Black v Revenue & Customs [2009] UKFTT 54 (TC)

FTT-Tax

Black v Revenue & Customs

[2009] UKFTT 54 (TC) · 2009-04-20

[1]

[2009] UKFTT 54 (TC)

TC00033 Appeal number: SC 3175/2008 NATIONAL INSURANCE — married woman paying contributions at reduced rates — whether she had elected to do so — challenge to decision by HMRC that she had done so — election, if made, destroyed — other evidence considered — on balance of probabilities, election made — appeal dismissed FIRST-TIER TRIBUNAL TAX PATRICIA BLACK Appellant - and - THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS Respondents TRIBUNAL: David Demack (Judge) Sitting in public in Manchester on 16 February 2009 The taxpayer in person Mark Harrison, HM Inspector of Taxes, for the Respondents © CROWN COPYRIGHT 2009 AMENDED DECISION This is an appeal by Mrs Patricia Black against a decision, set out in a notice dated 27 March 2007, given by the Commissioners for Her Majesty's Revenue and Customs ("HMRC"), that from 9 November 1970 to 8 April 1975 she was not liable to pay national insurance contributions, and that from 9 April 1975 to 5 April 1980 she was liable to pay contributions at the married women's reduced rate. HMRC contend that prior to 9 November 1970 Mrs. Black signed an election by which she chose to pay contributions at the special rate then available to married women, while she contends that she did not. It is common ground that any election made by Mrs. Black lapsed on 5 April 1980. What is also clear is that Mrs Black did in fact pay married women's contributions throughout the relevant period, in those weeks in which she was working. In reality, the issue before me is the measure of Mrs. Black's entitlement to state retirement pension.

[2]Mrs. Black appeared in person, and produced a number of documents, which formed the basis of her evidence-in-chief. HMRC were represented by Mr. Mark Harrison, one of their Inspectors of Taxes. He produced a bundle containing HMRC's records of Mrs. Black's employments in the years to 1980 and her national insurance contributions during that period.

[3]A similar question to that the present one came before Special Commissioner Colin Bishopp in Margaret Ann Morgan v The Commissioners

(2008) SC722

. In his decision Mr. Bishopp explained the changes made to married women's national contributions over the years in the following way:

"2. From 1948 to 1975 married women were permitted, by the National Insurance (Married Women) Regulations 1948, to elect to pay a much reduced national insurance contribution – reduced, that is, by comparison with the full rate of contribution they would otherwise have paid. The amount was a flat rate of a few pence per week. A married woman who chose to pay the reduced rate of contribution received also limited benefits, I believe only industrial injuries benefit. Particularly, there was no entitlement to state retirement pension; a married woman who elected to pay the reduced rate became dependent on her husband's contributions for her pension. The eligibility requirements and the consequences of making an election were spelt out in Leaflet NI1, published by the then Ministry of Pensions and National Insurance. At the end of the leaflet was a form of election, identified as CF9, which a married woman was required to complete and return to her local social security office, in order to indicate whether she wished to pay contributions at the full or the reduced rate. Although the form indicated that it was to be returned whatever the election made, I did not hear evidence about the Ministry's practice in those cases in which it was not. 3. In 1975 the system changed in some respects, in particular by the replacement of the former flat-rate contributions by a contribution linked to earnings. A married woman who elected to do so was required to pay at a rate of 2% of earnings while those paying the full rate contributed an amount which varied from one year to another but was typically about 6.5%. A married woman who had elected, before the changes in 1975, to pay reduced rate contributions was treated as having elected to continue doing so, and did not need to make another election. Indeed, it seems women in that position were not invited to reconsider elections they had already made. In 1977 the right to make an election to pay reduced contributions was abolished, but those who had already made one were allowed to continue paying at the reduced rate."

[4]For completeness, I should add to Mr. Bishopp's observations that from 6 April 1978 legislation provided that where two years had elapsed in which a married woman had not made national insurance ("NI") contributions, any election to pay reduced contributions automatically lapsed. As Mrs. Black made no contributions during the tax years 1978/79 and 1979/80, any election she had previously made lapsed on 5 April 1980.

[5]Against that background, I find the following facts.

[6]Mrs. Black, who was born Patricia Hitchens on 9 January 1946, registered for NI on 7 July 1961, and was treated as having entered into insurance on 30 March 1961. (Between 30 March 1961 and 6 July 1961 she was undergoing education: she left school on 6 July 1961). On registering she was provided with a contribution card.

[7]On 25 March 1967 Mrs. Black married Peter Robert Bier. Under the then current regulations, a woman was obliged to inform the Ministry of Pensions and National Insurance of her marriage. But it would appear that Mrs. Black did not immediately do so, and it was not until November 1967, when she made a claim for sickness benefit, that the Ministry became aware that she had married.

[8]On receipt of notification of marriage, it was the practice of the Ministry to send Leaflet NI1 to the woman concerned with an invitation to read it and to complete and return Form CF9, which formed the back page of Form NI1.

[9]Form CF9 was a dual purpose form which allowed a married woman to apply for an NI stamp card and to indicate whether or not she wished to pay NI contributions. (A married woman who chose not to pay NI contributions was still required to pay a contribution each week of employment under the Industrial Injuries provisions. That small weekly contribution, the employee's share being the equivalent of 3p in November 1970, provided insurance cover only for injuries sustained at work: in contrast the Class 1 contribution, ie that paid by other employed persons, was the equivalent of 75p per week).

[10]According to HMRC records in Form RF1, Mrs. Black elected not to pay ordinary Class 1 NI contributions from 9 November 1970.

