McPhail v Revenue & Customs [2011] UKFTT 369 (TC)

FTT-Tax
McPhail v Revenue & Customs
[2011] UKFTT 369 (TC) · 2011-06-02
[1]This is an appeal by Mrs. Joan McPhail against a decision made on 11 May 2010 by HMRC that from 2 September 1974 to 5 April 1975 she was not liable to pay Class I National Insurance Contributions and that from 6 April 1975 to 5 April 1979 she was liable to pay Class I National Insurance Contributions at the Married Women’s reduced rate The issue in dispute[2]The issue in dispute is whether the Mrs. McPhail made an election to pay Married Women’s reduced rate National Insurance Contributions. Mrs. McPhail disputes making an election. 3. HMRC say that Mrs. McPhail made an election to pay National Insurance Contributions at the Married Women’s reduced rate with effect from 2 September 1974, by signing an election to pay contributions at the special rate then available to Married Women in accordance with Regulation 2(1)(a) of the National Insurance (Married Women) Regulations 1973. The election purportedly made by Mrs. McPhail in September 1974 was subsequently deemed, pursuant to the Social Security (Contributions) Regulations 1975, to continue as a reduced rate election from 6 April 1975 until 5 April 1979. In consequence, HMRC say that Mrs. McPhail does not qualify for a full rate state pension but is entitled to a state pension at 92% of the full rate. 4 Mrs. McPhail accepts that she paid the special rate and then the reduced rate contribution during the periods in question, but asserts that she did not make the election in September 1974 and points to the fact that although HMRC is able to produce a substantial amount of historical documentary evidence in support of its case, it is unable to produce a copy of form CF9 being the document making the election which would have had to be signed by her. Mrs. McPhail believes that a mistake was made when she changed employment and her records were transferred from one local authority to another and that consequently the records held by HMRC do not accurately reflect the true position. 5. We heard evidence from Mrs. McPhail and Mr. Alan Greenshields, an officer of the Records Department of the National Insurance Contributions office at Longbenton Newcastle upon Tyne for HMRC. Mr. Greenshields provided a witness statement the contents of which were read to the Tribunal and which he affirmed to be the truth. The statement summarised the administration of National Insurance procedures relating to employed married women who elected to pay the reduced rate contributions, refunds of contributions and record-keeping regarding National Insurance contributions and claims generally. 6. HMRC provided the Tribunal with a bundle of documents including Mrs. McPhail’s form RF1 Permanent Record of National Insurance until 06 April 1975; document RD19 being the Technical copy of National Insurance Account from 6 April 1975; History Schedules from 1976 – 1977 to 1977 - 1978, tax deduction cards from 1972 - 1973 to 1979 - 1980, form RD28 Posting Query Report (regarding a refund of contributions) and other copy relevant documentation. The statutory context 7. The National Insurance Act 1946 created an obligation on employees to pay National Insurance Contributions. From 1948 to 1975 married women were given a special status and were permitted, by Regulation 2 of the National Insurance (Married Women) Regulations 1948, to elect to pay a much reduced National Insurance contribution. An employed married woman could choose either to pay a full flat rate ‘A’ contribution, which gave cover for all benefits including sickness benefit, invalidity benefit, unemployment benefit, maternity benefits, retirement pension, and industrial injuries benefits. Alternatively she could elect to pay a reduced ‘B’ rate contribution and rely on her husband’s insurance contributions for a smaller range of benefits. She was liable to pay the full flat rate unless she elected not to do so. The choice did not affect her liability to make a contribution for Industrial Injuries Benefit, which was obligatory. 8. The National Insurance Act 1965 replaced the 1948 Act. Under regulation 2 of the National Insurance (Married Women) Regulations 1973, which replaced the 1948 regulations:
"2(1)(a) a woman may elect not to be and thereafter (subject to the provisions of paragraph (2) of this regulation) shall not be liable to pay contributions…. in respect of any employment as an employed person for any period during which she is married. …….. (2)(a) any such election by a married woman not to pay contributions as an employed person may be made by her at any time by giving notice in writing to the Secretary of State to that effect, and the election shall be operative from the beginning of the week next but one following the week in which the notice was given from such early a date as the Secretary of State may allow." 9. The Department of Health and Social Security issued a leaflet NI 1 "
