Right to reside for EEA national with pre-settled status: preparatory steps and self-employment and self-sufficiency for ineligible partners

Current status

The case was heard in the Upper Tribunal (UT) (AAC) in November 2023. The decision was handed down in favour of VB and AD on 13 August 2024.

Overview

The UT considered whether VB, a Norwegian national with pre-settled status, had a right to reside for the purposes of claiming universal credit (UC) because she was i) a self-employed person, ii) a self-sufficient person with comprehensive sickness insurance, and iii) had retained worker status. The UT allowed the Secretary of State’s appeal on a point of law but remade the decision in favour of the claimants. It held that VB had a qualifying right to reside for the purposes of the joint claim for UC made on 20 March 2020 as a self-employed person and as a self-sufficient person, which was therefore to be paid at the rate for joint claimants plus their child.

Read the Upper Tribunal's decision:

Background

VB is a Norwegian national who has lived in the UK since July 2017. She was granted pre-settled status (limited leave to remain) under Appendix EU of the Immigration Rules in September 2019. On 21 January 2019, VB lost her job for reasons related to her pregnancy. Between February and April 2019 (the later stages of her pregnancy), she was looking for a job but did not register with the DWP as a jobseeker because she was not aware that she would have been entitled to any support; she expected to be able to find work quickly; and she and her British partner were able to live on her savings and her partner’s earnings.

VB gave birth to her son in June 2019. Around the time her son was born, VB decided to set up her own business. From March to November 2020, VB carried out activities for her business, alongside caring for her newborn after he was born. In December 2020, VB registered with HMRC as self-employed.

In March 2020, VB and her partner AD made a joint claim for UC. On 8 April 2020, the SSWP made a decision that VB did not pass the habitual residence test and refused VB entitlement to UC, recording her as an ‘ineligible partner’. UC was awarded to AD at the standard allowance (over 25) rate for single persons and with support for 1 child. 

AD’s final UC payment was in respect of the assessment period ending 19 August 2021. His UC account remained open until January 2022 and he was treated as claiming UC for 3 further assessment periods until he asked to withdraw his claim on 6 January 2022.

Procedural background

The First Tier Tribunal (FtT) allowed VB’s appeal against the SSWP’s decision that she was not entitled to UC because she did not pass the habitual residence test, applying the Court of Appeal decision in Fratila and anor v SSWP [2020] EWCA Civ 1741. The FtT decision was shown to be wrong following the decision of the Court of Justice of the European Union in C-709/20 CG v Department for Communities in Northern Ireland and the subsequent reversal of the Fratila Court of Appeal judgment by the Supreme Court.

The SSWP sought and was granted permission to appeal to the UT.

The Respondents argued that the FtT’s decision should be upheld, albeit for different reasons, on account of VB having a qualifying right to reside at the time of the UC decision.

Legal issues

At the time of the decision under appeal, EU law continued to apply with minimal modifications in the UK. Even though Norway is not a member state of the EU, it was common ground that EU law on freedom of movement applied to Norwegian nationals such as VB via the Oporto Agreement. 

UC is only available to those who are “in Great Britain” (s.4(1)(c) of the Welfare Reform Act 2012). Persons granted pre-settled status in the United Kingdom pursuant to Appendix EU are for these purposes treated as not in Great Britain (reg. 9(1), (2) and (3)(c)(i) of the Universal Credit Regulations 2013 (“the UC Regs”). To be eligible for UC, people with pre-settled status must show they have a qualifying right to reside for benefits purposes and be habitually resident in the Common Travel Area.

The Respondents argued that VB had a right to reside as a self-employed person, a self-sufficient person with comprehensive sickness insurance or as a retained worker.

1) Self-employed person

The UT found that VB had a right to reside as a self-employed person on account of her taking steps to set herself up as self-employed as at the date of her claim for UC.

Under Article 49 of the Treaty of Functioning of the European Union (TFEU) and Article 7(1)(a) of Directive 2004/38/EC(“the Citizens’ Directive”), all Union citizens shall have the right of residence in the territory of another Member State for a period of longer than three months if they are self-employed persons in the host Member State. The Citizens’ Directive was implemented via regulation 4(1)(b) of the Immigration (European Economic Area) Regulations 2016/1052 (‘the IEEA Regulations’).

