Bonner and Others v HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judgment Date | 14 December 2010 |
| Neutral Citation | [2010] UKUT 450 (TCC) |
| Date | 14 December 2010 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2010] UKUT 450 (TCC).
Upper Tribunal (Tax and Chancery Chamber).
Judge David Williams, Judge Howard Nowlan.
Appellants in person.
David Forsdick (instructed by the Solicitor to HMRC) for the commissioners.
The following case was referred to in the judgment:
Fenton v R & C CommrsTAX [2011] BTC 29
National Insurance contributions - Refunds - Contributions record - Voluntarily additional Class 3 contributions - Contributors made voluntarily additional Class 3 contributions to make up their National Insurance contribution records - Change in requirement for qualifying years for pension entitlement - Contributors having sufficient qualifying years under rules as amended - Whether contributions "paid in error" and so liable to be refunded - Effect of announcement of prospective change - Meaning of error - Contributors' appeals dismissed - Social Security (Contributions) Regulations 2001, reg. 52.
These were appeals against the decision of the First-tier Tribunal ([2009] UKFTT 241 (TC); [2009] TC 00190) that voluntary additional Class 3 National Insurance contributions paid by the contributors in respect of various tax years were not paid in error, and that consequently those contributions were not repayable under reg. 52 of the Social Security (Contributions) Regulations 2001 (SI 2001/1004).
The appellants were all individuals who had been told, under the rules then in force, that they had deficient National Insurance contribution records if they wanted to claim full state pensions when they reached their retirements in or after 2010. The appellants all decided voluntarily to make additional Class 3 NI contributions.
The government published a White Paper in May 2006 proposing to reduce the number of qualifying years for a full state pension from 44 to 30. The Pensions Act 2007 giving effect to the 30-year rule was enacted on 26 September 2007. Between those dates HMRC took steps to draw the attention of individuals to the new rules in what were described as "flyers".
The appellants all already had full contribution records under the new 30-year rule and therefore sought a refund of their Class 3 voluntary contributions. The FTT heard 13 appeals together, dismissing 11 and allowing two. Six of the contributors appealed and HMRC appealed in the case of one contributor (B) whose appeal had been allowed. In the case of the appellants whose claims for refunds had been dismissed by the FTT the contributions had all been made even before the issue of the White Paper in May 2006. In the case of B, his contribution had been made after the issue of the White Paper. He had received a formal payment request for a further contribution and a flyer about the rule change which he had thrown away. The FTT decided that his contribution was made in error. Since the proposed rule change was a matter in the public domain, but he was nevertheless ignorant of it, he did not make a legitimate choice to make his payment. He made the payment on account of a present error in relation to a present matter, and so was entitled to a refund.
Two questions of law arose on the appeal to the Upper Tribunal: whether the Class 3 contributions were properly paid and received when made; and whether, if they were properly paid and received, there were any circumstances in which HMRC were required or entitled to refund those contributions.
Held, dismissing the appeals:
1. The payments were within the allowable payments under s. 13 of the Social Security Contributions and Benefits Act 1992, read with the restrictions on rights imposed by s. 14 and any further relevant provisions in the 2001 Regulations. On the undisputed facts none of the appellants was restricted from making Class 3 contributions under s. 14 at the time he or she made them, and payments were made within the defined scope of section 13. The tribunal was satisfied in respect of each appeal that the payments were properly made and received at the times they were made and received.
2. The liability of HMRC to return contributions was a general liability applying to all classes of NI contributions other than Class 4. It was in reg. 52 of the 2001 Regulations. The definition of "error" in reg. 52(9) was wide in terms of the material scope of the term but it was entirely clear about its temporal effect. It could apply only to errors made at the time of payment, and then only to errors about some then present or past matter. A future change of law, as yet unannounced, could not be the cause of an error within that temporal rule. Accordingly the contributors' appeals were dismissed. (Fenton v R & C Commrs [2011] BTC 29 applied.)
3. Different considerations arose once the government had announced the prospective change. There was inevitably a period of uncertainty between the initial formal announcement of the prospective change and its formal enactment, and that uncertainty generated scope for error by individuals. The Upper Tribunal approached "error" as an ordinary word to be given an ordinary meaning subject to the temporal limits in reg. 52(9). The error or mistake can be as to matters of fact or of judgment or on matters of law, subject to the temporal limitation. There was no meaningful distinction between the position of someone who received official guidance and read it but having done so misunderstood it, later forgot it, or wrongly chose to ignore it on the one hand, and the position of someone who received official guidance but did not realise its importance and so did not read it on the other. They were all mistakes on the part of the recipient. There was no presumption or specific rule of law that operated to require the information to be read or that assumed the recipient to know of the contents. On that broad basis, there was no error of law in the decision of the FTT in allowing B's appeal on the basis of the facts it found. Even if the Upper Tribunal accepted that the person who read and understood the flyer, and made a wrong choice when making an unnecessary contribution, would not be entitled to claim that the contribution had been made in error, it was unrealistic to extend that reasoning to the facts in relation to B. He might arguably have been at fault in deciding to throw away part of the letter unread. That, however, did not change the fact that, on the narrower issue, B still made his payment in ignorance of the then announced rule change.
1. This decision concerns a number of appeals from a series of decisions taken together by Judge Berner in the First-tier Tribunal Tax Chamber ([2009] UKFTT 241 (TC); [2009] TC 00190). He issued one reasoned decision covering appeals to that tribunal by 13 individuals against similar decisions about each of them by the Respondents ("HMRC"). He allowed two of the appeals but dismissed the other eleven. Six of the unsuccessful appellants below now appeal, with permission, to...
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...above were referred to as the cases involving Osborne & OrsTAX[2009] TC 00190 at the First-tier level, and Bonner & Ors v R & C CommrsTAX[2011] BTC 1527 at the Upper Tier level. They related to broadly the same parties, though the further appeal to the Upper Tier involved only some of the p......