National Insurance - Guidance for Married Women", which gave general guidance to married women, considering their choice as to whether or not to pay the full flat rate contribution. A copy of the leaflet published in April 1973 was produced in evidence by HMRC. The leaflet runs to 23 pages and provides detailed advice on the benefits and disadvantages of making an election. It can be seen from the leaflet that in the tax year 1973 - 74 the full flat rate contribution for a person over 18 was £0.75 per week, whereas a married woman making the election paid just £0.04 pence per week, being her contribution to cover Industrial Injuries Benefit. 10. At the end of leaflet NI 1 was a tear-off form of election, known as form CF9, which, following marriage, 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 flat rate or the reduced rate. She was required to send form CF9 with her National Insurance card to the local Social Security office as soon as possible and, in any event, within 13 weeks. The married woman making the election would sign the CF9 which included a declaration that she had read, or had explained to her, the contents of the leaflet NI 1. The leaflet also set out the consequences of making the election and stated that the woman could cancel her election at any time. 11. Under regulation 2(3)(a) of the 1973 regulations, a certificate was issued to a married woman who elected not to pay Class I contributions. She was required to give the certificate to her employer immediately. There was no ‘certificate’ as such, the authority was in the form of either a married woman's ‘special NI card,’ (‘exempt rate card’ as it was more commonly known), or a flat rate card to which there had been affixed form CF16. This was an adhesive label that was attached to the card by the local office authorising the employer to affix only exempt rate contributions to the flat rate card. Until an employer had received either a special NI card or a flat rate card with form CF16 attached, he was obliged by law to deduct full flat rate contributions from the woman's wages and affix the flat rate stamps to the card. There was no advantage to the employer if a married woman chose not to pay the full flat rate contribution. The employer's share of the contribution remained the same irrespective of what the employee chose to pay. Local departmental inspectors carried out regular checks of employers to ensure that the requisite procedures were being followed. Notification of the election was sent by the Department’s local social security office to Records Branch in Newcastle upon Tyne where it was noted, in an abbreviated format, on the married woman's Permanent National Insurance and Benefit Record known as record form RF1. The RF1 was the main permanent National Insurance Contribution record. On it there were entered changes of name, changes of address, changes of marital status and summary details of contributions paid and credited. The details were entered in manuscript in ink. 12. In 1975 the legislative framework changed. The changes were brought about by the Social Security Act 1975 and the Social Security Pensions Act 1975. From 6 April 1975 under the Reconstructed National Insurance Scheme (RNI) the National Insurance system was restructured by the replacement of the flat rate contributions, with a contribution linked to earnings. Record-keeping procedures of the Department became fully computerized. Contributions were deducted by the employer under the PAYE system and the contribution year was realigned to the tax year running from April to April in each year. 13. The married woman's ability to elect not to take National Insurance contributions was replaced by the ability to elect to pay contributions at a reduced rate. A married woman who paid the full rate contributed an amount which varied from year to year but approximated to 5.5% (the percentage rate increasing in later years) whereas a married woman who elected to pay the reduced rate paid 2% of earnings. As part of the transition, under the provisions of Regulation 100 of the Social Security (Contributions) Regulations 1975, a non-paying election made prior to 6 April 1975 was deemed to continue without a break as a reduced rate election from that date. Therefore a married woman who had elected before the system changed in 1975, to pay reduced rate contributions, was treated as having elected to continue doing so, and did not need to make another election. There was no provision under the new scheme for those employed married women who had made the election to reconsider their choice 14. On 6 April 1977 under section 3 of the Social Security Pensions Act 1975 the married woman's contribution choice was abolished with effect from 11 May 1977. However under the provisions of Regulation 102 of the Social Security (Contributions) Regulations 1979 married women who had made an earlier election, which had not been revoked, were allowed to continue paying at the reduced rate until they instructed the Department that they wanted to pay standard rate contributions. 