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Social Welfare Update: Payments from discretionary trust did not disentitle claimant from income-related ESA

Friday 18 December 2020

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The facts

The claimant was refused a claim for income-related Employment and Support Allowance (‘ESA(IR’) because at the time she was receiving regular monthly payments from trust funds established by her parents, initially at a level of £600 per month, rising to £750 per month from July 2016 - such that her income exceeded the allowable limit for ESA(IR).  She appealed to the First-tier Tribunal on the basis that the trust payments she received from the family trusts should have been disregarded under para 16 of Schedule 8 to the Employment and Support Allowance Regulations 2008, SI 2008/794 when calculating her income.  The Tribunal found that paragraph 16(2) applied but this did not assist the claimant as her income was ‘payments made by the trustees of the testator for the maintenance of that person’s family’.
 

The judgment

On the appeal, the claimant's representative argued that since the First-tier Tribunal judge accepted that the trust fund established by the claimant’s parents was discretionary in nature, they should have found that the regular payments were to be disregarded under paragraph 16(1) read with 16(3) of Schedule 8 to the ESA Regulations as a ‘voluntary payment’.  Judge Church rejected a submission by the DWP that the payments by the trustees were analogous to the payments in lieu by British Coal in R(IS) 4/94 - such that they were “far removed from the purpose of benevolence required to bring them within the meaning of 'voluntary'”.  The Judge said that the payments in this case are more akin to the discretionary advances of capital in LG v Secretary of State for Work and Pensions (ESA) [2019] UKUT 220 (AAC), [2020] PTSR 550.

“While the trustees may discharge their obligations under the trusts by making payments to the Appellant, they may just as well discharge their obligations under the trust without making any payments to the Appellant whatsoever, and there would be nothing that the Appellant could do about that. She is only one of a pool of potential beneficiaries (para 30).

Since the trustees are under absolutely no obligation whatsoever to make payments to the Appellant I cannot see how the payments to her can be characterised as anything but “voluntary”. Similarly, it is difficult to see the purpose of the payments as anything but benevolent. If the First-tier Tribunal did decide that the regular payments made to the Appellant were (subject to the operation of paragraph 16(2)) “voluntary payments” then it was right to do so” (para 34).

The judgment is available here.

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