Breaking up is hard to do
Sandie Lock shares tactics for challenging ‘living together’ and ‘separated spouse’ decisions
This article was originally published in the October 2017 issue of Adviser magazine and was correct at the date of publishing.
Clients frequently find it difficult to prove that they are not living with an unmarried partner or are permanently separated from a spouse and, thus, that they are entitled to claim tax credits as a single person. This problem can be exacerbated when the client is separated from their spouse, but still married and living in the same accommodation. In recent years, there have been several Upper Tribunal (UT) decisions that have criticised HMRC (and First Tier Tribunals [FtT]) for their poor quality of decision-making and fact-finding in these cases and for misapplying the law.
Unfortunately, it can be difficult to prove that a partner is not living with the client or that a separation is not likely to be temporary, and HMRC frequently places too great a reliance on inconclusive evidence (often from credit reference agencies such as Equifax); for example an ex-partner using the client’s address for correspondence.
Relevant legislation
Section 3 (5A) of the Tax Credits Act 2002 defines a couple as:
a) man and a woman who are married to each other and neither:
- i. separated under a court order, nor
- ii. separated in circumstances in which the separation is likely to be permanent,
b) a man and a woman, who are not married to each other but are living together as husband and wife,
c) two people of the same sex who are civil partners of each other and are neither
- i. separated under a court order, nor
- ii. separated in circumstances in which the separation is likely to be permanent, or
d) two people of the same sex who are not civil partners of each other but are living together as if they are civil partners.
Guidance Claimant Compliance Manual
HMRC’s Claimant Compliance Manual¹ (CCM) gives internal guidance regarding ‘undisclosed partners’ Some particularly relevant paragraphs are CCM15035 (married couples), CCM15040 (couples who are unmarried and not civil partners) and CCM15060 (balance of evidence).
Para 15035 (married couples) states: ‘From the date on which a couple marry they will be treated as a married couple for tax credit purposes even if they do not begin living in the same household. They might also have been living as an unmarried couple for tax credit purposes prior to this date … They are to be treated as a married couple unless the evidence shows they are separated and it is likely to be permanent.’
Para 15040 (couples who are unmarried and not civil partners) states: ‘The legislation does not say what conditions must exist before we will conclude that a couple are LTAHAW [living together as husband and wife]. We have therefore adopted the approach used by the DWP
- living in the same household
- stability of relationship
- financial support
- dependent children
- public acknowledgement.’
The guidance stresses that ‘these are only indicators … They are not intended as a crude checklist and you should not apply a blanket ‘four out of five ticked’ type test. The weight and worth of each indicator will vary from relationship to relationship and you should arrive at your conclusions on the balance of evidence, based on the facts (see CCM15060).’
Relevant case law
In SA v HMRC [2017] UKUT 90 (AAC) CTC/3207/2016, the claimant received tax credits as a single person. HMRC decided that she was still part of a couple as, although it accepted she had been separated from her husband for around five years, there was no divorce or separation order, so their separation was not likely to be permanent. A FtT upheld that decision, finding that they continued to have a joint bank account and a joint mortgage, the husband provided some personal care for the claimant, who had considerable health problems (occasionally sleeping over on the sofa), and although he maintained another address, he used the claimant’s address to receive his post.
The Upper Tribunal Judge held that in a case such as this (especially involving children), it was ‘inherent’ that the couple may still continue to have some involvement with each other, especially over family and financial matters. The length of the separation must be considered, although there may well be valid reasons why a couple would not wish to formalise the separation by divorce. The continuing involvement of the parties in aspects of each other’s lives could indicate that they had not truly separated, but it did not necessarily mean that any separation was not likely to be permanent. Even divorced couples may continue to be involved in each other’s lives. It was possible for a separated couple to continue to share interests and provide mutual support without there being a likelihood that they would get back together. The judge re-made the decision and decided that the claimant was entitled to tax credits as a single person.
In AP v HMRC [2015] UKUT 580 (AAC) CTC/455/2015, the claimant and her husband had claimed tax credits jointly until 2008, when she re-claimed as a single person, having separated from her husband. HMRC decided in 2013 that she should have been claiming jointly with her husband as a couple, since he had used her address for financial purposes, was still on the electoral role at her address and she had not provided evidence that she was financially independent or an alternative address for him. However, she had stated that he sometimes lived in Turkey and sometimes lived with friends. The FtT confirmed the decision and found that the couple were married, jointly owned the matrimonial home with a joint mortgage, had two children together and joint responsibility for utility bills.
