Thacker
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 November 2012 |
| Neutral Citation | [2012] UKFTT 698 (TC) |
| Date | 12 November 2012 |
| Court | First Tier Tribunal (Tax Chamber) |
[2012] UKFTT 698 (TC)
Judge J Gordon Reid Q.C., FCIArb., Eileen A Sumpter, W.S.
The Appellant appeared in person
Mr Steve Duke, Officer of HMRC, appeared for the Respondents
National Insurance - class 2 contributions - failure to pay - whether failure to pay attributable to ignorance or error - whether ignorance or error due to failure to exercise due care and diligence - Social Security (Crediting and Treatment of Contributions and National Insurance Numbers) Regulations 2001, reg. 6 - Appeal dismissed.
1.This is an unfortunate case. The Appellant (Mrs Thacker), a self-employed earner since at least 1989, has failed to pay Class 2 National Insurance contributions. Having reached the age of 60 years, she discovered that her weekly state retirement pension was not as much as she expected. Her failure to pay these contributions is the reason. She now wishes to pay such contributions with a view to enhancing her weekly pension. HMRC have decided that any Class 2 contributions now paid in respect of the period between 1989 and 2004 should be treated as not having been paid for the purposes of any contributory benefit such as the retirement pension. This is because HMRC, while they accept that Mrs Thacker's failure to pay was attributable to her ignorance or error, contend that such ignorance or error was due to a failure on her part to exercise due care and diligence.
2.Mrs Thacker engaged in correspondence with HMRC, and they provided a number of lengthy and clear letters explaining the legal background and why they considered that her failure was due to her lack of due care and diligence. Mrs Thacker appeals to this Tribunal.
3.A Hearing took place at Edinburgh on 12 October 2012. Mrs Thacker represented herself (assisted by her husband, Phillip). She gave evidence. Mr Steve Duke, an HMRC Official, appeared on behalf of the Respondents. He led the evidence of Lisa Storey, a senior HMRC official with very considerable experience in and knowledge of the law and practice relating to the administration and collection of Class 2 National Insurance contributions. A bundle of documents and some authorities were produced. There was no dispute about the authenticity of the documents. Mrs Thacker did not take issue with the law as set forth by HMRC in the correspondence and in their Statement of Case.
4.Every self-employed person is liable to pay Class 2 National Insurance contributions each week in which they are self-employed (Social Security Act 1975 s. 7(1), Social Security Contributions and Benefits Act 1992 Social Security Benefits and Contributions Benefits Act 1992 section 11 subsec-or-para 1s. 11(1)). This is a weekly flat rate specified by regulations from time to time. For example in the tax year 1989/90 it was £4.25; in the tax year 1992/1993 it was £5.35.
5.Such a person is required to give notification of their self-employment as soon as it starts (Social Security (Contributions) Regulations 1979 (SI 1979 No 591)), regulation 53A, and Social Security (Contributions) Regulations 2001 (SI 2001 No 1004). Regulation 53A applied from 11 April 1993 (SI 1993/260). Regulation 87 applied from 6 April 2001 and was subsequently amended in 2009 by the Social Security (Contributions) (Amendment No. 3) Regulations 2009/600, regulation 5 with effect from 6 April 2009.
6.The 1979 Regulations as originally enacted required a person liable to Class 2 contributions, to apply to the Secretary of State (ie the DSS) for a contribution card (Regulation 51). In 1989, the application had to be made to the Department of Social Security (DSS).
7.In 1989 the application was carried out by completing and sending a form CF11 to the DSS. The form offered two ways of paying the contributions. The first was by stamping a contribution card, which was sent out by the DSS on receipt of form CF11; the stamps could be purchased at the post office; at the end of each tax year, the card was handed in to the local office of the DSS and a replacement card issued. The second method was by direct debit.
8.That system changed in 1996. From April 1996 a joint registration form was introduced, known as CWF1. That enabled a self-employed person to register with the DSS and HMRC (at that time, the Inland Revenue) at the same time. Before that date, separate registration with the Inland Revenue and the DSS was required.
9.The National Insurance Scheme is essentially a pay-as-you-go scheme. Regulations specify periods within which contributions have to be made. This is necessary to prevent persons delaying payment until an event which triggers an entitlement to benefit (eg sickness or retirement) occurs.
10.Since 6 April 1983, for Class 2 contributions to count towards the basic State retirement pension, they must be paid by the end of the sixth year following the year in which liability for that contribution arises. If they are not so paid, then the contribution is treated as not paid towards basic State retirement pension. If they are paid before the end of that sixth year, the Class 2 contribution is treated as paid on the date made (Social Security (Crediting and Treatment of Contributions and National Insurance Numbers) Regulations 2001 regulation 4(3)); these provisions were formerly enacted in regulations 38(1A)(a) and 38(2) of the Social Security (Contributions) Regulations 1979. Regulation 38(2) provided for a two year time limit. The time limit changed over the years but as no payments have been made the changes do not matter.
11.Regulation 6 of the Social Security (Crediting and Treatment of Contributions and National Insurance Numbers) Regulations 2001, as amended, provides inter alia that
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(1)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...
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Schonfield
...that the appellant might wish to seek an explanation from his accountant which was the route suggested by Judge Reid in ThackerTAX[2012] TC 02367. [58]HMRC referred to the case of Walsh v Secretary of State for Social Security [1994] (unreported) in which Mr Justice Owen stated in his decis......
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Arens
...of Owen J in Walsh v Secretary of State for Social Security (1994) (unreported), the decisions of the First-tier Tribunal in Thacker [2012] TC 02367 and the decision of the Special Commissioners in Rose v R & C Commrs (2006) Sp C 574 in support of her submission. Discussion [53] As we have ......
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Chilvers
...line I see no reason why he should have read the Notes attached to his self-assessment returns. As Judge Reid pointed out in Thacker [2012] TC 02367 at para. 16 and 17 the Notes provided with tax assessments from 5 April 1990 referred to Class 2 contributions and the Notes attached to the s......