15. In addition Regulation 101(1)(c) of the 1979 Regulations provided that a woman's choice terminated if, at any time after 5 April 1978 there are two consecutive tax years during which she had no earnings in respect of which primary Class 1 (employed earners), contributions were payable and in which she was not self-employed. The historical background 16. Mrs. McPhail was born on 19 June 1949. A National Insurance number is allocated to every child in the United Kingdom shortly before their 16th birthday. Mrs. McPhail was allocated her National Insurance number and treated as having entered into insurance on 1 August 1964 which was the end of the school term following her 15th birthday. She was still in full-time education. She was issued with a National Insurance Contribution card in the 1968 - 69 contribution year which ran from the first Monday in September 1968 and expired in September of the following year. The Permanent Record of Insurance form RF1 was issued. 17. Mrs. McPhail’s form RF1 shows that following the end of her college course on 25 June 1971 she paid full flat rate (employed person) contributions for what remained of the 1970 -71 contribution year and continued to do so during the period up to 31st of December 1973 when she became employed by West Riding of Yorkshire County Council. She left that employment and in January 1974, as a young career teacher, took up a full-time teaching post at a young offenders detention centre at Kirklevington Teeside, her new local authority employer being North Riding of Yorkshire County Council. According to North Riding County Council wage records she ‘left’ on 1 April 1974, when under the Local Government Act 1972 the new non metropolitan County of Cleveland was created and took over as her employer. Form RF1 shows that in the year 2 September 1973 – 1 September 74 Mrs. McPhail made 52 paid contributions. 18. In the meantime Mrs. McPhail had married on 9 February 1974. Notification of the marriage was received at the Records Branch in Newcastle upon Tyne from the Department’s local Social Security office in Stockton upon Tees on 2 September 1974. Mrs. McPhail’s surname was changed from her maiden name of Chadwick to McPhail and her new address in Eaglescliffe was entered on form RF1. 19. According to the information contained on record form RF1 Mrs. McPhail elected, when returning her form CF9, from 2 September 1974 (being the start of the 1974 -75 contribution year), not to pay contributions. This is noted in column k of form RF1 as ‘MW1/NP 2/9/74 (601)’. This abbreviation meant that Mrs. McPhail was a married woman in Class 1 (Employed Person) employment not wishing to pay Contributions from 2 September 1974. The reference to 601 is in the code number of the Stockton upon Tees’s local office. 20. According to the information contained on record form RF1 in the 1974 - 75 contribution year which ran from 2 September 1974 to 5 April 1975 Mrs. McPhail paid 30 exempt rate Contributions and was credited with one contribution on the grounds of sickness. The RF1 shows that Mrs. McPhail made a sickness benefit claim and that the benefit was paid based on her previous full flat rate contributions. 21. Mrs. McPhail then continued to pay the reduced rate contributions (under her deemed election) for the three tax years 1975-76, 1976-77 and 1977-78 with her then employer Cleveland County Council. She left their employment a month or so after the start of the 1977-78 tax year and started employment with Wakefield Metropolitan District Council. She remained in this employment until 8 May 1978 when she left following expiration of maternity leave. Mrs. McPhail’s computerised post 1975 record (the Technical Copy of Account) shows that she claimed child benefit from 6 April 1978 until 18 June 1996. There is no record of her having claimed her 18 weeks maternity allowance in 1978 which she would not have been entitled to in any event. Maternity Allowance in 1974 was £7.35 a week and presumably in 1978 had been increased appropriately. 22. When Mrs. McPhail left Cleveland County Council on 5 April 1977 the Council would have been required to return the certificate of ‘reduced rate’ authority to her. However according to HMRC, either her former employer did not return the certificate to her, or if they did, Mrs. McPhail did not pass it on to her new employer Wakefield MDC. As a result of not having the relevant certificate Wakefield MDC had no other option than to deduct full rate contributions from Mrs. McPhail during the 1977- 78 tax year. HMRC produced a copy of Mrs. McPhail's end of year return which showed full rate contributions amounting to £176.93. 