Moss v Revenue & Customs [2010] UKFTT 295 (TC)

FTT-Tax
Moss v Revenue & Customs
[2010] UKFTT 295 (TC) · 2010-07-01
[1]This is an appeal by Mrs Sonja Moss against the respondents’ refusal to allow her to pay Class 3 national insurance contributions (“NICs”) for the period from 6 April 1975 to 5 April 1979. A formal decision to that effect was set out, without reasons, in a very brief letter dated 6 April 2009 from the Commissioners to Mrs Moss. A review was requested and its outcome, set out with reasons in a letter of 8 July 2009, was that the decision was upheld. When the appeal came before me Mrs Moss was represented by her husband, Alan Moss, and the respondents by Angela Main Thompson of their solicitor’s office.[2]The facts of the case were undisputed, and I heard no oral evidence. Mrs Moss was born on 10 November 1942. She entered the national insurance scheme on 10 November 1957, her 15 th birthday, when she was issued with a national insurance number, but she remained a student until 21 December 1957, I presume the end of the school term. She married on 11 September 1965, and made an election (a “married woman’s election”) to pay NICs at the reduced rate then permitted to married women with effect from 21 February 1966. The contribution required was a very small weekly sum; the point important for present purposes is that a woman paying the reduced rate earned no entitlement to state retirement pension. The election remained in effect until 6 April 1979, when Mrs Moss began paying Class 1 (employed person’s) NICs at the full rate. She reached state pension age on 10 November 2002 but, because of her contribution record, is entitled only to a reduced rate of pension. Her objective in making additional contributions, if she is permitted to do so, is to augment her pension.[3]The relevant domestic legislation is to be found at ss 13 and 13A of the Social Security Contributions and Benefits Act 1992. So far as relevant to this case, those provisions are as follows:
“ 13 Class 3 contributions (1) The Treasury shall by regulations provide for earners and others, if over the age of 16, to be entitled if they so wish, but subject to any prescribed conditions, to pay Class 3 contributions; … 13A Right to pay additional Class 3 contributions in certain cases (1) An eligible person is entitled, if he so wishes, but subject to any conditions prescribed by regulations made by the Treasury and to the following provisions of this section, to pay Class 3 contributions in respect of a missing year. (2) A missing year is a tax year not earlier than 1975–76 in respect of which the person would under regulations under section 13 be entitled to pay Class 3 contributions but for a limit on the time within which contributions may be paid in respect of that year. (3) A person is not entitled to pay contributions in respect of more than 6 tax years under this section. (4) A person is not entitled to pay any contribution under this section after the end of 6 years beginning with the day on which he attains pensionable age. (5) A person is an eligible person if the following conditions are satisfied. (6) The first condition is that the person attained or will attain pensionable age in the period— (a) beginning with 6th April 2008, and (b) ending with 5th April 2015. (7) The second condition is that there are at least 20 tax years each of which is a year to which subsection (8) or (10) applies … (10) This subsection applies (in the case of a person who attained or will attain pensionable age before 6th April 2010) if the year is one in which the person was precluded from regular employment by responsibilities at home within the meaning of regulations under paragraph 5(7) of Schedule 3. (11) The third condition applies only if the person attained or will attain pensionable age before 6th April 2010. (12) That condition is that— (a) the person has, in respect of any one tax year before that in which he attains pensionable age, actually paid contributions that are of a relevant class for the purposes of paragraph 5 of Schedule 3, and (b) in the case of that year, the earnings factor derived as mentioned in subsection (13) is not less than the qualifying earnings factor for that year. (13) For the purposes of subsection (12)(b) the earnings factor— (a) in the case of 1987–88 or any subsequent year, is that which is derived from— (i) so much of the person’s earnings as did not exceed the upper earnings limit and upon which such of the contributions mentioned in subsection (12)(a) as are primary Class 1 contributions were paid or treated as paid, and (ii) any Class 2 or Class 3 contributions for the year, or (b) in the case of any earlier year, is that which is derived from the contributions mentioned in subsection (12)(a). 14 Restriction on right to pay Class 3 contributions (1) No person shall be entitled to pay a Class 3 contribution in respect of any tax year if his earnings factor, or the aggregate of his earnings factors, for that year derived— (a) in the case of 1987–88 or any subsequent year, from earnings upon which Class 1 contributions have been paid or treated as paid or from Class 2 contributions actually paid; or (b) in the case of any earlier year, from contributions actually paid, is equal to or exceeds the qualifying earnings factor for that year; and regulations may provide for precluding the payment of Class 3 contributions in other cases .…”
[4]Class 3 contributions are the voluntary contributions which those who are not otherwise liable to pay Class 1 (employed persons) or Class 2 (self-employed persons) contributions may make in order to acquire or preserve various benefits, one of which is state retirement pension. As the Act indicates, however, there are some restrictions. The most important, which the respondents say is fatal to the appellant’s case, is contained in s 14(1), precluding the payment of Class 3 contributions when the person concerned has, or is treated as having, made Class 1 contributions. It is common ground that Mrs Moss, despite her election, was in that category during the four years in respect of which she now wishes to pay contributions.[5]Section 13A, which was inserted by the Pensions Act 2008 s 135(2), came into force on 6 April 2009 (coincidentally the date of the disputed decision), does not assist Mrs Moss because sub-s (4) precludes payment more than six years after the person concerned attained pensionable age. Mrs Moss attained that age in 2002, and therefore more than six years before the section came into force. She is additionally not an eligible person because, for the same reason, she cannot satisfy the condition set out at sub-s (6).