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Case Overview
1. This document summarises the decision of the Upper Tribunal (Administrative Appeals Chamber) in the case of CA v Hastings BC [2022] UKUT 57 (AAC). The appeal concerns the appellant’s entitlement to Housing Benefit and whether the First-tier Tribunal (FTT) erred in law by upholding Hastings Borough Council’s decision that the appellant possessed capital exceeding the prescribed limit of £16,000, leading to an overpayment recovery demand. The Upper Tribunal (UT) found that the FTT did err in law.
Key Issues
2. Capital Limit Exceeded: The central dispute revolves around whether the appellant possessed capital (specifically, the value of his shares in a limited company) exceeding the £16,000 limit stipulated in Regulation 43 of the Housing Benefit Regulations 2006, resulting in the overpayment.
3. The respondent (Hastings BC) originally determined that the appellant’s income exceeded the limit and later determined the appellant’s share in the company as of August 21, 2017, was valued at £40,000 (well over the limit).
4. Valuation of Company Shares: A significant point of contention is how to value the appellant’s shareholding in the company. The FTT determined the value of the company based on what an investor was willing to pay for a percentage of the shares, concluding the appellant’s share was worth £40,000.
5. The FTT stated that “the value of a company is ‘what someone is willing to pay for it’.”
6. Regulation 49(5) and (6) of the Housing Benefit Regulations 2006: This regulation, crucial to the UT’s decision, concerns individuals who stand in a position analogous to that of a sole owner or partner in a company. Critically, this regulation allows for the value of their holding to be disregarded under certain circumstances, specifically if they are actively involved in the business.
7. Regulation 49(5): “Where a claimant stands in relation to a company in a position analogous to that of a sole owner or partner in the business of that company, he may be treated as if he were such sole owner or partner and in such a case—(a) the value of his holding in that company shall, notwithstanding regulation 44 (calculation of capital) be disregarded; and (b) he shall, subject to paragraph (6), be treated as possessing an amount of capital equal to the value or, as the case may be, his share of the value of the capital of that company…”
8. Regulation 49(6): “For so long as the claimant undertakes activities in the course of the business of the company, the amount which he is treated as possessing under paragraph (5) shall be disregarded.”
Upper Tribunal Decision and Rationale
9. The Upper Tribunal allowed the appeal and remitted the case back to a new panel of the First-tier Tribunal for a complete rehearing. The primary reason for this was the FTT’s failure to consider Regulations 49(5) and 49(6) of the Housing Benefit Regulations 2006. The UT found this to be an error of law.
10. The UT Judge noted the FTT was not made aware of the regulation.
11. The UT determined that based on FTT findings, “The Claimant’s position was, on the findings made at paragraphs 8-12 of the Tribunal’s reasons, analogous to that of a partner in the business of the company…” The appellant worked substantial hours and had significant influence on the company.
12. The UT also highlighted the discretionary nature of Regulation 49(5), noting the FTT never addressed whether, if the appellant was in a partner-like position, he ought to be treated as such for the purpose of calculating his capital.
13. The UT emphasised that even if the capital calculation were changed due to considering Regulation 49(5) and (6), the First-Tier Tribunal would still need to consider the appellant’s income level to determine housing benefit eligibility. The FTT had not previously made any factual findings regarding income.
Key Arguments and Evidence
14. Appellant’s Argument: The appellant consistently disputed the valuation of his shareholding, arguing the company was not worth the amount attributed to it by the Respondent. He highlighted the precarious financial state of the company.
15. Respondent’s Argument: The council argued that the appellant’s shareholding should be valued based on what the investor was willing to pay and that the appellant’s income exceeded acceptable limits. They argued the appellant was not a “sole owner”.
16. Valuation Tribunal Decision (Council Tax Reduction): The Valuation Tribunal, in a related Council Tax Reduction appeal, did consider the equivalent of Regulation 49(5) and (6) and determined that the appellant’s capital holding should be disregarded because he was undertaking activities in the course of the company’s business. The Council disagreed with this ruling.
Directions for the First-tier Tribunal on Remittal
17. The Upper Tribunal directed the new FTT panel to address specific questions:
- Did the Appellant at the material time stand in relation to the company in a position analogous to that of a partner in the business of the company?
- If so, ought he to be treated for the purposes of the Tribunal’s decision on the appeal as if he were such a partner?
- If so, what is the amount of capital which he is to be treated as possessing, applying Regulation 49(5)(a) and (b)?
- If the Appellant is to be treated as possessing capital by reason of those provisions, did the Appellant at the material time undertake activities in the course of the business of the company, resulting in the capital amount arrived at by the application of Regulation 49(5) being disregarded?”
Conclusion
18. The Upper Tribunal’s decision emphasises the importance of considering all relevant regulations, especially those that could potentially lead to a disregard of capital assets for Housing Benefit eligibility. The case has been remitted for a complete rehearing, requiring the First-tier Tribunal to assess the appellant’s position in relation to the company and the applicability of Regulations 49(5) and (6) of the Housing Benefit Regulations 2006, as well as the appellant’s income.