JW v Her Majesty's Revenue and Customs (TC): [2019] UKUT 114 (AAC) : [2019] AACR 23

Upper Tribunal Administrative Appeals Chamber decision by Judge Poole on 25 March 2019.

From:
HM Courts & Tribunals Service and Upper Tribunal (Administrative Appeals Chamber)
Published
30 April 2019
Last updated
17 August 2021 — See all updates
Categories:
Tax credits and family credit and Tribunal procedure and practice
Sub-categories:
Tax credits and family credit - other and Tribunal procedure and practice - tribunal jurisdiction
Judges:
Poole, AI
Decision date:
25 March 2019

Read the full decision in [2019] AACR 23ws

Judicial Summary

Reported as [2019] AACR 23

Working tax credit − definition of “self-employed” in the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 − relevance of “profitability” and “genuine and effective”

The appellant was an author, musician, publisher and promoter of his own creative intellectual property. He had been in receipt of Working Tax Credit (WTC). He claimed WTC for the tax year 2017/2018. The Commissioners for Her Majesty’s Revenue and Customs (HMRC) made an initial decision under section 14(1) of the Tax Credits Act 2002 to award him £2770.35 WTC, on the basis that he was working 30 hours a week in self-employment. On 13 November 2017, HMRC made a further decision, this time under section 16(1) of the 2002 Act, that the appellant was not eligible to receive WTC for the tax year 2017/2018. The appellant appealed to the First-tier Tribunal (F-tT). The F-tT refused the appeal against the section 16 decision finding that the appellant did not meet the entitlement condition for WTC of being self-employed, because his business activities were not carried on “on a commercial basis.”

The appellant appealed to the Upper Tribunal (UT). The issues before the UT were: the definition of “self-employed” in the entitlement conditions in the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 and in particular what the requirement that a trade, profession or vocation is carried on “on a commercial basis” means.

Held, allowing the appeal, that:

  1. it was an error of law to find that self-employment was not commercial on the basis it was unprofitable (paragraph 25);

  2. the tests the tribunal actually has to apply are those set out in the legislation, including the full definition of self-employment and the various conditions in regulation 4 of the 2002 Regulations. “Genuine and effective” is not part of those tests and is best avoided (paragraph 27);

  3. the tribunal’s decision was made in error of law because it wrongly applied tests of profitability and genuine and effective to decide whether the claimant’s business was carried on “on a commercial basis”. What the tribunal should have done was apply all of the various conditions in the 2002 Regulations in order to decide whether the claimant was eligible for WTC (paragraph 28).

The Judge found that the F-tT erred in law and directed HMRC to have regard to her findings when making its further decision under section 18.

Updates to this page

Published 30 April 2019
Last updated 17 August 2021 + show all updates

  1. Decision selected for reporting as [2019] AACR 23

  2. First published.