Upper Tax Tribunal resolves SMP issues in the Deborah Wade case

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In September 2009, the First-tier Tax Tribunal gave its decision in the case North Yorkshire Police and Mrs Deborah Wade v The Commissioners for HM Revenue and Customs.  This was the first judicial decision on a matter concerning statutory payments since administration of the SMP/SAP/SPP schemes was transferred to the Inland Revenue (now HMRC).  The judge’s ruling in that case had potentially significant implications for employers when handling maternity leave and statutory maternity pay (SMP) where a woman is absent from work for any reason at the start of the 11th week before the expected week of childbirth (EWC).

The First-tier Tribunal decision in that case was appealed by both Deborah Wade and HMRC and, in a decision just published, the Upper Tax Tribunal allowed the appeals.  The result, fortunately, removes the potential problems created by the original decision and preserves the integrity of the statutory maternity leave and maternity pay rules.

Mrs Wade is a police officer and, between 2005 and 2008, was absent twice on maternity leave.  She was entitled to SMP for both periods of leave and, in addition, qualified for paid maternity leave under the Police Occupational Maternity Scheme.  Without going into great detail, it was possible for a woman to take advantage of the rules of both the statutory and occupational schemes and receive full police pay for 13 weeks, followed by 6 weeks SMP at the higher rate, and followed by 33 weeks SMP at the standard rate, i.e. pay for 52 weeks instead of just 39.  However, this could only be achieved if the woman started her police leave at least two weeks earlier than the 11th week before the EWC (the earliest possible start date for leave under the statutory scheme).

The issues raised by the First-tier Tax Tribunal and now resolved by the Upper Tax Tribunal arise from the application of three of the five rules governing when a woman can start her maternity pay period (MPP).  In summary, these are:

• the default rule, which requires the MPP  to start from the 11th week before the EWC if none of the other rules apply,
• the notice rule, which applies when a woman specifies the date from which she wants her MPP to start, and
• the pregnancy-related rule, which forces the MPP to start if she is absent from work for a reason related to her pregnancy at the start of the fourth week before the EWC.

All five rules are explained in more detail at the end of this article.

In particular, it was the interpretation of the notice rule that was in question.  In greater detail, this rule states that a woman’s MPP starts on the day on which she says she wants it to start (which may be not earlier than the 11th week before the EWC and not later that the day following childbirth) if

(a)   she gives notice of the date when she wants her MPP to start, and

(b)   in conformity with that notice she ceases work on that date.

The First-tier Tribunal judge’s interpretation of the expression “in conformity with that notice” was that, if she were absent from work on occupational maternity leave on the date she gave notice, she could not cease work “in conformity with that notice” because she had already ceased work.  As she could not meet the notice rule conditions, the default rule would apply instead and her MPP had to start from the 11th week before the EWC.

This decision had the effect of reducing the period for which Mrs Wade could receive payments, so she appealed the decision.

The decision also had implications for the integrity of the combined maternity leave/maternity pay scheme, because the employment law rules governing the start of statutory maternity leave do not require it to start from the 11th week in this same situation.  Mrs Wade’s MPP would start from the 11th week but her maternity leave would start from a later week.  This conflict between the application of the pay rules and the leave rules required HMRC also to appeal the decision.

The original First-tier Tribunal decision and our full explanation of its implications are still available at the links provided below.

The Upper Tax Tribunal judges took a different view of the “in conformity with that notice” condition.  They decided that a woman can start leave “in conformity with” her notice despite being absent on occupational maternity leave because

(a)   a literal interpretation would mean that a woman would also have to start her MPP from the 11th week if, at the time she gives notice, she were absent sick, on holiday, or absent for any other reason, and

(b)   the MPP and statutory maternity leave should start on the same date, in order to preserve the “symmetries” between the two sets of closely related legislation.

Consequently, the Upper Tax Tribunal allowed the appeals and ruled that Mrs Wade’s MPP did not start at the 11th week before the EWC but at the 4th week.  Why the 4th week?  The pregnancy-related rule states that if, at the 4th week before the EWC, a woman is absent from work due to pregnancy, the MPP and statutory maternity leave must start.  Because she was, at the time, absent on occupational maternity leave, i.e. for a reason related to her pregnancy, her MPP and statutory leave had to start from the 4th week before the EWC.

Our review of the original decision included a summary of the five statutory rules that govern the date from which a woman’s MPP must start, and their application to the Deborah Wade case.  It is reproduced again here in order to clarify the context of this latest decision.

The statutory rules

The statutory rules, as set out in the Social Security Contributions and Benefits Act 1992 (SSCBA) and the Statutory Maternity Pay (General) Regulations 1996 (SMP Regs) may be summarised as follows.

The default rule (section 165(2) of SSCBA) is that, unless otherwise prescribed in regulations, the MPP starts at the 11th week before the EWC.

The rules prescribed in regulation 2 of the SMP Regs, which apply instead of the default rule if the conditions are met, are that a woman’s MPP starts

1. [the notice rule] on the day on which she gave notice for it to start, but not later than the day following the day she is confined, if
   1. she gives notice of the date when she wants her MPP to start, and
   2. “in conformity with that notice” she ceases work on that date, but not earlier than the 11th week before the EWC.
2. (not relevant to this discussion)
3. [the confinement rule] on the day following confinement, if she is confined
   1. before the 11th week before the EWC, or
   2. in or after the 11th week but before the date she has given notice  for it to start.
4. [the pregnancy-related rule] on the day following the day on which she is absent from work wholly or partly because of pregnancy or confinement and which
   1. falls on or after the start of the 4th week before the EWC, but
   2. not later than the day following the day on which she is confined.
5. [the leaver rule] on the day following the day on which she leaves her employment
   1. at any time after the start of the 11th week before the EWC and before the start of the MPP, but
   2. not later than the day on which she is confined.

Further information:

Wade and North Yorkshire Police v HMRC

North Yorkshire Police and Mrs Deborah Wade v The Commissioners for HM Revenue and Customs

Statutory Maternity Pay – First ever tax tribunal decision on SMP issues

Tags: Deborah Wade Case, Recent Payroll News, tax tribunal

This entry was posted on Friday, January 21st, 2011 at 16:49 and is filed under Tax Calculations. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.