The UT has previously considered a small number of cases relating to the concept of ‘freedom of establishment’ where the activity under consideration had been ‘up and running’. In comparison, decisions on the relevance of preparatory steps in the context of Article 49 TFEU, however, are extremely sparse. The UT referred to C-268/99 Jany v Staatsecretaris van Justitie, in which the Court held that work performed that is “genuine and effective” and not “purely marginal and ancillary” would constitute an economic activity within the meaning of Article 2 of the EC Treaty [18]. It also referred to R(IS) 6/00 (a case concerned with the predecessor of the Citizens’ Directive), in which the Commissioner rejected the notion that a mere intention to set up a business would be sufficient and held that concrete preliminary steps were required, it being a question of fact in all the circumstances of the case whether sufficient steps had been taken. Finally, it considered the judgment of the UT in SSWP v JS (IS) [2010] UKUT 240 (AAC), concerning whether a person who had been self-employed no longer was if she was not currently providing services under the Citizens’ Directive.

The UT agreed with the Respondent that the purpose of the Citizens’ Directive was to “strengthen rights” [28]. While acknowledging that the assessment of whether preliminary steps are towards a genuine and effective business “requires skills more commonly associated with investors” [32], the UT saw no reason not to follow R(IS) 6/00, while noting that the “concrete preliminary steps” referred to in that case must be “preparatory steps to a projected genuine and effective business” [29] – [33]. Ward J also noted that if the aim of the concept of establishment is to be served, there must be “a reasonable degree of proximity in time between the preliminary steps and the implementation of the genuine and effective business which is being set up” [33].

The UT noted that, notwithstanding section 12(8)(b) of the Social Security Act 1998 that requires the FtT and the UT to only consider circumstances obtaining at the time when the decision under appeal was made, it is settled law that evidence of subsequent events
may be taken into account for what light they shed on the circumstances obtaining at the date of the decision (R(DLA 2/01) and 3/01).

Ward J went on to consider the detailed evidence VB had provided to consider whether, and at what point, it would demonstrate preparatory steps for a business. He found that on the date that VB and her partner made a joint claim for UC, she was taking steps preparing to be self-employed, for example sourcing the materials for products she wanted to produce. While Ward J found that the level of sales and profit in the first tax year where VB was running her business would not be such as to lead him to consider that the activity was genuine and effective, he considered that the future development of the business reflected in the increased turnover figures provide evidence that what was starting up was indeed the early stages of a genuine and effective business.

The UT concluded that as at the date of the decision under appeal, VB had taken steps appropriate to the business she was later to launch (and which was genuine and effective) to prepare for doing so. In doing so, she had moved beyond the stage of a mere idea or intention and brought herself within the scope of Article 49 TFEU and had a right to reside for the purposes of being entitled to UC.

2) Self-sufficient person

As a fallback, Ward J went on to consider VB’s arguments regarding self-sufficiency as if she did not have a qualifying right to reside based on her right of freedom of establishment under Article 49 TFEU. 

The SSWP had previously accepted, following C-247/20 VI v Commissioners of HM Revenue and Customs [2022] 1 WLR 2901, that affiliation to the public health insurance system of the host state is sufficient to meet the requirement for comprehensive sickness insurance cover. Therefore, the key issue in this case concerned VB’s sufficiency of resources. Specifically, the UT needed to consider whether VB had “sufficient resources” during the period where she was claiming social assistance (the SSWP having conceded that up to the date of the claim for UC, she had “sufficient resources”).

Sufficient resources

The UT referred extensively to Pensionsversicherungsanstalt v Brey, C-140/12 [2013], which established that claiming social assistance does not automatically mean that the right to reside is lost. Instead, the competent national authorities have a power to assess, taking into account a range of factors in the light of the principle of proportionality, whether the grant of a social security benefit could place a burden on a Member State’s social assistance system as a whole. Ward J noted that he had previously considered the application of these principles in AMS v SSWP (PC) (Second interim decision) [2017] UKUT 48; [2018] AACR 27.

The UT took into account VB’s circumstances and the potential collective impact. In relation to VB’s circumstances, the key issue the UT considered in detail was the length of time when VB should have been considered not self-sufficient. Following his decision in SSWP v WV [2023] UKUT 112 (AAC) (appeal pending to be heard before the Court of Appeal in October 2024; ref: CA-2024-000119), Ward J found that the point at which VB would be granted settled status provided an outer date to the amount of benefit falling to be taken into account in the assessment of whether she was a “burden” on the UK.

The key issue was therefore whether this period could be truncated. Bearing in mind that the decision under appeal was taken at the height of the Covid-19 pandemic, the UT found that it would be undue speculation to conclude that on the circumstances obtaining at the date of the decision that the period where VB was not self-sufficient could be truncated, i.e. up until a point which she would no longer be reliant on UC yet still not have obtained a right to reside on other grounds (namely settled status). 

