The Supreme Court heard an appeal regarding a resident parent’s claim for the child element of Universal Credit (UC) while the child was living, at all material times, outside of the UK.
Facts:
Ms. Michaela Simkova, who is resident in England with a permanent right to reside in the UK, claimed entitlement to the child element of UC for her son, Markus, on 26 July 2017. It was awarded on 25 September 2017 by the Secretary of State for Work and Pensions (SSWP). However, for the periods declared, Markus was residing with his grandparents in Slovakia.
Ms. Simkova’s claim was based on a directly effective right under Regulation (EC) No 883/2004 on the coordination of social security systems (the so-called Coordination Regulation, or CR), which continues to have effect in the UK via the EU-UK Withdrawal Agreement 2020.
On 17 October 2019, the SSWP revised its decision on Ms. Simkova’s entitlement to UC to remove the child element from the calculation of her award. Following mandatory reconsideration, the SSWP confirmed Ms. Simkova’s non-entitlement on 31 January 2020.
The core legal issue was whether the child element of UC is a “family benefit” within the meaning of Article 3(1)(j) of the CR. If it were considered a family benefit, Article 67 would entitle Ms. Simkova to the benefit as if Markus were residing in the UK. Ms. Simkova appealed to the First-tier Tribunal, which awarded the child element. The Upper Tribunal reversed that decision, and the Court of Appeal dismissed Ms. Simkova’s appeal. Ms. Simkova then appealed to the Supreme Court.
Decision:
The Supreme Court has unanimously dismissed the appeal. The Court began by noting that the characterisation of any benefit as a social security benefit under the CR must be done by reference to the benefit’s substantive characteristics in national law, and not merely its name or presentation. For a benefit to be coordinated, it must satisfy two conditions: first, it must be granted based on objective criteria without an individualised assessment of need (which UC and the child element met), and second, it must fall within one of the branches of social security listed in Article 3(1) of the Coordination Regulation, such as “family benefits.”
The parties agreed that UC as a whole could not be a coordinated social security benefit because its overall purpose is poverty relief, which falls outside the listed branches. Therefore, Ms. Simkova’s case depended entirely on the Court agreeing to sever the child element from the composite UC scheme and treat it as a free-standing benefit that could be separately characterised as a family benefit.
The Court rejected the doctrine of severance. It found that the child element of UC is deeply integrated into the generalised, composite benefit scheme of UC, having replaced its predecessor, the Child Tax Credit (CTC), which was a standalone benefit. The Court held that the integration was a matter of substance and not merely presentation. It stated there was no basis or authority in EU law upon which to treat different components of a single, unified benefit, such as UC, as being open to separate characterisation under the CR. Given that UC, as a whole, is not a coordinated benefit, its essential components, including the child element, cannot be severed and coordinated in isolation.
Implications:
This case is important for EU/EEA nationals residing in the UK and claiming benefits for children who reside outside the UK. The decision confirms that for the child element of UC, the domestic residence test is legally upheld. Since the child element is not considered a “family benefit” under the Coordination Regulation, the UK is not obliged by retained EU law (Article 67) to pay the benefit for a child residing outside the UK. This means that if a child resides abroad, the parent will not be entitled to the child element of UC.
