IN THE UPPER TRIBUNAL	Case No.  CIB/818/2011
ADMINISTRATIVE APPEALS CHAMBER

Before:	Judge A Lloyd-Davies 

DECISION

My decision is that the decision of the tribunal held on 17 December 2010 involved the making of an error of law.  I set that decision aside.  This does not, however, assist the claimant since I substitute my own decision which is to the same effect, namely, that the claimant’s appeal against the decision of 18 May 2010 is disallowed and that that decision is confirmed. 

REASONS 

1.	The claimant became incapable of work in April 1995, for mental health reasons.  From about 2003 the claimant worked part‑time with a semi‑retired on‑course bookmaker.  This work, involving the inputting of bets onto a computer, was for two or three days per month for a payment of £70 per month (as stated by his employer).  The Department had been notified of this work and treated it as permitted work.

2.	As a result of an anonymous allegation that the claimant was working on a self‑employed basis as a poker player, a joint investigation between the Department and claimant’s local authority was initiated.  The claimant was interviewed under caution on 9 December 2009 by officers of the Department and of the local authority.  The claimant’s mother was also present.  Following the investigation, on 18 May 2010 a decision‑maker decided that the claimant should be treated as capable of work from 1 January 2009 as the claimant had commenced work on a self‑employed basis for at least 16 hours per week on that date and the work did not fall within an exempt category.  The decision‑maker further decided that the claimant was not entitled to incapacity benefit from 1 January 2009.  The claimant appealed.  The tribunal dismissed his appeal.  

3.	The claimant appeals with the leave of an Upper Tribunal judge.  The claimant requested an oral hearing, which request was granted.  At the oral hearing the claimant attended, together with his mother, and the Secretary of State was represented by Mr James, instructed by the Office of the Solicitor to the Department.  I am grateful to both the claimant and Mr James for their submissions.  

4.	It is not in dispute that the claimant had been paying on‑line poker for a number of years, since at least 2003.  The question before the decision‑maker and the tribunal was whether this was “work” within regulation 16 of the Incapacity for Work (General) Regulations 1995 and, if so, whether it fell into any of the categories of exempt or permitted work or whether, as the claimant maintained, it was merely a hobby.  The decision of 18 May 2010 was in the following terms:

	“[The claimant] has been incapable of work and entitled to sickness/incapacity benefit from 8 April 1995.  On the basis of evidence submitted, I accept that [the claimant] has been working on a self‑employed basis as a poker player since 1 January 2009, for at least 16 hours per week and earning in excess of £20 per week.  This is a relevant change of circumstances.  As a result of this I have superseded the decision of the decision‑maker dated 10 May 1995 awarding sickness/incapacity benefit from 8 April 1995.  My superseded decision is as follows.  [The claimant] is treated as capable of work and not entitled to incapacity benefit from 1 January 2009.  This is because he has worked as a poker player and that work does not fall into an exempt category.”

The tribunal confirmed this decision.

5.	By virtue of regulation 16(1) of the 1995 Regulations a person is treated as capable of work on each day of any week during which he does work.  There are exceptions set out in regulation 16(3), which include the categories of permitted or exempt work set out in regulation 17.  Regulation 16(7) defines “work” as:

	“Any work which a person does, whether or not he undertakes it in expectation of payment.”

It is accepted by the Secretary of State that the tribunal fell into error inasmuch as it did not explain why what the claimant was doing constituted “work”, but assumed that it must be.  The claimant’s appeal is supported on this ground.  I agree with this support.  Another area where the tribunal fell into error was in relation to the claimant’s alleged losses.  On this the tribunal found in paragraph 11 of its statement of reasons:

	“In short [the claimant] states that the outcome of his gambling is that he is in significant debt – about £20,000 according to his evidence.  Again there is no corroborative documentary evidence of this assertion.  Whilst I accept that [the claimant] will have had bad runs as well good runs, since that is the nature of gambling, I do not accept on the weight of the evidence including of the level of his activity and profile that overall he has not been a successful gambler.”

In fact, contrary to this assertion by the tribunal, there was corroborative documentary evidence of the claimant’s overall gambling losses.  This is to be found at pages 111 and following of the case papers where there are printouts (some 40 pages with up to 40 entries a page) from the on‑line poker site that the claimant used of, first, his “redemptions”, namely, withdrawals of money from the site and of, secondly, his “deposits”, namely, payments into the site, over a period from 2003 to 2010.  These printouts showed that the claimant had during this period withdrawn rather over $40,000, but had deposited rather over $80,000.  This was, contrary to the view taken by the tribunal, capable of being evidence corroborative of the claimant’s overall losses.  (I should point out that each entry on the printouts represents a redemption or a deposit and not necessarily only the result of a single bet, since the claimant might run a winning bet on his account into another bet).

6.	In view of these errors in my judgment the decision of the tribunal must be set aside.  Mr James, on behalf of the Department, suggested that I should remit the case to a new tribunal.  The claimant asked me to substitute my own decision.  The claimant gave evidence before me and was examined by Mr James.  I considered that this is a case where I may properly substitute my own decision.  

7.	The evidence against the claimant was the frequency of his betting; his being interviewed for the purposes of on‑line poker websites; and statements that he had made on those to the effect that he had won of the order of $370,000.  He also admitted that he had been abroad to three or four funded poker tournaments, the last in January 2009 to the Bahamas.  In his interview under caution he stated he gambled on‑line up to six hours a day; before me he gave evidence to the effect that on average it was about two hours a day, but that on occasions if he became involved in a lengthy tournament he would play on‑line for up to six hours.  He also admitted in his interview under caution that others would give him money to place bets on their behalf and he would retain 40% of any winnings; he maintained that these third party‑bets were in effect loans from the third party.