23. When these contributions were brought to account sometime after the end of the 1977 - 78 tax year, the Department could not accept them because the contributions deducted were not consistent with the reduced rate election held on record. A computer-generated output report was sent to the Department’s local office in Wakefield for investigation. The report was sent to Wakefield because Mrs. McPhail's last claim to benefit had been made at the Wakefield local office and her benefit papers would have been held there. That office was therefore likely to have her most up to date address. The administrative process in the local office was to send a letter to Mrs. McPhail informing her that the wrong rate of contributions had been paid. The letter explained that she could either cancel her election from the start of the following tax year or allow the election to continue. A claim form was enclosed with a letter so that the difference between the full rate contributions and the reduced rate contributions which should have been paid could be refunded. 24. The security procedures covering the refund of contributions from the National Insurance Fund, according to HMRC, were such that a refund could not be made with the written consent of the contributor. HMRC were not able to produce a copy of its letter to Mrs. McPhail but produced a draft example of the letter, which is taken from the Contributions Procedure Code, and which was used by local offices at that time, and outlines the information which would have been given. HMRC say that Mrs. McPhail would have been required to sign refund claim form CF28 and return it to the local office confirming the choice she wished to make with regard to her married woman’s election. When a reply was received the claim form and the computer report would be sent to Refunds Group in Newcastle upon Tyne which checks that claims are correct, have been signed and that the refund has been calculated correctly. If there was any discrepancy, for example, if the claim form had not been signed HMRC say that the papers would have been returned to the local office for correction. Consequently they say that the only way a refund could be authorised was if the claim form had been completed correctly, signed and returned by Mrs. McPhail. 25. Evidence was produced to show that a refund of £115.39 was authorised by the Refunds Group on 3 July 1978. HMRC say that the order payable would have been sent to Mrs. McPhail within 7 to 10 days after preparation of the voucher verifying the refund. The record would then be adjusted to show the reduced rate contributions. The document produced by HMRC shows that the ‘replacement contribution’ details were noted in manuscript as ‘category B rate contributions’. HMRC say that if the payment order had not been encashed, the Paymaster General's office would have notified the Department and another voucher would have been input to show the refund had not been made. There is no record of that having happened. 26. Because Mrs. McPhail was not working from 8 May 1978, no Contributions were paid by her during the 1978 - 79 tax year. 27. HMRC say that Mrs. McPhail revoked her election with effect from 5 April 1979. Mrs. McPhail denies this on the basis that that she had not elected to pay reduced contributions in any event. HMRC assert that it is reasonable to assume that Mrs. McPhail revoked her election, having been contacted by the Department in 1978 about the refund and that contributions paid by Mrs. McPhail in the subsequent years were consistent with what happened, the procedures in place and in accordance with her liability choice to pay at the full rate from the start of the following tax year. 28. HMRC pointed out that the records of the Department have always been subject to audit. Up to 1975 the clerical records were regularly checked by an independent team of officers from its Finance Division which was controlled by the Accountant General in its Departmental Headquarters. Contributions were checked to ensure that they were consistent with the persons recorded liability. Benefit claims were also subject to scrutiny. Refund cases in particular were audited to ensure no overpayments were being made. These scrutiny checks were carried out both at the clerical preparation stage in Refunds Group and again at the stage where the actual payment was dispatched by the Department’s Finance Division. Auditing of records was undertaken on a purely random basis, auditing officers arriving in the local offices and on the clerical sections, in the Records Department in Newcastle, unannounced. HMRC say that it was not possible to know in advance which records, or what type of checks would be carried out. 29. Form RF1 shows that Mrs. McPhail made three claims to sickness benefit between December 1977 and May 1978. HMRC say that the claims would not have succeeded because Mrs. McPhail would have been unable to satisfy the contribution conditions having had the reduced rate liability during the years which were relevant to each claim. She would have been advised of this by the local benefits office and