Revenue and Customs Commissioners v Thompson

JurisdictionEngland & Wales
CourtChancery Division
JudgeMR JUSTICE PATTEN
Judgment Date28 November 2005
Neutral Citation[2005] EWHC 3388 (Ch)
Date28 November 2005
Docket NumberCase No: CH/2005/APP/0463

[2005] EWHC 3388 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand

London WC2A 2LL

Before:

Mr Justice Patten

Case No: CH/2005/APP/0463

Between:
Her Majesty's Revenue & Customs
Appellant
and
Roland Eugene Thompson
Respondent

MR NAWBATT appeared on behalf of the Appellant.

MR JUSTICE PATTEN
1

This is an appeal by Her Majesty's Revenue and Customs against a decision of the General Commissioners of Income Tax for the Division of Daventry made following a hearing on 17 th November 2004.

2

The appeal concerns a failure by the taxpayer, Mr Roland Eugene Thompson, to make national insurance class 2 contributions as required for the period from 5 th June 1972 to 5 th April 1983. The issue that the General Commissioners had to decide and which form the basis of the taxpayer's appeal was an assertion by the taxpayer that he fell within the limited class of case contemplated by section 8 of the Social Security Contributions (Transfer of Functions, etc) Act 1999 and the relevant statutory regulations which deal with cases where national insurance contributions are not paid on time as required or indeed within the period allowed for late payment in order for those contributions to count towards the taxpayer's state pension, but, nonetheless, may at the discretion of the Inland Revenue be counted towards the calculation of the payment if the taxpayer is able to satisfy the Revenue that at the time when the relevant national insurance payments were due they were not made due to ignorance or error on his part that was not due to a failure on the part of the taxpayer to exercise due care and diligence.

3

For reasons which I will come to a little later in this judgment, the Revenue contends that the General Commissioners failed to apply their mind to the statutory provisions that I have just referred to and, therefore, failed to apply the correct test and to answer the correct question that they have to be satisfied about in order to allow the taxpayer's appeal.

4

The liability to pay national insurance contributions is governed by statute and a failure to pay a contribution during the relevant time with which this appeal is concerned constituted a criminal offence triable summarily under section 8(2) of the National Insurance Act 1965 and under section 146(1) of the Social Security Act 1975.

5

The scheme under the 1965 Act was that a self-employed taxpayer was liable to pay class 2 contributions on a weekly basis by affixing a stamp of the appropriate value to his contributions card not later than the end of the relevant contribution week. From April 1975 every self-employed taxpayer over the age of 16 and below pensionable age was liable to pay a weekly class 2 contribution. Again payment was to be made by affixing a stamp of the appropriate value to the taxpayer's contribution card.

6

Under the relevant legislation, a time period is allowed following the date on which the contributions ought properly to have been made during which back payments can be made which count towards the individual taxpayer's retirement pension entitlement. So for the period 5 th June 1972 to 5 th April 1975 national insurance contributions had to be paid before the end of the sixth contribution year following the contribution year in which the national insurance contributions become due. If paid outside that period in satisfaction of the taxpayer's liability, they would not be counted in for the purposes of determining his pension entitlement. That period of grace was reduced in length for the period 6 th April 1975 to 5 th April 1983, which is the remaining period with which this appeal is concerned, as a result of Regulation 33 of the Social Security Contribution Regulations 1975 and Regulation 38 of the Social Security Contribution Regulations 1979.

7

The time limits that I have referred to are of course prescribed by law and are not capable of extension. But, notwithstanding those time limits, there is provision, under the Social Security Contributions (Transfer of Functions, etc) Act 1999 and the regulations that I am about to refer to, to exempt the taxpayer from the consequences that would ordinarily follow from payment outside the statutory periods of extension that I have referred to and to allow late contributions beyond that period nonetheless to count towards a pension.

8

The relevant statutory provisions are contained in section 8(1)(m) of the 1999 Act, which merely provides that an officer of the Board of the Inland Revenue is empowered "to decide such issues relating to contributions, other than the issues specified in paragraphs (a) to (l) or in paragraphs 16 and 17 of Schedule 3 to the Social Security Act 1998, as may be prescribed by regulations made by the Board." It is therefore to those regulations that one turns for the conditions which have to be satisfied for the statutory exemption to apply.

9

For the relevant period in question in this appeal those regulations are contained in The Social Security (Contributions Regulations) 2001 and Regulation 155A(5)(b), which provides that for the purposes of section 8(1)(m) of the 1999 Transfer Act the decisions specified in paragraphs (2) to (5) of the Regulation are prescribed.

10

The relevant one is that contained, as I say, in sub-regulation 5(b), which refers to a decision as to whether, in the case of a contribution paid by or in respect of a person after a due date, the failure to pay the contribution before that time was attributable to ignorance or error on the part of that person or the person making the payment and, if so, whether that ignorance or error was due to the failure on the part of such person to exercise due care and diligence, as mentioned in regulation 6 of the Social Security (Crediting and Treatment of Contributions, and National Insurance Numbers) Regulations 2001.

11

Ultimately, therefore one turns to that latter set of regulations, regulation 6 of which provides in sub-regulation (1) that:

"In the case of a contribution paid by or in respect of a person after the due date, where-

(a) the contribution is paid after the time when it would, under regulation 4 or 5 above, have been treated as paid for the purpose of entitlement to contributory benefit; and

(b) it is shown to the satisfaction of the Inland Revenue that the failure to pay the contribution before that time is attributable to ignorance or error on the part of that person or the person making the payment and that that ignorance or error [on the part of that person] was not due to any failure on the part of such person to exercise due care and diligence

the Inland Revenue may direct that, for the purposes of those regulations, the contribution will be treated as paid on such earlier day as the Inland Revenue may consider appropriate in the circumstances, and those regulations shall have effect subject to any such direction."

12

Therefore, for late contributions made by the taxpayer outside the statutory periods of extension that I have mentioned to count towards pension, it was necessary for him to satisfy the...

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