[6]The Regulations referred to in those sections are the Social Security (Contributions) Regulations 2001. Regulation 127(1) and (3) (replacing similar earlier provisions) provided that “(1) A woman who on 6th April 1977 … was married … may—(a) elect that her liability in respect of primary Class 1 contributions shall be a liability to contribute at the reduced rate; and(b) elect that she shall be under no liability to pay Class 2 contributions … (3) Where a woman has made an election to which this regulation applies— (a) any primary Class 1 contributions which are— (i) attributable to section 8(1)(a) of the Act, and (ii) payable in respect of earnings paid to her or for her benefit in the period during which the election has effect under the following provisions of this Case, shall be payable at the reduced rate; and (b) she shall be under no liability to pay any Class 2 contribution for any contribution week in that period.”[7]Mrs Moss’s election was made in accordance with the predecessor legislation. Its effect was, as I have indicated, that she remained liable for Class 1 contributions, but at the reduced rate. The right to make an election ceased on 11 May 1977, but existing elections remained effective (see reg 135 of the 2001 Regulations) until revoked, in Mrs Moss’s case with effect from 6 April 1979. Regulation 132 precluded a woman who had made such an election from making Class 3 contributions:
“A woman who has made, or is under the regulations 126 to 131 treated as having made, an election under regulation 127 shall be precluded from paying Class 3 contributions for any year in respect of the whole of which that election has effect.”
[8]Mr Moss agreed that the effect of those provisions was that his wife was not eligible to make Class 3 contributions for the period from 6 April 1975 to 5 April 1979, as she wishes. That was the conclusion of Patten J in Revenue and Customs Commissioners v Mayor [2008] STC 1958, a case which is a little different from this, but the judge’s reasoning is in my view of equal application here. Mr Moss’s argument was, rather, that the domestic legislation offends his wife’s Community and Convention rights, in essence by discriminating between, on the one hand, women who had worked but had chosen to pay reduced contributions, and, on the other, those women who had chosen not to work, and who had in consequence paid no contributions at all, but who had now been given (by s 13A and otherwise) the right to make Class 3 contributions in order to secure a pension entitlement. I should make the point at this stage that it does not seem to me that the Convention adds anything to Community rights (and Mr Moss did not identify any difference between them) and I shall therefore confine what follows to Community rights.[9]Mr Moss’s starting point was Council Directive 79/7/EEC “on the progressive implementation of the principle of equal treatment for men and women in matters of social security.” Article 4(1) provides that “The principle of equal treatment means that there shall be no discrimination whatsoever on ground of sex either directly, or indirectly by reference in particular to marital or family status, in particular as concerns: — the scope of the schemes and the conditions of access thereto, — the obligation to contribute and the calculation of contributions, — the calculation of benefits including increases due in respect of a spouse and for dependants and the conditions governing the duration and retention of entitlement to benefits.”[10]Mr Moss accepted that there may have been no intention to discriminate unfairly against women in his wife’s position, but that was immaterial; what mattered was whether discrimination, even indirect discrimination, existed. The fact that some women, those who had not worked, were treated more favourably than those who had worked and had made a married woman’s election amounted to indirect discrimination. He relied on the judgment of the Court of Justice in Richards v Secretary of State for Work and Pensions (Case C-423/04) [2006] ECR-I 3585 in which it determined that the refusal to pay a state pension at age 60 to a person who had undergone male to female gender re-assignment surgery at the age of 59 was discriminatory, and on the judgment of the European Court of Human Rights in Hoogendijk v Netherlands (Application 58641/00) in which the nature of unintended indirect discrimination was considered.[11]It might well be laudable to allow women who chose to stay at home to look after their children, or not to take paid employment for some other reason, to make contributions now in order to purchase state pension rights; but if they were allowed to do so there was no legitimate reason for preventing those who had worked from doing the same. Regulation 132 was, by its own terms, discriminatory since it differentiated between two categories of women, without evident justification. Mr Moss had asked whether any concession, by relaxation of reg 132, might be made but was told by the respondents (by letter of 25 January 2010) that it would not. The government’s policy, the letter continued, was to introduce pension reform so as to bring men and women onto a more equal footing gradually, and in a manner which was as fair as possible. The author of the letter pointed out that relaxation of reg 132 to benefit women who had made an election would be unfair to those women who had worked but had not made an election and in consequence had received a lower net income as they were earning. Mr Moss challenged that comment, saying that the cost now to a woman wishing to make Class 3 contributions would be comparable to the loss of net income for a woman who had not made an election. In addition, he said, it was well established that discrimination cannot be justified on grounds of cost.[12]For the Commissioners, Ms Main Thompson drew my attention first to art 7(1) of Directive 79/7/EEC:
“This Directive shall be without prejudice to the right of Member States to exclude from its scope: … (e) the consequences of the exercise, before the adoption of this Directive, of a right of option not to acquire rights or incur obligations under a statutory scheme.”