this would have alerted her to the election she had made. 30. The records also show that Mrs. McPhail made a claim to maternity allowance (presumably prior to the birth of her second child) on or about 14 April 1980. However HMRC say that she would not have satisfied the contribution conditions and again would have been told the reason why she was not entitled. She would however have received a one-off maternity grant on the basis of her spouse's contribution record. This is noted on her technical copy of account and is dated 11 April 1980. Mrs McPahil’s contentions 31. Mrs. McPhail reluctantly accepts that she must have paid a reduced contribution between 6 April 1975 and 5 April 1979 but says she is absolutely certain that she did not make a non-paying election and did not complete and sign form CF9. She says that her parents were always insistent that their children must ensure adequate pension provision and not rely on their husband’s pension or savings. She says this made a strong impression on her and for that reason has always maintained her own private pension and savings accounts despite being married for over 36 years. She says that it is unthinkable that she would voluntarily and illogically have signed away her state pension rights in the manner described by HMRC. She says that she had never been aware of paying a reduced National Insurance Contribution or having a different type of National Insurance card. She says that returns by her employer to the Department suggest a knowledge or acceptance on her part of her National Insurance Contribution position at any time which she denies. She maintains that the microfiche copies of the Department’s records contain mistakes and inaccuracies; for example that she did not receive a refund of contributions for the contribution year 1977 - 78 and that between December 1977 and May 1978 she was in full-time employment and did not make the claim to sickness benefits as indicated on form RF1. She regards it as fundamentally unfair that she is now being penalised for mistakes in these documents for which she is not responsible and feels let down by the Government. Crucially she says the HMRC is unable to produce a copy of the alleged signed forms CF9. 32. HMRC accept that it is unable to produce either copy of Mrs. McPhail's signed forms CF9, containing the election and revocation. This was because due to the volume of documentation handled by the Department it was impractical to retain every item relating to each person's record. Under the Public Records Act 1958 and 1967 there is a requirement on all Government departments to stringently review the cost effectiveness of the storage of documents. In line with Departmental practice, forms CF9 were retained for six years and then destroyed. Destruction of the forms was Minister approved and in line with Government policy on the retention of documents. However it was the Department’s practice to undertake destruction of forms CF9 only after the persons Permanent Record, form RFI, had been noted with the choice made. 33. Mrs. McPhail does not accept that an amendment to her record could not have been inadvertently made on the instruction of a third party such as an employer who may have mistakenly believed that she had made an election. She also does not believe that the records kept in the early 1970s would effectively be subject to the same level of scrutiny as they are today. She contends that a mistake was made when her records were transferred from one local authority to another and that 2 September 1974 being the date of her alleged election was the first day of the academic year under the newly formed County of Cleveland. Mrs. McPhail recalls that during the creation of the new local authority, the school in which she worked was staffed entirely by married women teachers, that she was the only teacher in the school who had not elected to pay a reduced contribution and that a mistake was made. 34. HMRC contend that Mrs. McPhail's employer could not sign form CF9 on her behalf or transfer another married woman’s election onto her record without it being detected. The employee was required to personally contact the Department and after careful consideration of the options available and impact on her circumstances complete form CF9, signing the document immediately below a declaration to the effect that she was choosing to pay at the reduced rate of class I contributions and that the declaration was true to the best of her knowledge and belief. Employers took no part in the process and had no influence over the contribution choice the married woman would make. 35. Mrs. McPhail says that she left her employment with Cleveland County Council and moved to Wakefield MDC on 5 April 1977 - exactly 2 years before her election was revoked. She says this suggests her obligation to pay full National Insurance contributions on 5 April 1979 was because her records show that she had paid no married woman's contribution for two years when in fact she had been employed full-time paying tax and National Insurance with Wakefield MDC until May 1978 and that this is evidence of the Department’s record keeping not being entirely reliable. In April 1979 when the election was supposedly made by her, she says she was not employed and had been claiming child benefit for over a year. She contends that there would have been no reason for her to decide to pay for contributions at that date and that this is supported by the fact that there is no copy of signed form CF9 revoking the election. 