The Upper Tribunal judge overturned the decision and criticised the FtT for proceeding with the appeal hearing despite the claimant having written to say that she could not attend due to receiving chemotherapy for breast cancer. Judge Mark also commented on the FtT’s findings of fact: “There was in fact not a shred of evidence that they owned the matrimonial home together or had a joint mortgage, or that [the husband] was the father of [the elder child], who had a different surname. There was no identifiable evidence of financial support on a mutual basis. The continuing presence of [the husband] on utility bills did not provide any evidence of this and there was no suggestion that he had contributed to mortgage payments or made any other financial contribution in that time. Nor was there any evidence that the claimant had provided him with any financial support. The second child had been born in May 2005, long before the couple were said to have split in March 2008.” (Paragraph 6).
In TS v HMRC [2015] UKUT 507 (AAC) CTC/5600/2014, HMRC terminated the claimant’s single person claim on the grounds that she was still living with her husband, as he had used her address for tax and benefits purposes, had applied for credit from her address and was jointly liable for the mortgage. A FtT upheld the decision, stating that the onus was on the claimant to prove that they should not be treated as a couple.
Judge Ovey allowed the claimant’s appeal and stressed that the onus was on HMRC to prove that they had grounds to revise the original decision and to terminate the tax credits award. Judge Ovey also stated that: “Some caution should be exercised as to reliance on the ‘financial footprint’ where the question concerns separation between a husband and wife. Financial support may be significant when considering whether an unmarried couple have a relationship akin to that of husband and wife living together. In the converse case of separation between husband and wife, it is very likely that there will have been financial support and dependence, or interdependence, taking such forms as a joint mortgage, joint bank accounts, joint names on utility bills and so on. The fact that names may not have been changed may be attributable as much to inertia as to lack of separation, at least where there is no immediate practical consequence. In the case of a joint mortgage it may well not readily be possible to remove one party from the mortgage. The continued use of the former matrimonial home as an address for official correspondence and other postal purposes may also be explained by practical convenience, especially if, as the claimant says is the case here, one party has no convenient alternative permanent address.” (Paragraph 12).
The above are some recent examples of UT decisions that criticise the standard of decision-making in relation to separated married couples. However, there are other decisions relating to unmarried partners that may also be relevant and are equally critical of the standard of decision-making. For example:
- CTC/5672/2014², in which the judge described HMRC’s submission to the FtT as “woefully inadequate” and highlighted the FtT’s erroneous decision that the onus was on the claimant to prove she was separated from her partner. The judge overturned the FtT’s decision, which was based on inadequate and inaccurate information.
- CTC/919/2015³, in which documents supporting the client’s appeal were omitted (by HMRC) from the evidence bundle.
- CTC/99/2015⁴, which stresses that evidence should not be appraised by reference to what a “reasonable person” would have done but to what the claimant (or their partner) would do.
- CTC/1879/2015⁵, which criticises over-reliance on the partner’s “financial footprint” (mainly from information provided by Equifax) and failure to question the claimant about HMRC’s evidence or to allow her to give her oral evidence to the FtT when she arrived late for the hearing.
How to challenge decisions
The following tactics may be helpful for both cases involving separated married couples and unmarried partners:
- Check that the relevant law (legislation and case law) has been correctly applied by HMRC and by the FtT.
- Check the evidence on which HMRC/the FtT have based their decision.
- Differentiate between findings of fact or inferences from those facts.
- Check whether evidence supporting the client’s appeal has been omitted from the FtT bundle of evidence.
- Cite relevant case law, where relevant to your client’s case. See examples above, especially for separated spouses.
- If possible, collect documentary evidence to support your client’s case, for example proof that the partner lives elsewhere.
- Try to explain the reasons for continued contact/financial ties/the spouse still occupying the client’s home.
- Encourage clients to attend an oral hearing of their appeal. Even without documentary evidence, a client’s oral evidence may convince a FtT to allow their appeal.
- However, remember that the onus of proof lies with HMRC, where HMRC is revising a decision and removing an existing award.
- Consider requesting a set-aside or an appeal to the Upper Tribunal if the FtT proceeds with a paper hearing without considering the need for the client’s oral evidence. Bear in mind the frequent Upper Tribunal criticism of HMRC decision-making and lack of evidence.
Sandie Lock works in the Welfare Benefits Expert Advice Team at Citizens Advice