8.	The claimant maintained that his on-line gambling was merely an extended hobby.  He referred to his overall losses of $40,000 and to the fact that he had borrowed to fund his gambling.  He also referred to the fact that he had been previously interviewed in 2007 by officers of the Department when his gambling activities had been examined and he had been asked to produce bank and credit card statements.  There is, unfortunately, no record of this interview held by the Department.  It is not, however, in dispute that the interview took place.  The claimant gave evidence to the effect that at the time of this interview he was about $10,000 in the red.  The claimant stated that the Department took no further action in respect of his activities following that interview.  He maintained, before me, that nothing had changed in his activities since his interview in 2007, which he considered permitted him to continue going on as he had been doing.  Certainly the printouts referred to above show that his activity in 2005 seems to have been roughly commensurate with his activity in 2009.  The claimant questioned before me why there had been this departmental change of heart:  as far as he was concerned nothing had changed. 

9.	The decision of 18 May 2010 was to the effect that the claimant “commenced work” on 1 January 2009.  His benefit was stopped on the ground of this change of circumstances.  If, however, the claimant’s activities had, in broad terms, remained the same since he was first investigated in 2007, the claimant questioned how there could have been a change of circumstances.  

10.	The claimant referred me to the practice of HMRC not to treat winnings from gambling as income from a “trade, adventure, profession or vocation” and, in particular, to the case of Graham v Green [1925] 9TC 309, which he argued should equally apply for social security purposes.

11.	He also pointed out that although he had stated to on‑line sites that his winnings exceeded $370,000, this figure only referred to his winnings; it did not reflect the amount of losses he had made.  He pointed out that in a session he might win on 10 occasions and lose on 10 occasions and be in monetary terms exactly where he was when he started the session:  nonetheless he would only aggregate his winnings.

12.	I accept that the playing of on‑line games as a way of passing the time for somebody who is incapable of work does not of itself constitute “work” as defined.  There may come a time, however, when the frequency of the activity and the money expended on the activity changes the nature of the activity into “work”.  I take the following matters into account.  First, I consider that the evidence that the claimant gave under caution as to the number of hours he spent on-line gambling, namely six hours per day was more likely to be accurate than the revised version he stated in evidence to me:  on any footing I consider the number of hours he devoted to the activity would have exceeded 16 hours per week.  Secondly, a level of expenditure of $80,000 from 2003‑2010 for a person whose principal source of income is otherwise incapacity benefit indicates a level of activity wholly different from somebody whose gambling is merely a simple pastime.  Thirdly, I take into account that the claimant allowed his achievements to be advertised on‑line.  Fourthly, I consider the fact that he took on bets for others as was indicative that his activities were more than just a hobby or pastime.  Fifthly, I do not consider that the HMRC treatment of gambling winnings for the purposes of income tax is of any relevance to whether what the claimant was doing constituted “work”.  I have come to the conclusion that the claimant’s activities in on-line gambling taking into account the time expended and his financial input can only be regarded as work which took place for more than 16 hours a week.  

13.	The next question I have to address is why nothing was done following his first interview in 2007.  Since there are no records of the interview any opinion must be pure conjecture:  it may be that the interviewers were satisfied that the claimant’s activities were wholly loss‑making and that therefore there was no reason for them to take them into account. 

14.	The claimant is, however, entitled to know why the position changed with effect from 1 January 2009.  In my judgment this is because for the period from 1 January 2009 to 18 May 2010 (the date of the decision appealed against) it is clear from his own evidence (namely the printouts referred to above) that he drew out more than he paid in.  Pages 111 to 113 show that his withdrawals on one account increased from $8,500 odd on 24 December 2008 to $14,615 on 22 December 2009 and on another account from nil on 4 February 2009 to $6,965 odd on 28 December 2009.  During the periods referred to, therefore, the claimant withdrew rather nearly $13,000.  In the printouts relating to his deposits, however, for the period from 16 January 2009 (pages 117 to 118) to 22 March 2010 he is shown as having only paid in rather under $750.  This indicates net takings for the period of rather over $12,000.  During the calendar year of 2009 the US dollar/sterling exchange rate varied from just over 60p to the US dollar to over 70p.  Taking the most favourable rate to the claimant this indicates that his net takings from his gaming activities in 2009 were in excess of £7,000.  I am satisfied that these net takings are to be treated as earnings of a self‑employed earner for the purposes of the Computation of Earnings Regulations 1996 (compare the parallel case of CCS/2878/2009).  I recognise that the net takings from 1 January 2009 onwards may not completely accurately match the claimant’s gambling “profitability” during the period, but in the absence of details of all bets placed and winnings/losses during the period it is in my judgment the best measure.  

15.	The claimant may well ask why, if in previous periods, he had established losses, he could not set off the losses against the net takings that I have held that he received during the period from 1 January 2009 onwards.  The answer lies in regulation 13(6)(d) of the Social Computation of Earnings Regulations 1996:  this states that losses incurred before the beginning of the period under consideration are not to be deducted.  

16.	I am therefore satisfied that from 1 January 2009 the claimant was working more than 16 hours a week and that his earnings exceeded £20 per week.  This could not be permitted or exempt work within regulation 17 of the 1995 Regulations.

17.	Before I leave this case I should add that although there is reference in the case papers to a potential recoverable overpayment decision, as far as I am aware none has been made.  If any has been or should be made, then the evidence of what the claimant said or was told in 2007 when he had his first interview could be very material, since it might show that the Department could not establish any relevant material failure to disclose or misrepresentation.

18.	I regret the time it has taken me to produce this decision.  

				(Signed on the Original)
								A Lloyd-Davies
								Judge of the Upper Tribunal
								
								23 October 2012