36. HMRC respond that the two-year test, which automatically triggers a revocation of a reduced rate election if an individual does not pay any contributions for two consecutive years, did not come into effect until 6 April 1980 and therefore Mrs. McPhail must have chosen to cancel her election from 5 April 1979 as is shown on her record. HMRC also suggest that one reason why Mrs. McPhail may have decided to revoke her reduced rate election was because the Home Responsibilities Protection (HRP) scheme had been introduced on 6 April 1978 and it may have been that Mrs. McPhail wanted to take advantage of this. HRP was designed to protect the pension rights of men and women who may have been prevented from going out to work because of responsibilities at home. The effect of HRP was to reduce the number of qualifying years needed for the basic state pension at the standard rate, by the number of complete tax years covered by HRP. Part tax years did not count, nor did any years that were covered by a valid married woman's reduced rate election. To satisfy the conditions for the award of HRP, the applicant had to be in receipt of one or more prescribed ‘passport benefits,’ of which child benefit was one. In the case of child benefit, HRP was awarded until the youngest child reached age 16. HMRC says that Mrs. McPhail was awarded HRP following a claim to child benefit. Mrs McPahil’s National Insurance record shows that she was in receipt of HRP from the scheme's inception on 6 April 1978 to 18th of June 1996. She would however have only benefited from it for the period from 6 April 1979 until 5 April 1996. That was because only full tax years were used and the first tax year 6 of April 1978 to 5 April 1979 would not have counted because her married woman’s election would have been valid until 5 April 1979. Leaflet NI 1 February 1978, included information highlighting how the married woman's contribution choice affected HRP. 37. Mrs. McPhail says that she did not receive the refund of £115.39 which HMRC say was paid to her on 3 July 1978. She says that she did not live at the address which the Department had on file and to which it had written. She had not done so since April 1977 when she had moved to West Yorkshire. She did not receive the letter and did not write back to the Department electing to continue to pay reduced rate contributions. Mrs. McPhail says that at the time she had just had her first child and the sum of in £115.39 would have been a significant windfall for her and her husband at a time when money was very tight. For this reason alone she says she knows that it did not happen. 38. HMRC reply that the History Schedules they hold and which were produced to the Tribunal show that Mrs. McPhail's address changed during the 1977-78 tax year. The History Schedule shows that Mrs. McPhail made a claim to benefit on 29 December 1977, and whilst the local Wakefield office would have amended their records to reflect her new address, it appears they did not complete the appropriate forms to amend the National Insurance recording system until sometime later. Consequently although the Department’s records show Mrs. McPhail's old address, it is clear that at the time the computer output was generated, Central Office were aware of her new address as the output was sent to the local Social Security office appropriate to that address not Mrs. McPhail's old address. 39. Mrs. McPhail maintains that at the time when she was alleged to have made claims to sickness benefit between December 1977 and May 1978, she had no need to do so as she was on maternity leave and was in receipt of full pay from Wakefield MDC. 40. HMRC respond that whilst they are unable to comment on any pay arrangements which Mrs. McPhail had with their employer they can confirm that her permanent NI record shows that claims to benefit were made, amongst other times, on 8 December 1977, 3 January 1978 and 4 May 1978, and that Mrs. McPhail would have had to make a claim to benefit on those dates for the claims to have been recorded. Summary and reasons for the Tribunal’s Decision 41. The entries on a form RF1 are not conclusive evidence that an election was made. Mrs. McPhail could have made an election to pay full contributions, but the election may have incorrectly entered as the usual election - not to pay. Alternatively Mrs. McPhail may made