Smith v Smith and another (2004)
| Jurisdiction | England & Wales |
| Judge | LORD RODGER OF EARLSFERRY,BARONESS HALE OF RICHMOND,LORD NICHOLLS OF BIRKENHEAD,LORD WALKER OF GESTINGTHORPE,LORD CARSWELL |
| Judgment Date | 12 July 2006 |
| Neutral Citation | [2006] UKHL 35 |
| Date | 12 July 2006 |
| Court | House of Lords |
[2006] UKHL 35
HOUSE OF LORDS
Appellate Committee
Lord Nicholls of Birkenhead
Lord Rodger of Earlsferry
Lord Walker of Gestingthorpe
Baroness Hale of Richmond
Lord Carswell
and another
Appellants:
Nicholas Mostyn QC
Giles Goodfellow QC
Rachel Spicer
(Instructed by Family Law in Partnership)
Respondents:
For Secretary of State for Work and Pensions
Nathalie Lieven
Rupert Baldry
(Instructed by Office of the Solicitor - Department for Work and Pensions)
For Robert Smith
David Burrows
James Henderson
(Instructed by David Burrows & Co)
My Lords,
On this appeal your Lordships' House is concerned with the interpretation of a singularly unhappy piece of drafting. Your Lordships are called upon to interpret the phrase 'total taxable profits … as submitted to the Inland Revenue' in paragraph 2A of Part 1, Chapter 2 of Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 (SI 1992/1815) as amended by the Child Support (Miscellaneous Amendments) Regulations 1999 (SI 1999/977). This phrase is used for determining the earnings of a self-employed non-resident parent for the purpose of calculating the amount of child support maintenance payable by him. The legislation and facts are set out fully in the speech of my noble and learned friend Lord Walker of Gestingthorpe.
For the reasons given by my noble and learned friend Lord Rodger of Earlsferry I am satisfied this phrase was intended to refer to the amount inserted by a taxpayer in his tax return in the box captioned 'Total taxable profits from this business'. The newly-introduced paragraph 2A was intended to simplify the maintenance calculation process and this was the somewhat unusual means chosen for that purpose. But that is not the end of the matter. I am also satisfied that the consequence of using this amount for the purpose of a maintenance calculation was not fully appreciated. Had the consequence been appreciated, this amending regulation would not have been presented to Parliament and the world in the way it was.
In short, the unappreciated consequence was that using this figure from a non-resident parent's tax return can yield a significantly different result from a calculation made in accordance with the existing paragraph 3 of the 1992 regulations. Using the 'total taxable profits' figure from the tax return means using an amount of profits arrived at after deducting capital allowances and losses brought forward. By way of contrast, under the existing paragraph 3 expenses deductible from gross receipts did not include capital allowances or losses carried forward. The present case is an extreme example of the difference there can be between these two calculations.
The first of these two methods of calculation can produce a most unfair result to the parent with care and the children in question. Hence, it is said with force, the newly-introduced paragraph 2A cannot have been intended to have this effect. Paragraph 2A should not be so construed.
So what is to be done? It goes without saying that the House will seek to interpret statutory language so as to give effect to its intended meaning. The intended meaning of language is to be derived from its context. Here the context suggests that the end result produced by the 'total taxable profits' formula in paragraph 2A was not intended to bring about a radical departure from the end result produced by the existing paragraph 3.
But there are difficulties in interpreting the new paragraph 2A in a way which would produce much the same result as the existing paragraph 3. There are two particular difficulties. First, paragraph 2A clearly was intended to refer to figures readily derivable from the non-resident parent's tax return. If the amount appearing in the box captioned 'Total taxable profits from this business' is discarded it is far from obvious what amount is to be substituted. To achieve the same result as paragraph 3 it would be necessary to use an amount which does not, as such, appear anywhere on the tax return. It would be necessary to take the amount of net profits shown on the tax return, add back the disallowable expenses, but ignore the deductions made on the form in respect of matters such as capital allowances and losses carried forward. It is far from clear that paragraph 2A can reasonably be read as requiring any such calculation. It is, to say the least, highly questionable whether the phrase would be so understood by anyone in the context of a form which on its face applies that very phrase ('total taxable profits') to a different amount.
The difficulty in reading paragraph 2A in this way is compounded by the terms of paragraph 2B. In two circumstances the earnings of a self-employed earner are calculated by reference to paragraph 2B, not paragraph 2A. One circumstance is where a self-employed earner is unable to provide a total taxable profits figure for the relevant period as submitted to the Inland Revenue but he can provide a copy of his tax calculation notice. The other circumstance is where the total taxable profits figure submitted by the self-employed earner has been revised by the Inland Revenue. Paragraph 2B provides that in either of these events the earner's earnings shall be calculated by reference to his income from employment as a self-employed earner 'as set out in the tax calculation notice issued in relation to his case'.
