Non-dep deductions – disregard childcare element?

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  • #31717
    peterdelamothe
    Keymaster

    Background

    The claimant lives with her daughter and granddaughter. The full non-dep deduction is being made from her HB/CTB claim by the local authority, mainly because the daughter is receiving the tax credit childcare element.

    The childcare element is intended to reimburse a WTC applicant for 90% of any childcare charges which he or she incurs. The childcare element is not paid directly to the person who undertakes care of the child. Instead, it is paid to the WTC applicant who is free to spend the money as he or she wishes. However, he or she must actually be paying childcare charges in order to be entitled to the benefit.

    The argument

    How can the childcare element be counted as the daughter’s “income”? It is given to her by the state for a specific purpose. It cannot be used by the daughter twice i.e. to also help pay the rent. Is this another example of the welfare state paying out with one hand and grabbing back the money with another?

    In reality, the childcare payment is paid by the Government to the carer. The daughter acts as a conduit – merely to pass on the monies.

    In such a situation, why should the claimant be penalised? Her daughter does not actually have the money as claimed by the local authority. She cannot choose to have the money paid to the carer. On the other hand, if the daughter stops the payment to the carer then HMRC will do likewise. Is this not discrimination? Or just bureaucracy gone mad?

    Should the childcare element be disregarded? That would make a big difference to the amount of the non-dep deduction.

    The answer is

    Over to you ….

    #88699
    Anonymous
    Guest

    I’ve come across a similar case before, about five years ago. The LA’s position at that time was that no, the childcare element cannot be disregarded from the non-dep’s income. The reason? Non-deps are not means-tested like claimants; the deductions are structured in such an arbitrary way that there will always be some unfairness; eg a penny increase in income above £230.99 per week increases the deduction by £14.85. So tough luck, deal with it 😆

    #88700
    Anonymous
    Guest

    You could make an argument that the income of the non-dep is only held on trust for the childminder and is not actually the income of the non-dep, might be slightly tenuous though as she can spend the money in any way she wishes although at some point she will have to pay an equivelant amount to the carer?

    #88701
    Stuart Macd
    Participant

    Why would you not deduct the child care costs from the non deps gross income?

    I know it is the gross income that is taken into account but surely you would have to take into account this type of expense

    We do the same for Self employed, we take the gross only after allowable expenses have been deducted from the profits.

    #88702
    Mikeb2
    Participant

    ‘We do the same for Self employed, we take the gross only after allowable expenses have been deducted from the profits.’

    Not for self employed non-deps though…

    I’d say we have to include 100% of the WTC with no deduction.

    It might make a nice DHP request though… 😉

    #88703
    Anonymous
    Guest

    [quote:4a9b5d1ec0]Why would you not deduct the child care costs from the non deps gross income? [/quote:4a9b5d1ec0]
    Because Hb reg 27(1)(c) only allows childcare charges to be deducted from the claimant’s income.

    Furthermore to my above post, non-dep deductions are based on gross income. They are incompatable with provisions for treating the claimant’s income; like comparing apples and oranges. Similarly Child Benefit is disregarded from the claimant’s income but not the non-dep’s. One could argue that when setting the level of deduction, the DWP policy-maker has taken Child Benefit, Tax Credits and childcare into account… unlikely but arguable!

    Regarding self-employed non-deps, I believe there is caselaw that states that gross self-employed income is already adjusted for business expenditure…

    Edit: Its “Hogg” – see http://hbinfo.org/forum/viewtopic.php?t=16168

    #41613
    Anonymous
    Guest

    Is the answer not in the scenario? If the NDEP is living with their parent, why do they need childcare?? 😆

    Seriously though, it is a tough one, but I dont think the NDEP’s have ever been fairly considered in Benefit’s land. Taking gross income is unfair really! However, we have to do what it says on the tin! If we don’t allow tax & N.I for employed NDEP’s, we can’t really account for other forms of expenditure.

    #88704
    Anonymous
    Guest

    I am actually starting to think that a good argument could be made that as per Barclays Bank v Quistclose Trusts case there could be a good argument that the money paid in this case is merley held on trust by the claimant for the carer and therefore cannot form part of her gross income. It is paid to her by HMRC for a specific purpose to pay for her childcare. If she stopped paying it over for child care the payments would cease and she would have to repay any monies if she was not paying for the child care.

    #88705
    Kevin D
    Participant

    [quote:482048ebf3=”Mark Anderson”]…for employed NDEP’s, we can’t really account for other forms of expenditure.[/quote:482048ebf3]

    See “Hogg” as cited by Michael above.

    #88706
    Anonymous
    Guest

    [quote:93727ec7c4]I am actually starting to think that a good argument could be made that as per Barclays Bank v Quistclose Trusts case there could be a good argument that the money paid in this case is merley held on trust by the claimant for the carer and therefore cannot form part of her gross income. [/quote:93727ec7c4]
    If that was the case why would there be a specific regulation to disregard childcare expenses (up to a point) from the claimant’s income? If you took that argument to the extreme the claimant could benefit twice by having the childcare expenses deducted [b:93727ec7c4]and[/b:93727ec7c4] having the childcare element of WTC disregarded…

    #88707
    Anonymous
    Guest

    Sorry to keep hogging this thread, but I wonder if this legal principle could be relevant:

    “expressio unius est exclusio alterius” – to include one thing is to exclude another (thanks Peter Barker)

    By specifically allowing childcare charges to be deducted from the claimant’s income, the regulations exclude the possibility of such charges being deducted from the non-dep’s income.

    #88708
    Anonymous
    Guest

    [quote:c687f34f7f]Sorry to keep [b:c687f34f7f]hogging[/b:c687f34f7f] this thread[/quote:c687f34f7f]
    Do you see what he did there?

    I am having trouble with the link to Hogg and I cannot find it anywhere else, so I might be completely wrong in my initial reaction here.

    But I would have thought intuitively that the rates of non-dep deduction have been set taking into account what would normally be deducted by way of tax and NI. Using gross income isn’t unjust – if net income were used, the income thresholds would be set lower and the non-dep would end up paying the same contribution.

    The WTC child care payment is different from that, because it is clearly not available to contribute to the householder’s rent and council tax. Since “gross income” is a somewhat vaguely defined concept and is capable of being modified where common sense requires, as Hogg shows, the UT Judge in this teaser case may well have gone to great lengths to find a way of interpreting it generously so as to exclude WTC child care payments. The idea of a Quistclose trust has some merit although I still think it is an optimistic argument. If the claimant won, I think s/he will have done so because the Judge will have interpreted “gross” generously. One possible way of doing that is to say that for the purpose of Tax Credit itself, an amount of taxable income has been used by HMRC and that is an amount that many people would regard as a person’s gross income in every day language. Since that amount plainly does not include the tax credit award that springs from it, it is consistent and logical to use the gross income for Tax Credit purposes as the gross income for HB purposes. That conflicts somewhat with Reg 74(9), but I have a feeling the judge might have done it anyway.

    Taking the argument a stage further, it could be argued that a non-dep’s gross income should never include any tax credit income, since the tax credit is derived from the gross income in the first place.

    #88709
    Anonymous
    Guest

    That is an interesting argument Peter could see an Upper Tribunal judge making a case that as you are looking at gross income including tax to then take into account a credit paid to a non dep because they have paid that tax is somewhat double counting in determining a gross income??

    #88710
    Kevin D
    Participant

    The one potential flaw in the tax credit argument is that, despite it’s title, tax credits are not related to tax at all – it is no different, in principle, from other means tested benefits.

    #88711
    Anonymous
    Guest

    So do we have to wait until tomorrow afternoon for the ‘answer’?

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