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Significant decision on Child Benefit and right to reside

AS v Her Majesty’s Revenue and Customs (CB) NICom 15 (21 February 2013) - file number C1/10-11 (CB)

In a case taken by the Law Centre on behalf of an EU8 national, Commissioner Mullan found that she should be entitled to Child Benefit and that applying the right to reside rule in her case was unlawful direct discrimination under Article 3 of EC Regulation 1408/71.

A first in the UK, this is a very significant decision on right to reside requirements for benefit entitlement.

Regulation 1408/71 and the right to reside test

The Commissioner held that an EU8 national subject to registration requirements should be entitled to Child Benefit where s/he falls within the scope of EC Regulation 1408/71.  EU8 nationals are nationals of the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia or Slovenia.

Our client had worked and paid tax and national insurance in the UK for over twelve months.  Although her employer had not registered this employment under the Worker Registration Scheme, it brought her within Regulation 1408/71, which prohibits direct discrimination on grounds of nationality.

Regulation 1408/71 (as well as Reg 883/2004 which has since replaced it) concerns the co-ordination of social security systems. It applies to all EU member state nationals who are or have been covered by the social security system of one of the member states, as well as members of their family and their survivors. 

The Commissioner distinguished his decision from the Supreme Court Decision in Partmalniece v Secretary of State for Work and Pensions 2011, which considers the habitual residence test.

Child Benefit entitlement is based on an ordinary residence and right to reside test (rather that a habitual residence and right to reside test).  Commissioner Mullan held that, unlike the habitual residence test which UK nationals can also fail, the ordinary residence provision is rarely failed by UK nationals, so that, in effect, the only residence test for entitlement to Child Benefit is the right to reside test.  As all UK nationals satisfy the right to reside test, in the context of Child Benefit it is directly discriminatory to non UK nationals.

Wider implications

As well as EU8 nationals, this decision may be of assistance to Romanian and Bulgarian nationals who could raise similar arguments.  It would also help Croatian and Serbian nationals when their countries join the EU.

Economically inactive EU nationals, such as those not working due to caring responsibilities, may also be able to rely on this decision if they come within the Regulation.

Child Tax Credit, Working Tax Credit, ESA in youth – among other benefits – also have an ordinary residence and right to reside rule, so the decision may have relevance to similar disputes for entitlement to those benefits.

HMRC has until 21 May to appeal.

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