HMRC v AS
[2023] UKUT 67 (AAC)
SK & Anor v Secretary of State for Work and Pensions
20 January 2023
[2023] UKUT 21 (AAC)
Upper Tribunal
A man on sick leave got a bonus and a tax refund. The government said he earned too much for benefits. The court agreed that he earned too much, but said the government used the wrong rule to calculate it. The result was the same: no benefits.
Key Facts
- •SK (claimant) was a former employee of Nikko Asset Management, a Real Time Information employer.
- •Claimant went on sick leave in April 2019, receiving sick pay initially, then unpaid sick leave.
- •Received a £25,000 personal loan in October 2019.
- •Received a £20,000 bonus (net of tax) in May 2020.
- •Received tax repayments totaling £2144.60 during the assessment period (May 29th - June 28th, 2020).
- •Joint universal credit claim made in April 2020; appeal against denial of benefits for the assessment period of May 29th - June 28th, 2020.
Legal Principles
Universal Credit is payable for each assessment period, with the amount calculated by deducting earned and unearned income from the maximum amount.
Welfare Reform Act 2012, s.7 & s.8
Earned income is defined in the Universal Credit Regulations 2013.
Universal Credit Regulations 2013, reg. 52
For Real Time Information employers, employed earnings are based on information reported to HMRC under PAYE Regulations.
Universal Credit Regulations 2013, reg. 61(2)
A repayment of income tax received from HMRC in a tax year where the person was in paid work is treated as employed earnings, unless it's treated as self-employed earnings.
Universal Credit Regulations 2013, reg. 55(4A)
General earnings for income tax purposes include various forms of remuneration and benefits.
Income Tax (Earnings and Pensions) Act 2003, s.7(3) & s.62(2)
Outcomes
Appeal allowed; First-tier Tribunal decision set aside and substituted with a decision to the same effect.
The First-tier Tribunal erred in law by misapplying reg. 55(4A) (tax repayment from HMRC, not employer); however, the conclusion regarding the claimant's entitlement to benefits was correct due to the application of reg. 61(2) (PAYE information). The tax refund was considered effectively deferred remuneration.