Herein lies the further difficulty. The amount shown in the tax calculation notice as 'income from employment as a self-employed earner' is a net amount after deduction of capital allowances and allowable losses. Thus this alternative method of identifying a self-employed earner's earnings assumes that capital allowances and allowable losses are deductible under the paragraph 2A mode of calculation. Paragraph 2B assumes this because paragraphs 2A and 2B cannot have been intended to operate differently. Thus paragraph 2A cannot be read as identifying an amount arrived at before deducting capital allowances and allowable losses without producing an unacceptable and inescapable discord between paragraphs 2A and 2B. With reluctance and regret I would dismiss this appeal.
My Lords,
The issue in this appeal concerns the interpretation of paragraph 2A(2) of Schedule 1 to the Child Support (Maintenance Assessments and Special Cases) Regulations 1992 which deals with the calculation of the earnings of a self-employed person for the purpose of assessing his liability to pay child support. In the speech which he is to deliver, my noble and learned friend, Lord Walker of Gestingthorpe, sets out the terms of this paragraph and of all the other relevant provisions I need not repeat them.
When the regulations were originally made in 1992, for the purpose of child support the earnings of a self-employed person were to be calculated in accordance with para 3. That paragraph provided that certain expenses were to be deducted from the self-employed person's gross receipts, while other expenses were not to be deducted. In terms of para 3(4)(b)(ii) among the expenses which were not to be deducted was any capital expenditure. In other words, for calculating the non-resident parent's earnings, no deduction was to be made for capital expenditure. Similarly, for example, in terms of para 3(4)(b)(v) and (vii) no loss incurred before the beginning of the current earnings period and no loss incurred in any other self-employment was to be deducted.
In practice the calculation of earnings in terms of para 3 proved to be far from straightforward and the complications were one of the causes of the delays for which the whole child support scheme became notorious. So in 1999 the Secretary of State for Social Security amended the Schedule and introduced a number of changes which were designed to simplify the system. One simplification was to allow more use to be made of the figures in non-resident parents' tax returns. Para 2A was designed to introduce that change.
Para 2A gives a new definition of "earnings", which applies subject to the provisions of paras 2B, 2C and 5A of the Schedule. In terms of para 2A(2) "earnings" means "the total taxable profits from self-employment of that earner as submitted to the Inland Revenue" less certain amounts which the sub-paragraph goes on to specify.
It is common ground that the expression in para 2A(2) which has to be interpreted is not just "the total taxable profits" but "the total taxable profits from self-employment of that earner as submitted to the Inland Revenue". The form of the expression ("as submitted to the Inland Revenue") points to the total taxable profits which, as a matter of historic fact, the non-resident parent submitted to the Inland Revenue. Given the purpose of para 2A, it is therefore no surprise to find that in the tax return which is submitted by self-employed earners, such as Mr Smith, there is a box (3.92) in which a figure is to be inserted and opposite which are the words "Total taxable profits from this business". The phrase is not a technical term in the tax statutes. It is found only at this one point in the form of tax return for self-employed persons drafted by the Inland Revenue. Which makes it all the more striking that it should have been adopted by the official who drafted para 2A(2). This must have been done deliberately. I am therefore satisfied that, in terms of regulation 2A, the starting point for calculating the non-resident parent's earnings is the figure for total taxable profits which he submitted to the Inland Revenue in box 3.92 of his tax return. QED, as Ward LJ so rightly said.
This straightforward approach assumes...
To continue reading
Request your trial
-
Application by Robert McMillen, Chairman of the Board of Governors of Ballyclare High School, for Judicial Review
...domestic legislation requires otherwise. I adopt the words of Baroness Hale in Smith v The Secretary of State for Work and Pensions [2006] UKHL 35 at [78] - “Even if an international treaty has not been incorporated into domestic law, our domestic legislation has to be construed so far as p......
-
Willow GIA 428 2015
...Home Department [2011] UKSC 4 at [23] that Article 3.1 is a “binding obligation in international law”, and her decision in Smith v Smith [2006] UKHL 35 that domestic legislation should be construed as far as possible so as to comply with the state’s obligations under UNCRC. He submits that,......
-
Rebecca Hannah Steinfeld & Charles Robin Keidan v Secretary of State for Education
...No 31417/96) (2000) 29 EHRR 548, [2000] ECHR 31417/96, ECt HR. M v Secretary of State for Work and Pensions[2006] UKHL 11, [2006] 1 FCR 497, [2006] 2 AC 91, [2006] 4 All ER 929 Norris v Ireland [1988] ECHR 10581/83, (1991) 13 EHRR 186, ECt HR. Odièvre v France (Application No 42326/98) [200......
-
Wigan Metropolitan Borough Council v W
...Dyer (Procurator Fiscal, Linlithgow) v Watson; JK v HM Advocate [2004] 1 AC 379 and Smith v Secretary of State for Work and Pensions [2006] 1 WLR 2024 at 70 It must be acknowledged within the foregoing context that, as made clear in Botta v Italy (1998) 26 EHRR 241, in considering the appl......
-
Disabled children and the Children Act 1989
...(1998) Removing Barriers for Disabled Children: The inspection of services to disabled children. London: SSI.Smith vs Smith and another (2006) UKHL 35 at 78.Together for Disabled Children (forthcoming). Available from: http://www.togetherfdc.org (accessed August 2010).Endnotes1 Note on use ......