[11]Where a married woman elected not to pay ordinary Class 1 contributions, she was issued with a special contribution card which informed her employer that only exempt rate contributions, as married women's contributions made by those who had elected were known, must be deducted. The contributor was responsible for passing on the card to her employer to enable him to commence stamping it from the first pay day thereafter. Only if the employer held such a card could he deduct exempt rate contributions.

[12]The local NI office issuing the exempt rate card and Form CF9 notified the records branch of the Ministry of the date of any election and, on receipt of an election the ledger, the section clerk noted the taxpayer's NI record sheet, Form RF1.

[13]Mr. Alan Greenshields, a long serving officer of HMRC dealing with NI contributions, gave evidence as to the steps taken by the records branch of what was then the Ministry and is now HMRC to ensure the accuracy of records sheets. They include: 1) regular spot checks of items of work by the supervisor of each ledger section; 2) regular unplanned and unannounced checks by independent auditors of the different sub-sections of the records office; and 3) corrective action where errors were found.

[14]On 3 April 1961 the Graduated Pension Scheme began, and because of the administrative process used to collect graduated contributions, it became possible for the Ministry to record a person's employment history. Graduated contributions were collected by the Inland Revenue together with PAYE tax, and details were recorded on an end of year return, particulars from which were supplied to an employee on Form P9 (certificate of pay, income tax and graduated insurance contributions).

[15]In the tax year 1967/68 Mrs. Black was employed first by Marks & Spencer Ltd and later by Riley Bros. (Halifax) Ltd. The Form P9 prepared by the latter for Mrs. Black shows the total amount of her graduated contributions in that year as 18s.10d, that sum representing the full NI contributions due from her.

[16]Mrs. Black left her employment with Riley Bros (Halifax) Ltd on 12 April 1968 as she was pregnant.

[17]The records held by HMRC do not show Mrs. Black as resuming employment until the tax year 1971/72 and indicate that by then she had elected to pay only exempt rate contributions. As I previously mentioned, Mrs. Black's Form RF1 shows her as having made such an election by 9 November 1970. Quite why, or how, she might have made an election at that time is something of a mystery. Suffice it to say that, in evidence, she was adamant that she had not signed such an election.

[18]However, Mrs. Black's employers in 1971/72, Marks & Spencer Ltd, held a card authorising deduction of only exempt rate contributions as the certificate of pay and tax deducted the company issued shows graduated contributions of but 29p on pay of £162.79. The certificates for the following two years also show her as having made only exempt rate contributions.

[19]The Graduated Pension Scheme came to an end on 5 April 1975, and with it the payment of contributions for employers and employees by the stamp card method. From 6 April 1975 the Social Security Act 1975 introduced earnings related contributions for employed persons. Married women who had elected not to pay contributions were treated as having chosen to pay reduced rate contributions which did not provide entitlement to Social Security contributory benefits.

[20]Mrs. Black paid reduced rate NI contributions in the tax year 1975/76, when she was employed by Calderdale Metropolitan Borough Council. In the same year, she also worked for Marks & Spencer plc, which company erroneously deducted full rate contributions of £2.21. She was invited to apply for repayment of those contributions but did not do so. The letter of invitation would have offered Mrs. Black the opportunity to revoke the election from the following tax year, but again she did not act on it. (Mrs. Black explained that at the time the letter was sent the was in the process of moving house, and claimed not to have received it. I accept that that might have been the case.)

[21]In December 1976 Mrs. Black applied for sickness benefit, and her NI contributions in 1975/76 were relevant to the claim. Department records show her application as having been rejected due to her failing to satisfy the relevant contribution records, ie as having made only exempt rate NI contributions.

[22]On 20 April 1977 Mrs. Black terminated her employment with Calderdale Metropolitan Borough Council. Her employer was required to return the reduced rate authority certificate to her.

[23]In May 1977 Mrs. Black made a claim for unemployment benefit. Her NI contributions in 1975/76 were relevant to that claim. Department records show her claim as having been disallowed.

[24]Later in the tax year 1977/78 Mrs. Black worked for Country Farms Ltd, and paid reduced rate NI contributions during that employment. As she did so pay, it appears, and I find, that she handed to that company her certificate of reduced rate authority. Without the certificate, Country Farms Ltd would have had to deduct NI contributions at the full rate from her earnings.

[25]In September 1979 Mrs. Black made a claim for sickness benefit which the Department refused on the basis that her NI contributions for 1977/78, the year relevant to her claim, were inadequate.

[26]In cases such as the present one, what is known as the burden of proof is on the Appellant, Mrs. Black, and the standard of proof is the civil one. What that means is that it is for Mrs. Black to prove that it is more likely than not that she did not sign an election to pay exempt rate NI contributions prior to 9 November 1970; it is not for HMRC to prove to the same standard that she did sign such an election. I therefore have to balance the evidence before me, and decide where the truth is more likely to be.

[27]I find it implausible that HMRC would have recorded an election and issued a contribution card to Mrs. Black on which her employers over the years acted by deducting NI contributions at the nil rate had she not made an election when they say that she did so.

[28]I find Mrs. Black to be an honest witness, and do not consider she was trying to mislead me in claiming that she did not sign an election. However, I do not consider her oral evidence so reliable that I must prefer it to what was an overwhelming bundle of documentary evidence.

[29]Mrs. Black has failed to satisfy me to the required standard that she did not sign an election, and I must therefore dismiss her appeal. DAVID DEMACK TRIBUNAL JUDGE Release Date: 20 April 2009