no election at all and possibly the details of someone else with a similar NI number was posted on to Mrs. McPhail’s RF1. Another reason could be that Mrs. McPhail’s election could have been made on her behalf by her employers. Each of these possible explanations seem extremely unlikely. It is however odd that the date from which Mrs McPhail elected not to pay contributions is the same date as that on which her marriage and change of name were recorded, and also the first day of Mrs McPhail’s new academic year. 42. Under regulation 16 of the National Insurance (Married Women) Regulations 1973 it was the duty of every woman who had married to furnish evidence of her marriage to the Secretary of State not later than 13 weeks thereafter or if she claimed benefit before the expiration of that period, at the time of making such a claim. Mrs. McPhail’s marriage and change of address was, according to the information on form RF1, recorded on 2 September 1974, some seven months after her marriage. The leaflet NI 1 would have been sent out if and when the evidence of marriage was produced to the local Social Security office. It may have been that Mrs. McPhail did not produce evidence of marriage within the stipulated 13 week period and that there was then some delay before NI 1 was dispatched and form CF9 returned to the Department. 43. There is no indication of the reason for the delay, which may suggest that a clerical mistake occurred, or possibly that time limits referred to in the regulations were simply not adhered to by Mrs McPhail or the Department. However, given the meticulous manner in which records were kept, checked and scrutinised, it is unlikely either that an election on 02 September 1974 was recorded when it should not have been or that the wrong date was inserted. The Department clearly took considerable care to reduce the possibility of error. They installed procedures which would, so far as possible, ensure the accuracy of entries on the Permanent Record of National Insurance, form RF1. They undertook investigations when it became apparent that a married woman's employee’s National Insurance contributions were not in accordance with the election which had been recorded on form RF1. The fact that the new county of Cleveland had been formed and that Mrs McPhail’s employment “moved” from one local authority to another cannot be of any relevance as the new county had been formed five months previously on 1 April 1974. 44. The Employer's Guide to Flat Rate National Insurance Contributions issued by the Ministry of Social Security required that, within the last four weeks before a card is due to be exchanged, the employer must arrange for the employee to sign the card and insert his or her address. Once the period of currency of the card expires the employer must surrender it to a Social Security office within six days and a fresh card would then be issued to him. However in practice it appears that new cards were sent directly to an employer and that when a person changed employment it was possible for NI cards to be passed from one employer to the next without being seen by the employee, although that is not what should have happened. It also appears that there was no practice of employees actually signing the cards before they were exchanged. This would seem to support Mrs. McPhail’s assertion that she never saw her card and was unaware of the existence of a special National Insurance card. 45. Given Mrs. McPhail’s educational background, it is extremely unlikely that she would not have been aware of the range of benefits available under the National Insurance system, including maternity allowance. A claim for maternity allowance would have been made some time prior to the claim for child benefit which was paid to Mrs McPhail from 1978. There is however no mention on Mrs. McPhail’s record – the Technical Copy of Account - that a claim for maternity allowance was made. This suggests that Mrs McPhail was aware that she was not eligible for the 18-week maternity allowance and therefore did not make the claim. Furthermore, on the birth of her second child, the record shows that she was awarded a maternity grant but that no maternity allowance was paid. 46. There must have been a number of opportunities for Mrs. McPhail to challenge or question the fact that she was paying reduced contributions. There would have been an increase, albeit marginal, in her pay packet following the election in 1974, followed by a subsequent decrease during the period when erroneously full contributions were made during her period of employment with Wakefield MDC and then another increase in her pay packet following the revocation of the election on 05 April 1979. Mrs McPhail’s P60s, the disallowance of sickness benefit, the fact that a maternity grant was paid but no maternity allowance and the changes in her monthly pay would all suggest that Mrs McPhail was aware of her contribution position. If