Mr Dilip Kumar Dass v Revenue & Customs [2011] UKFTT 632 (TC) (27 September 2011)
DECISION
The Appeal
1. The
Appellant appealed against HMRC’s decision dated 17 September 2009 that he
had paid National Insurance contributions as shown in the attached schedules.
The Grounds of Appeal
2. The
Appellant in its Notice of Appeal dated 1 February 2010 sets out the following
grounds of Appeal:
(1)
HMRC failed to assess correctly class 1 NI contributions for the
Appellant’s multiple part-time work in 1993, 1994, 1995, and 1996 and for which
National Insurance (NI) contributions were paid by the Appellant.
(2)
HMRC failed to determine accurately appropriate earning factors in
relation to the Appellant’s earnings from Mary Ward Centre in 1997-1998, Tower Hamlets College (April – May 1993), Tower Hamlets Racial Equality Council (December
1995 – January 2006).
(3)
HMRC failed to assess any entitlement to NI contributions and
appropriate adjustments in relation to the Appellant’s child care between 1991-1994;
maintenance payments for child between 1995 and 1998 and resumption of child
care between 1998and 2000.
(4)
HMRC failed to assess entitlement to NI contributions in relation to
employers’ non-payment of pay increases in 1993, 1994, 1995 etc.
(5)
No investigation report has been submitted by HMRC in spite of the
Appellant’s repeated requests.
(6)
HMRC failed to comply with directions of the Tribunal.
(7)
The Appellant’s grounds are well founded in law and facts.
(8)
HMRC was in breach of Human Rights Act 1997.
3. On
25 July 2011 the Appellant submitted additional grounds of Appeal which are
summarised below:
(1)
In spite of the judgment made by Chairman, Mr G P Sigsworth, (Employment
Tribunal), HMRC has not supplied a revised assessment for the period of
contracted out service from 20 September 1993 to 3 July 1995. The period of
contracted out employment with the College of North East London from 4 January
1996 until 14 March 2003 has not yet been determined by the Employment
Tribunal.
(2)
NI contributions have been unlawfully deducted at the not contracted out
rate. No estimated figures of NI contribution refunds have been provided by
HMRC.
(3)
HMRC failed to apply the aggregation rules while assessing multiple
employments with reference to the computational procedure 1987/88 to 2008/09.
(4)
HMRC excluded the record of earnings from the Commonwealth Law College without any explanation.
Chronology
4. On
13 July 2007 the Appellant appealed to the predecessor of the First Tier
Tribunal (Social Entitlement Chamber) against the amount of State Retirement
Pension awarded to him by the Department for Work and Pensions (The Pension
Service). The amount of the award was 89 per cent of the standard rate.
5. The
Pension Service in a letter 15 March 2010 explained the calculation of the 89
per cent entitlement rate:
“Your working life for pension purposes runs from 6
April 1958 to 5 April 2007, a period of 49 years of which 44 would need to be qualifying
years to achieve a 100 per cent basic pension.
Although you did not arrive in this country from Ethiopia until 13 July 1968, and your record shows you entered the National Insurance
scheme on 15 July 1968 for pension purposes your pension must be calculated by
using the above criteria.
You paid, or were credited with 349 NICs between 6
April 1958 and 5 April 1975. The sum of 349 is divided by 50 and rounded up to
give a total of 7 qualifying years.
A further 32 qualifying years were achieved between
6 April 1975 and 5 April 2007 which when added to the 7 qualifying years
achieved prior to 6 April 1975, give a total of 39 qualifying years.
Your basic pension entitlement is 89 per cent”.
6. One
of the Appellant’s grounds of appeal to the Social Entitlement Tribunal was
that he had not received a breakdown of his NI contributions. On 17 July 2008
HMRC sent the Appellant a letter setting out his record of contributions from
when he entered the NI scheme.
7. Following
correspondence with the Appellant, on 25 February 2009 HMRC sent out a revised
statement of account incorporating NI contributions from his employment with
Zed X Agency during the 2005/06 tax year.
8. On
3 June 2009 Tribunal Judge Wright of First Tier Tribunal (Social Entitlement
Chamber) directed that
“Despite my joining the HMRC as a party to this
Appeal on 9 February 2009, and then for a year prior to that having failed to
issue the Appellant with a decision on his contributions record, quite
lamentably HMRC have failed to comply with my direction of 9 February 2009 even
though nearly 3 months has passed since the deadline for complying with that
direction expired.
In these circumstances I am left with no option but
to list the appeal for a hearing at which HMRC must attend to explain
themselves and their complete inaction”.
