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A Tribunal of Commissioners stated that regulation 14(2)(d) of the Working Tax Credit Regulations was ultra vires section 12 of theTax Credits Act 2002, resulting in no valid scheme of approval of childcare providers outside the UK for the purposes of the childcare element of Tax Credits.

The decision under appeal to the Social Security Commissioner was that of an appeal tribunal in Enniskillen on 23 April 2012, which held that the working mother-of-four was not entitled to the childcare element of Tax Credits (TC) from 11 March 2009 to 21 March 2010 because her childcare provider was situated in the Republic of Ireland.

Background

The mother-of-four claimed and was awarded TC by HM Revenue & Customs (HMRC), which included an element for weekly childcare costs for her two youngest children. While she lived and worked in Fermanagh, her childcare provider was in County Cavan in the Republic of Ireland.

In October 2009 the appellant was notified that her claim was being reviewed, and was called to an interview with HMRC to provide further information.

On 23 March 2010, HMRC decided that the appellant was not entitled to an award of the childcare element of TC from 11 March 2009 to 21 March 2010 – however, in all the circumstances, HMRC indicated that she was not required to repay any TC overpaid as a result of the decision.

The reason given for the decision on entitlement was that the childcare received by her children was not eligible childcare within the meaning of regulation 14(2) of the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002.

The appellant appealed from the decision that she was not entitled to the childcare element of TC – it was argued on her behalf that the legislation under which the decision had been made was not compatible with European Union Directive 79/7(EEC) concerning equal treatment for men and women in matters of social security.

The tribunal confined its consideration to this issue, finding that the legislation was not discriminatory on grounds of gender, and disallowed the appeal.

Grounds of the present appeal to the Social Security Commissioner

The appellant, represented by Law Centre (NI), submitted that the tribunal had erred in law on the basis that:

(i) The tribunal had given inadequate reasons for its decision; and (ii) the tribunal failed to take into account evidence provided by the appellant relating to gender discrimination.

HMRC accepted that Article 56 TFEU was potentially engaged in the case, but submitted that there was no interference with the right or, if there was, that such interference was justified and proportionate. The HMRC submitted that the tribunal had not erred in law as alleged, and indicated that HMRC did not support the application for leave to appeal.

Treaty on the Functioning of the European Union

The circumstances of the appellant represented an instance of a European Union citizen moving from one Member State of the European Union to another to receive a service – consequently thatArticle 56 of TFEU and Directive 79/7(EEC) were engaged.

Argument had centred on the question of whether the existence of the scheme provided by the UK government for the authorisation of child care providers outside the UK meant that there had been no restriction of the appellant’s freedom to receive child care services from elsewhere in the European Union.

Although the transposition date for the Directive was 28 December 2009, whereas the period considered commenced on 6 April 2008, the Directive had codified the principles arising from relevant jurisprudence on receipt of services such as Luisi and Carbone v Ministero del Tesoro (Cases C-286/82 and C-26/83) and nothing turned on the question of timing.

Conclusions

After hearing submissions from representatives of the appellant and the tribunal, the Social Security Commissioner held that the appellant was not disentitled to the TC already paid, having been satisfied that:

(i) The appellant had a right under Article 56 of the TFEU and the Directive to receive services from a childcare provider in another Member State;

(ii) Under Directive 79/7(EEC) the UK government could not set discriminatory limits on the grant of financial assistance for such services by reason of the fact that the service provider was established in another Member State;

(iii) There would not necessarily be discrimination if the real reason for placing limits on the grant of financial assistance was that the service provider had not been authorised under a necessary and proportionate scheme of authorisation;

(iv) The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 relied upon as establishing a scheme of authorisation, had lapsed when the Tax Credits Act 1999 repealed in its entirety by section 60 and Schedule 6 to the Tax Credits Act 2002;

(v) The Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 were not preserved by the effect of section 17(2)(b) of the Interpretation Act 1978;

(vi) It was not possible read the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 as continuing in force under the principle derived from the Marleasing case that there is anobligation under EU law to interpret domestic legislation as to accord with EU law;

(vii) Even if the Working Tax Credit (Entitlement and Maximum Rate) Regulations 2002 were still in force, they could not be accepted as a proportionate scheme of authorisation since the authorisation scheme was not made public in advance and was insufficiently transparent and accessible;

(viii) The decision to find that the appellant was not entitled to the childcare element of TC was unlawful under EU law; and

(ix) The appellant was not disentitled to the childcare element of TC solely on the basis that her childcare provider was situated in the Republic of Ireland.