[13]The Directive was adopted in December 1978, more than 12 years after Mrs Moss made her election, and it was therefore not possible for her to rely on it. Furthermore, member States were allowed six years to implement the Directive, a period expiring in 1984 and therefore beyond the period for which Mrs Moss was seeking to make additional payments. In addition, the Court of Justice had made further observations about it in Richards v Secretary of State . At para 33 it said “… it is enough to remember that, according to settled case law, Community law does not affect the power of the member states to organise their social security systems, and that in the absence of harmonisation at Community level it is therefore for the legislation of each member state to determine, first, the conditions governing the right or duty to be insured with a social security scheme and, second, the conditions for entitlement to benefits.”[14]It is true (as the Court also pointed out) that national legislation must conform with Community law, but art 7(1)(e) of the Directive made it clear that, even if the Directive had been effective at the relevant time, UK law in this respect did so comply. She argued too that there was no discrimination which could be recognised as an infringement of either Community law or the Convention. The Court of Justice pointed out in Ruckdeschel v Hauptzollamt Hamburg-St Annen (Joined Cases C-117/76 & C-16/77) [1977] ECR 1753 , “similar situations shall not be treated differently unless differentiation is objectively justified”. Here, there was good reason for distinguishing between women who had made an election, deliberately choosing to pay at the reduced rate, and those who had not exercised any such choice.[15]In my judgment there is merit in the Commissioners’ case which is, in essence, that Mrs Moss is in reality seeking relief from a choice which she now regrets. The comment in the letter of 25 January 2010 to which I have referred that Mrs Moss chose to sacrifice the right to a pension in order to secure higher net earnings is in my view well made. Nevertheless I see also merit in Mr Moss’s argument that women who, even though they did not work, had the opportunity (for some, though not all, of the period since Mrs Moss began working) of making Class 3 contributions but did not do so are being relieved of the consequences by being allowed now the facility of making payments. There is however, a difference between them: Mrs Moss, unlike her non-working counterpart, was required to make contributions, and was given the choice of making them in full or at a greatly reduced rate. It is not a case in which she did not make contributions, but one in which she adopted one course, for immediate gain, rather than another which would have brought her a long-term benefit. I do not, however, need to decide whether that amounts to discrimination which is contrary to Community law (though art 7 of Directive 79/7/EEC seems to me to point strongly against that conclusion) since I am satisfied that the appeal must fail on other grounds.[16]As I have mentioned, s 13A of the 1992 Act came into force on 6 April 2009, when (irrespective of her ability to meet the other qualifying requirements) it was already impossible for Mrs Moss to benefit from it, because of sub-s (4). That provision did not affect only married women who had made an election; it was and is of equal application to women who have not worked, and to men. I detect no discrimination of the kind of which Mr Moss complained in a provision which is of universal application. It is true that the sub-s discriminates between those whose state pension age occurred six or more years before 6 April 2009 and others, but I agree with the Commissioners that there must be some retrospective limit to the effect of a reforming measure of this kind, and I am not persuaded that six years is too short a period. Thus Mrs Moss is unable to overcome what I regard as a legitimate obstacle to her making the additional contributions.[17]The appeal is, therefore, dismissed.[18]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. COLIN BISHOPP Tribunal Judge Release Date: 1 July 2010