Mrs McPhail was the only person at her school who had wanted to pay the full flat rate contribution, then clearly this was a matter of some importance to her and therefore all the more reason why she would have been aware of her entitlement to maternity allowance and notice any changes in her pay. 47. Following her marriage in February 1974, Mrs McPhail was obliged to complete form CF9 to indicate whether or not she wished to pay full flat rate contributions. She says that she did not make an election either to pay or not pay the full flat rate. This in itself seems unlikely as she has already said that she wanted to make the full flat rate contribution. It is probable that a mistake could have been made on her permanent RF1 record if indeed she made no election at all. For the same reasons it is difficult to understand how a further error might have occurred when Mrs. McPhail is recorded as having revoked her election in April 1979, when again she claims that she made no such election. 48. It is not necessary for the Tribunal to determine whether or not Mrs. McPhail actually made an election not to pay flat rate National Insurance contributions. The Tribunal must decide on the available evidence whether it is more likely than not that Mrs. McPhail made such an election. The Tribunal does not have to be satisfied beyond all reasonable doubt that Mrs. McPhail did or did not make the election. The issue must be decided on a balance of probabilities. 49. Mrs. McPhail’s evidence to the Tribunal was persuasive and she was clearly truthfully relating the history of events so far as she could recollect them. However, the events in dispute took place between 32 and 37 years ago and it is possible that her recollection of events is incorrect. Even allowing for the possibility that errors may have occurred within the National Insurance record-keeping system, it is difficult for Mrs. McPhail to displace the presumption that what was recorded in writing must have taken place. 50. Mrs. McPhail’s evidence in essence is comprised of unsubstantiated statements which directly contradict a substantial amount of meticulously recorded documentary evidence supporting HMRC’s contention that Mrs. McPhail made a married woman's election on 2 September 1974. The evidence produced by the Department is clear and consistent for the relevant period. It is difficult for any Appellant in such circumstances to establish a negative and the Tribunal recognises and takes this into account. However, on balance, the conclusion must be that Mrs McPhail has not discharged the burden of satisfying the Tribunal that the decision against which she appeals is wrong. The Tribunal must therefore conclude that the Department’s record of what happened is correct. 51. The Tribunal makes the following findings of fact: 1 Mrs. McPhail’s Permanent National Insurance record RF1correctly recorded her election not to pay the full flat rate National Insurance contributions from 2 September 1974. 2 No adverse inference is drawn in respect of HMRC’s inability to produce a copy of election form CF9 signed by Mrs. McPhail Form CF9 was destroyed in accordance with HMRC's Record Management policy and was not destroyed with any improper motive. The absence of a copy of Mrs. McPhail’s signed form CF9 is not evidence that there was no election not to pay reduced rate National Insurance contributions by Mrs. McPhail. 3 Mrs McPhail paid Class I National Insurance Contributions in respect of her employment with Wakefield MDC from 05 April 1977 to 08 May 1978. The first payments were made in error because her employers did not have a copy of Mrs. McPhail’s certificate of election and the excess contributions were refunded to her. 4 From 02 September 1974 to 05 April 1975 Mrs. McPhail made no National Insurance contributions while she was in full-time employment and, from 06 April 1975 to 05 April 1980, she paid reduced rate contributions. 5 From 02 September 1974 to 05 April 1979 the Tribunal is satisfied that Mrs. McPhail would have been aware at the time that she was paying the reduced rate National Insurance contributions. This would have been evident from her wage slips, P60s and the disallowance of sickness benefit claims. It is also evidenced by the fact that Mrs McPhail did not claim maternity after the birth of her first child in 1978 and either did not claim or was disallowed maternity allowance on the birth of her second child when paid a maternity grant on 11 April 1980. 52. For the above reasons the Tribunal determines that : 1 Mrs. McPhail made a married woman's election with effect from 2 September 1974 and was not liable to pay Class I National Insurance contributions; and 2 From 06 April 1975 to 05 April 1979 she was liable to pay Class I National Insurance Contributions at the married woman's reduced rate. The Tribunal therefore dismisses the appeal 53. 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. MICHAEL S CONNELL TRIBUNAL