Exemption of Council Tax because of SMI

Just to reopen this thread, about showing entitlement for an SMI discount for periods when someone isn’t actually entitled to a qualifying benefit, can I run something by the hive mind to see what others think? We’ve had an enquiry where the council have awarded SMI from date of AA award but refusing to go back. Our adviser has highlighted this recent judgment CO/936/2020 which pretty much confirms the council’s position as being correct.

However, when I read the judgment in more details, I noticed this at para.5 (my emphasis):

Pursuant to paragraph 2 (1) (c) of Schedule 1 above the Secretary of State made the Council Tax (Discount Disregards) Order (UK SI 1992/548). Article 3 of this order prescribed an additional condition as follows:
“The severely mentally impaired
3.—(1) The condition prescribed for the purposes of paragraph 2(1)(c) of Schedule 1 to the Act is that the person in question is entitled to one of the qualifying benefits listed in paragraph (2) below.
(2) The qualifying benefits for the purposes of paragraph (1) are—
(a) an invalidity pension under section 33, 40 or 41 of the Social Security Contributions and Benefits Act 1992(1);
(b) an attendance allowance under section 64 of that Act;….”
Other benefits are prescribed but are not relevant to this appeal.

All well and good - the judge is saying there are a list of benefits referred to in para.1 and as AA is in sub-para (2)(b), that’s all that needs to be considered here. However, the quoted Article is from the original version of the Order and not the current version which actually provides:

The severely mentally impaired
3.—(1) The condition prescribed for the purposes of paragraph 2(1)(c) of Schedule 1 to the Act is that the person in question is entitled to one of the qualifying benefits listed in paragraph (2) below or meets the requirements in paragraph (3) or (4) below.

So as well as the list of benefits in para.2, we also need to consider para’s 3 and 4 and para. 3 provides:

3) The requirements in this paragraph are—

(a)that the person in question has reached pensionable age as defined for the purposes of Parts I to VI of the Social Security Contributions and Benefits Act 1992, and
(b)that had he not reached pensionable age he would have been entitled to one of the benefits listed in paragraph (2) above

Basically this is the provision that has caused so much discussion about how to demonstrate entitlement to the SMI where someone would be entitled to a qualifying benefit but they aren’t claiming it. I’ve gone back to the Amendment Order and the explanatory note says:

The amendments in article 2(2) and (3) of this Order ensure that severely mentally impaired people eligible for certain benefits do not cease to be disregarded when they reach retirement age.

This is pretty clear that this is intended to act whereby someone who has been entitled to an SMI due to receiving a working-age sickness benefit doesn’t lose the SMI simply because they have reached State Pension age. However, it can also be read in the ways discussed above, namely that the SMI can apply if someone can demonstrate that they would be entitled to one of the list of qualifying benefits despite never having claimed it.

The purpose of the amendment and inclusion of para.3 suddenly makes much more sense, as it takes us away from imaginary entitlements but does that still leave the door open to argue for either the SMI to be applied despite no qualifying benefit being in payment and/or for SMI discounts to be backdated before the award of a qualifying benefit?

I’d also note that a lot of the arguments above seem to be in relation to working-age people and this provisions expressly only applies to people over State Pension age so I can’t see how someone can be held to qualify for the SMI in this situation unless they are claiming one of the qualifying benefits.

Any thoughts? Sorry it’s such a long one but this has always been a puzzling provision but this has finally made some kind of sense to me now.

I think you are right Paul, I cannot read it any other way than that the only thing stopping the person from being entitled to the qualifying benefit is being a pensioner.  I don’t see how it can cover either:

- unclaimed working age benefits when the taxpayer is working age, or
- unclaimed pensioner benefits when the taxpayer is a pensioner.

While the judgment appears to have been per incuriam the latest version of the Regs, I don’t think the bits the Judge overlooked offer a way round the principle established in the case which is that where a person needs to be actually entitled to something that means they have made a claim and been awarded that benefit.

Thanks Peter, do you agree that council’s still have a discretion to go back beyond the date of award of qualifying benefit?