribunal for determination in accordance with his directions.
DECISION OF THE CHILD SUPPORT COMMISSIONER
1. The parent with care’s appeal is allowed. The decision of the Preston child support appeal tribunal dated 1 December 1997 is wrong in law, for the reasons given below, and I set it aside. The case is referred to a differently constituted appeal tribunal for determination in accordance with the directions given in paragraph 30 below (Child Support Act 1991, section 24(3)(d), as amended by Schedule 7 to the Social Security Act 1998).
2. This appeal stems from the child support officer’s (CSO’s) decision of 13 June 1997 making the absent parent liable to pay child support maintenance of £106.93 per week in respect of the qualifying child (Robert) with effect from 27 February 1997. Robert was born on 10 October 1996. The application for a maintenance assessment was made on 13 November 1996. The maintenance enquiry form (MEF) was issued to the absent parent on 2 January 1997. The parent with care applied for review of the CSO’s decision, which was refused by a second CSO on 30 July 1997. It was her appeal against that decision which was before the appeal tribunal.
3. The appeal tribunal allowed the appeal and in its decision notice set out five directions for the CSO who was to deal with the case on its remission. Most of those were on uncontroversial points put forward in the CSO’s written submission to the appeal tribunal. The chairman prepared a full statement of findings of fact and reasons, to which, after an application by the absent parent for a correction, was added what was in effect a sixth direction about rental income of the absent parent.
4. The parent with care now appeals, with my leave, against the appeal tribunal’s decision. Following the exchange of lengthy written submissions, an oral hearing was directed. The parent with care attended and was represented by her father (who I shall refer to as “the representative”). The absent parent did not attend. The Secretary of State (who took over the functions of CSO’s with effect from 1 June 1999) was represented by Miss C. Goldburg, of counsel. I am grateful to all those present for their assistance, and record that sight was not lost of the interests of the absent parent.
5. At the oral hearing, four issues remaining in dispute were helpfully identified. I shall deal with each of those in turn, giving enough of the background to enable my decision to be understood, rather than attempting to describe the previous course of the case in any detail. There are first two issues to do with “pension” contributions made by the absent parent; whether the type of contributions made fell within paragraph 1(3)(b) or (c) of Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (the MASC Regulations) and whether paragraph 27 of Schedule 1 needed to be considered in relation to one-off lump sum contributions. The third issue is to do with the calculation of the amount of rental income to be taken into account under paragraph 15 of Schedule 1 and paragraph 23 of Schedule 2 to the MASC Regulations. The fourth issue is to do with the possible application of paragraph 27 of Schedule 1 to the absent parent’s interest in the rented property and to the buying of a new home on an increased mortgage.
Pension contributions and retirement annuity contracts
6. The appeal tribunal...
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