9. On
19 June 2009 HMRC sent a revised statement of account incorporating ₤6.05
NI contributions from the Appellant’s employment with Commonwealth Law College in 2004/05 tax year.
10. On 14 September
2009 the Appellant supplied HMRC with details of earnings from the Mary Ward
Centre. HMRC pointed out that no NI contributions were payable in respect of
this employment.
11. On 17 September
2009 HMRC issued its Notice of Decision which set out the Appellant’s NI contribution
details from 1967/68 to 2006/07.
12. On 5 October
2009 the Appellant provided details of his NI contributions from his part-time
employment with the College of North East London and London Guildhall University. On 14 October 2009 HMRC responded stating that the contributions had
already been included in his record, which, therefore, did not require
amendment. HMRC offered the Appellant a review of the decision which was
accepted. HMRC failed to complete the review within 45 days. The Appellant did
not consent to an extension of time in which to complete a review. The
Appellant instead appealed direct to the Tax Tribunal.
13. On 2 September
2010 the Tribunal heard evidence from the parties, and adjourned the hearing
part heard subject to the following directions.
(1)
The Appeal be adjourned part heard to a date to be fixed, if necessary,
before the same Tribunal.
(2)
By no later than 4pm on 18 October 2010 the Appellant provide
HMRC with documentary evidence of employed earnings for the disputed period.
(3)
By no later than 4pm on 10 December 2010 HMRC respond to the
Appellant in respect of the additional information supplied and, if appropriate,
to provide a varied decision.
(4)
By no later than 4pm on 28 January 2011 the Appellant advise the
Tribunal and HMRC in writing whether the Appeal is withdrawn (settled) or
whether the Appeal requires re-listing.
(5)
If re-listed the Tribunal will issue directions to progress the
Appeal.
14. On 15 October
2010 the Appellant wrote to HMRC enclosing a bundle of documents from former
employers, none of which showed payment of NI contributions. These included:
(1)
Pay remittances and contracts from BBC.
(2)
A remittance from London Examinations.
(3)
Pay statements and a P60 from International Baccalaureate Organisation.
(4)
Remittances from University of Cambridge.
15. The Appellant
also asked about aggregation of earnings at the Appeal hearing on 2 September
2010 to which HMRC provided an explanation on 10 November 2010.
16. On 11 November
2010 the Appellant supplied further receipts of payments for 2006/07 from
various employers. On 7 December 2010 HMRC responded pointing out:
(1)
The Appellant’s engagements as an examiner with the International
Baccalaureate Organisation (IBO), University of Cambridge and London
Examination were categorised as self-employment for NI purposes.
(2)
One of the pay statements for the 2007/08 tax year related to a year
when he was over age 65 and there was no NI liability.
(3)
The Appellant’s employment with the BBC was self employment but even if
the Appellant has been categorised as an employed earner the amounts paid to
him fell below the lower earnings level and did not attract NI liability.
17. On 22 January
2011 the Appellant replied stating that he disputed his categorisation as a
self employed earner with BBC, and his right to pay contributions at the
contracted-out rate with various employers. On 18 March 2011 HMRC supplied a
full response to the points raised by the Appellant.
18. On 25 January
2011 the Appellant requested the Tribunal to re-list the Appeal hearing. On 5
March 2011 the Tribunal Registrar issued directions to progress the Appeal. On
25 March 2011 the Tribunal received the bundle of documents from HMRC. On 25 July
2011 the Appellant submitted an additional bundle. On 3 August HMRC provided an
updated statement of case.
Hearing on 9 August 2011
19. The Tribunal
that heard the Appeal on 2 September 2010 reconvened. The Tribunal advised the
parties at the outset that as it had previously heard evidence it intended to
regulate the proceedings of the Appeal. The Tribunal commenced with the
schedule of contributions as set out in paragraph 2 of HMRC’s statement of case
and requested the Appellant to indicate whether he agreed or disagreed with the
entry for each contribution year. Where the Appellant disagreed with a specific
entry he was asked for his reasons to which HMRC was given the opportunity to
comment. After going through the schedule the Tribunal explored with the
parties the areas of disagreement. The Tribunal then gave the parties the
opportunity to ask questions of each other, and make final submissions. The
Tribunal gave leave to the Appellant to supply a copy of his written closing
submissions to HMRC and Tribunal within seven days. The Tribunal reserved its
judgment.
20. The Tribunal considered
the Appellant’s written closing submissions which were sent by the due date.
