Compliance and adult child claiming for 4 siblings (benefit cap case)

-  Client was benefit capped with massive rent arrears.  Advised to stop claiming child tax credit/child benefit for her 4 dependent children, and instead have her eldest daughter claim for her younger siblings so client’s housing benefit would stop being capped.

-  This arrangement continued for the last 3 years despite the fact that the client would have been exempt from the cap for the last 2 as she’d have qualified for Working Tax Credit.

-  Compliance have just concluded their 16/17 examination and the daughter’s tax credits have been stopped generating an overpayment.  The letter states that their records show that the mother of the children lives in the same household and the daughter has not provided an explanation for why mum is not responsible for them.

I hadn’t see anyone get round the cap this way before so I looked into.  I don’t know if I’m missing something but I can’t see what specifically prevents them from doing this? There’s no competing claim so there’s no main responsibility test, and the daughter is normally living with her siblings.

Any thoughts/opinions gratefully received

Thanks

I think the initial advice a few years ago may not have done the daughter any favors, but maybe missing something. TCA 2002 Section 8, basically indicates that the claimant must be responsible for the children and under normal circumstances this would usually be the parent whom they live with.

There are circumstances where the daughter could hold that responsibility, perhaps through mental health or learning difficulties. However, in many normal circumstances I think it would be a little odd for the parent not to hold that responsibility.

I suppose we have to look at the analogy of the conflicting claim for separated parents with 50% custody this is usually decided on who would the school contact if there was a problem, who is the next of kin for GP/medical professionals and also who claims the child benefit etc.

Additionally you have mentioned that the mother is also in receipt of HB, was she getting child premiums for them in the HB. As if she is not responsible for them she may not have been entitled to these either.

All in all it looks a bit of a messy one, it would be interesting to hear other opinions

Apart from benefit cap was there any other reason why she was advised to make the change at the time (for example, as suggested above)? Who advised her to make the change (wrong advice could be basis for legal action by mum/dtr against the advisers organisation!)?

The same question would have arisen at the time client stopped her claim & dtr claimed for her siblings instead. I would argue to HMRC that they accepted that dtr was now responsible and not mum - what change of those circumstance are they now arguing? The burden of prooof falls on HMRC, not mum/dtr.

If still at the compliance investigation / request for information stage it may be more of a tactical question about what response / evidence to provide and when to raise the burden of proof issue. It may be a case where the technicalities of the TC decision making process become as important as the facts.

I’m getting the sense that this isn’t a case where the daughter is legitimately the primary carer and effectively the previous advisers have encouraged her to contrive this situation to maximise benefit. The big question then is whether having mum cede her claims to the eldest child is either (a) a legitimate way to avoid the cap or (b) dodgy, potentially fraudulent, nonsense. Its got to be one or the other and its probably pretty important to a lot of cases which way this goes.

I think the question, at least for CTC, is whether “normally living with” simply requires the claimant and the child to be physically proximate or whether there is a need for the claimant to have an element of genuine responsibility for the child. Reading the regulations literally, there is no need for any degree of responsibility - however if you take the rules in context, you could probably read it in. I don’t know of any case law on the point

I work in a low rent area so haven’t really dealt with many cap cases yet, but it would be very useful to have some guidance on how to approach this sort of issue.

Thank you for your response and I agree with everyone’s concerns.  But I spoke to CPAG about the case too and in the absence of anything in the regs to prevent this I put an MR in. The MR request was out of time but if they accept the reasons for the late request I will keep you posted on HMRC’s response/outcome of Tribunal etc.  Jenny