Summarised and Anonymised Opinion

Factual and Procedural Background

Between October 2014 and October 2015 the Appellant generated at least £30,000 from buying and selling stolen bicycles and, having later been convicted of handling stolen goods, was imprisoned. The Appellant received income-related Employment and Support Allowance (ESA) from 1 October 2014 to 5 April 2016. The Respondent decided (8 April 2016) that the Appellant had no entitlement to ESA for that period on the basis that he had been in work which had not been declared, and (19 April 2016) that the Appellant was liable to repay £9,842.15. The Appellant succeeded before the First-tier Tribunal (FTT), which held his criminal activities were not "work" and the receipts not "income" under the 2008 Regulations. The Upper Tribunal (UT) allowed the Respondent's appeal on 8 May 2024, holding the activities were "work" and the receipts "income" despite criminality. The Appellant appealed to this court against the UT decision.

Legal Issues Presented

1. Whether the UT erred in interfering with the FTT's factual finding that the Appellant was incapable of work (ground 1).
2. Whether the UT erred by construing "work" in regulation 40(1) of the Employment and Support Allowance Regulations 2008 so as to include illegal activity (ground 2).
3. Whether the UT erred by construing "income" and "earnings" under the 2008 Regulations so as to include monies illegally acquired (ground 3).
4. Whether the UT failed to interpret "work" and "income" in their statutory context and in light of Parliament's intentions as expressed in the statutory scheme and explanatory materials (ground 4).

Arguments of the Parties

Appellant's Arguments

• A person engaged in criminal activity due to substance addiction is not "working" for regulation 40(1) purposes; receipts from such activity are not "income" under the 2008 Regulations.
• "Work" and "income" should be read as referring to lawful work and legally acquired income, consistent with the statutory purpose of assisting vulnerable claimants to re-enter lawful employment.
• The FTT's factual findings that the Appellant was unfit to work were entitled to deference and should not have been disturbed by the UT.
• If Parliament had intended to include illegal activities within "work" it would have said so explicitly; the explanatory memorandum supports an interpretation focused on lawful labour-market participation.

Respondent's Arguments

• The question whether the Appellant's activities and receipts were "work" and "income" are mixed questions of fact and law; the FTT misdirected itself by excluding criminal conduct as a matter of principle.
• Regulation 40 contains no exclusion for criminal conduct; activity carried out at scale and yielding income is capable of being "work" and "remunerative work".
• Income-related ESA is means-tested; there is no sound reason to exclude criminal receipts from the means test and doing so would reward illegality and distort incentives.
• The UT was correct to set aside the FTT's decision and to remit factual questions for week-by-week assessment by a differently constituted FTT.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analysed the statutory text, context and purpose of the Welfare Reform Act 2007 and the Employment and Support Allowance Regulations 2008. Key elements of the reasoning were:

• Regulation 40(1) treats a claimant as not entitled to ESA in any week in which the claimant "does work"; "work" is used broadly and is not defined to exclude illegal activity. Regulation 40(7) expressly treats "work" as any work which a claimant does, whether or not in expectation of payment.
• There is no exclusion in regulation 40 for criminal conduct; the list of specified exclusions in paragraph (2) (e.g. domestic tasks) demonstrates breadth but does not support reading out criminality.
• Purposive construction: regulation 40 aims to exclude from ESA those who in fact do work, because doing work demonstrates capacity to work. Excluding criminal activity from "work" would produce perverse results (rewarding illegality and disincentivising lawful work) inconsistent with statutory purpose.
• Practical and conceptual problems arise if illegal activities were excluded: partial illegality in mixed activities, difficult factual and legal inquiries (mens rea, proof of criminality) contrary to the need for administrable rules.
• On "income" and "earnings": the Regulations define earnings broadly (including gross receipts of self-employment) and define income to include earnings and other receipts. There is no textual basis for excluding receipts from unlawful activity; excluding such receipts would create perverse incentives and undermine the means-test.
• The FTT's conclusion that the Appellant was incapable of work was reached by applying a legal rule (that criminal activity could not be "work" or "income"). That legal error justified the UT setting aside the FTT decision. The factual issues (week-by-week assessment of work/income) were remitted to the FTT for rehearing under correct legal directions.

Holding and Implications

DISMISSED

Holding: The court dismissed the Appellant's appeal. The UT was correct to conclude that conduct which is the sort of activity properly characterised as "work" does not cease to be "work" for ESA purposes merely because it is criminal, and that receipts from such activity can form "earnings" or "income" under the 2008 Regulations.

Implications: The UT decision stands; the FTT decision was set aside and remitted to a differently constituted FTT to determine, week by week, whether the Appellant was working and/or receiving income in the relevant periods. The opinion does not purport to establish any broader novel legal principle beyond this construction and application to the regulatory scheme; it addresses application of existing statutory language and scheme rather than creating a new general rule.