The submissions covered more ground than the oral ones made at the end of the
hearing and went beyond the legitimate function of closing submissions by
introducing new evidence or contradicting the Appellant’s evidence given at the
hearing. In paragraphs 1, 13 and 14 of the submissions the Appellant appeared
to be undermining the agreed basis upon which the Appeal was heard as
identified in the comments section of the Schedule of Contributions as
set out in the next paragraph (22) of this decision. Also at paragraph 17 of
the written submissions the Appellant introduced new matters which did not form
part of the evidence at the hearing. The Appellant has been given every
opportunity by the Tribunal to state his case at two separate hearings. On 2
September 2010 the Tribunal adjourned the hearing to enable the Appellant to
supply HMRC with any additional evidence of NI contributions. The Tribunal at
the hearing on 9 August 2011 asked the Appellant to indicate his agreement or
disagreement with each year of his contribution record, and identify the
dispute where he disagreed.
21. The Tribunal
intends to deal with the Appeal on the basis of the disputes identified at the
hearing which are recorded in the next paragraph, and the evidence heard in
relation to those disputes. The Tribunal, therefore, disregards those parts of
the written closing submissions which contradicted the Appellant’s evidence at
the hearing or introduced new matters. Although the Appellant represented
himself he was not unfamiliar with Tribunal procedure, and understood the
consequences of the Tribunal’s direction to identify the extent of the dispute
at the hearing on 9 August 2011. Given the circumstances of the conduct of this
Appeal the Tribunal considers its action was in accordance with the overriding
objective of dealing with cases fairly and justly.
The Schedule of Contributions
22. The Tribunal
sets out below the schedule of contributions with comments which indicate the
Appellant’s response and his brief reasons for disagreeing with a specific
entry.
|
Contribution
Year
|
Class 1
|
Class 2
|
Class 3
|
Comments
|
|
1967/68
|
8
|
Nil
|
Nil
|
Agreed
|
|
1968/69
|
52
|
Nil
|
Nil
|
Agreed
|
|
1969/70
|
53
|
Nil
|
Nil
|
Agreed
|
|
1970/71
|
39
|
Nil
|
13
|
Agreed
|
|
1971/72
|
48
|
Nil
|
Nil
|
Agreed
|
|
1972/73
|
52
|
Nil
|
Nil
|
Agreed
|
|
1973/74
|
52
|
Nil
|
Nil
|
Agreed
|
|
1974/75
|
18
|
Nil
|
Nil
|
Agreed
|
|
1975/76
|
₤197.28
|
Nil
|
Nil
|
Agreed
|
|
1976/77
|
₤281.09
|
Nil
|
Nil
|
Agreed
|
|
1977/78
|
₤306.60
|
Nil
|
Nil
|
Agreed
|
|
1978/79
|
₤275.45
|
Nil
|
Nil
|
Agreed
|
|
1979/80
|
₤315.22
|
Nil
|
Nil
|
Disputed. Appellant contended that his earnings from
BBC should be aggregated with his other employment earnings.
|
|
1980/81
|
₤423.06
|
Nil
|
Nil
|
Disputed. Appellant contended that his earnings from
BBC should be aggregated with his other employment earnings.
|
|
1981/82
|
₤604.28
|
Nil
|
Nil
|
Disputed. Appellant contended that his earnings from
BBC should be aggregated with his other employment earnings.
|
|
1982/83
|
₤698.63
|
Nil
|
Nil
|
Disputed. Appellant contended that his earnings from
BBC should be aggregated with his other employment earnings.
|
|
1983/84
|
₤803.27
|
Nil
|
Nil
|
Disputed. Appellant contended that his earnings from
BBC should be aggregated with his other employment earnings.
|
|
1984/85
|
₤813.66
|
Nil
|
Nil
|
Agreed
|
|
1985/86
|
₤887.38
|
Nil
|
Nil
|
Agreed
|
|
1986/87
|
₤968.94
|
Nil
|
Nil
|
Disputed. Appellant contended that his earnings from
RSA should be aggregated with his other employment earnings.
|
|
1987/88
|
₤1,022.72
|
Nil
|
Nil
|
Disputed. Appellant contended that his earnings from
RSA should be aggregated with his other employment earnings.
|
|
1988/89
|
₤1,145.64
|
Nil
|
Nil
|
Agreed
|
|
1989/90
|
₤1,147.92
|
Nil
|
Nil
|
Agreed. The Appellant accepted that the NI contribution
(₤30.75) in respect of his employment with LRB had been included.
|
|
1990/91
|
₤1,176.34
|
Nil
|
Nil
|
Agreed
|
|
1991/92
|
₤1,274.90
|
Nil
|
Nil
|
Agreed
|
|
1992/93
|
₤1,333.80
|
Nil
|
Nil
|
Agreed
|
|
1993/94
|
₤392.64
|
32
|
Nil
|
Disputed. Appellant contended that his earnings from LB
Tower Hamlets (Translation Work) should be aggregated with his other employment
earnings. Also in view of the Appellant’s retrospective membership of the
occupational pension scheme for the College of North East London, his record
should include a value for the NI contributions as contracted out.