In relation to the collective impact, the primary issue considered by the UT was the relevant cohort to be considered when assessing the burden on the UK. On the basis that the number of couples claiming UC jointly recorded as single because one is ineligible is “small”, there are numerous reasons why a person might be “ineligible” [94], those having had a right to reside on the basis of self-sufficiency (only) and then having lost it will be distinctly limited group, and those who are in these circumstances may not have had their previous sufficiency of resources as a result of a partner’s income, Ward J considered that the number of cases likely to be affected by a ruling in VB’s favour, “though not de minimis, will be small”. This is particularly the case given that the cohort of people with pre-settled status is a "diminishing” one [94].

Considering the above issues in the round, the UT found for the claimants. It highlighted the Chamber’s statement in Brey that 

“Directive 2004/38 thus recognises a certain degree of financial solidarity between nationals of a host Member State and nationals of other Member States, particularly if the difficulties which a beneficiary of the right of residence encounters are temporary” [98]. 

In the spirit of this extract, and with reference to the impact of the pandemic on AD’s business and its ability to contribute to maintaining VB and their child (as well as subsequent evidence that showed the capability for this to be revived) Ward J said: 

“VB was encountering essentially ‘temporary’ difficulties, making the degree of financial solidarity as underlined above ‘particularly’ to be recognised” [99].

3) Retained worker status

Finally, the UT considered VB’s argument that she had a right to reside by virtue of her retained worker status. Article 7(3)(b) Citizens’ Directive provides that a person is in this position if “he/she is in duly recorded involuntary unemployment after having been employed for more than one year and has registered as a job-seeker with the relevant employment office”. VB argued that she had been working for a period of more than 1 year prior to being made involuntarily employed, and was job-seeking from this point to the late stages of her pregnancy due to the physical constraints of her pregnancy. She argued that this represented the start of the period during which she could retain her status as a worker, as recognised in Saint Prix v SSWP C-507/12 [2014]. VB was still in her Saint Prix period when she (and AD) claimed UC and thereby registered herself with the employment office in March 2020. She resumed applying for jobs in June 2020. 

VB argued that the delay between her last day of work on 21 January 2019 and registration as a jobseeker in March 2020 was not an undue delay. First, she argued that she could not have been expected to register as a jobseeker during her Saint Prix period (between April 2019 to April 2020). She therefore needed to justify the delay between her job ending and her entering her Saint Prix period. Under Regulation 89(1)(c) of the UC Regs, if a claimant is within 11 weeks of expected week of childbirth then there are no work-related requirements. For VB, that would apply from 10 April 2019. The delay to be justified was therefore the period between 21 January 2019 and 9 April 2019.

The UT referred to paragraph 69 of SSWP v MK [2013] UKUT 0163 (AAC), in which UT Judge White held that 

“where there is delay of more than a very few days between the end of employment and the completion of the formalities required to take the benefit of Article 7(3)(b) of the Citizenship Directive, the proper approach is to ask whether, having regard to all the circumstances of the case, there has been undue delay in meeting the requirements of the Citizenship Directive” [112]. 

The UT affirmed that it is the duty of a person seeking to retain worker status to comply with the requirements of the Directive, so that the state may, if it sees fit, monitor and check a person’s continuing link with the labour market. While VB had argued that she did not register with the jobcentre as she was not familiar with the benefits system in the UK, the general principle is that ignorance of the law is no excuse. 

While noting that there were factors supporting VB’s position (including her (erroneous) belief that she would be able to get work in her field and would be able to be supported by AD), the UT found that there was a lengthy period in which the state was deprived of the ability to monitor her connection with the labour market, and that the delay (at between 11-13 weeks) was at the upper end of the periods considered in other cases and in this instance was “’undue’” [122]. The consequence of that initial conclusion is that VB never entered into a Saint Prix period and when she did register at the jobcentre, the relevant delay to consider was therefore, at 14 months, far in excess of other cases in which the delay was not found to be ‘undue’. VB’s argument on retained worker status therefore failed. 

What should claimants do? 

Claimants with pre-settled status and appropriate facts can rely on the UT’s decision. At the time of writing, the DWP have not yet published guidance for decision makers and it is not yet known if SSWP will seek to appeal the UT decision. 

Claimants who rely on a self-sufficiency argument may also need to consider the recent decision in SSWP v WV [2023] UKUT 112 (AAC) (discussed in more detail here: Right to reside based on self-sufficiency) and the associated decision maker guidance. 

Advisers representing claimants who did not register with the Jobcentre during a period of jobseeking that fell immediately prior to late stages of pregnancy, should contact CPAG's advice services or relevant access to justice project.

CPAG represented the Respondents in the UT proceedings. Adrian Berry (Garden Court Chambers) was instructed as counsel.