|
|
1994/95
|
₤355.52
|
52
|
Nil
|
Disputed. His record should include a value for the NI
contributions as contracted out.
|
|
1995/96
|
₤178.56
|
52
|
Nil
|
Disputed. His record should include a value for the NI
contributions as contracted out.
|
|
1996/97
|
₤125.59
|
52
|
Nil
|
Disputed. The Appellant has pending proceedings before
the Employment Tribunal regarding the contracted out status of his NI
contributions from his employment with College of North East London. The
Appellant also contended that his self employed earnings with the
International Baccalaureate Office (IBO) and his earnings with London
Examinations should be aggregated with his other earnings.
|
|
1997/98
|
₤380.69
|
53
|
Nil
|
Disputed. The correct characterisation of NI
contributions as contracted out. The Appellant also contended that his self
employed earnings with IBO and his earnings with the Mary Ward Centre should
be aggregated with his other earnings.
|
|
1998/99
|
₤305.51
|
52
|
Nil
|
Disputed. The correct characterisation of NI
contributions as contracted out. The Appellant also contended that his self
employed earnings with IBO should be aggregated with his other earnings.
|
|
1999/2000
|
₤277.28
|
52
|
Nil
|
Disputed. The correct characterisation of NI
contributions as contracted out. The Appellant also contended that his self
employed earnings with IBO should be aggregated with his other earnings.
|
|
2000/01
|
₤416.10
|
52
|
Nil
|
Disputed. The correct characterisation of NI contributions
as contracted out. The Appellant also contended that his self employed
earnings with IBO should be aggregated with his other earnings.
|
|
2001/02
|
₤905.62
|
52
|
Nil
|
Disputed. The correct characterisation of NI
contributions as contracted out. The Appellant also contended that his self
employed earnings with IBO should be aggregated with his other earnings.
|
|
2002/03
|
₤599.69
|
52
|
Nil
|
Disputed. The correct characterisation of NI
contributions as contracted out. The Appellant also contended that his self
employed earnings with IBO should be aggregated with his other earnings.
|
|
2003/04
|
₤9.15
|
52
|
Nil
|
Disputed. The correct characterisation of NI
contributions as contracted out. The Appellant also contended that his self
employed earnings with IBO should be aggregated with his other earnings.
|
|
2004/05
|
₤255.57
|
52
|
Nil
|
Disputed. The correct characterisation of NI
contributions as contracted out. The Appellant also contended that his self
employed earnings with IBO should be aggregated with his other earnings.
Appellant accepted that his earnings record had
included the amount of ₤450 in respect of his settlement by Commonwealth Law College for previous earnings
|
|
2005/06
|
₤33.20
|
52
|
Nil
|
Disputed. The correct characterisation of NI
contributions in respect of his employment with Zedx Limited as contracted
out. The Appellant also contended that his self employed earnings with IBO
should be aggregated with his other earnings.
|
|
2006/07
|
Nil
|
52
|
Nil
|
Disputed. The Appellant also contended that his self
employed earnings with IBO should be aggregated with his other earnings.
|
Details of the Disputes
Contracting out
23. The Appellant
produced an order of the Employment Tribunal dated 29 March 2011 which declared
that the Appellant was entitled to retrospective membership of the College of N orth East London occupational pension scheme from 20 September 1993 to 3 July
1995. The Employment Tribunal also ordered by no later than two months from the
date of promulgation of the judgment the College of North East London must
write to the pension fund trustees requiring the trustees to state the terms on
which they would admit the Appellant to membership of the scheme between 20
September 1993 to 3 July 1995.
24. The Appellant
has also taken action in the Employment Tribunal in respect of his claim against
College of North East London for retrospective access to the teacher’s
pension scheme from 1996 to 2003.
25. HMRC accepted
that the most likely effect of the Appellant’s retrospective membership of the
teacher’s pension scheme was that the Appellant’s national insurance
contributions from his employment with College of North East London would be
calculated on a contracted out basis. This would result in his record
containing a value for the contracted out NI contributions for the relevant
years and render a refund of excess NI contributions to the Appellant. HMRC
stated that it would effect the necessary alterations to the Appellant’s NI
record once it received the appropriate notification from the Trustees of the
Pension Scheme. HMRC, however, pointed out that this was a matter between the
Appellant and his employers, and not one which concerned this Tribunal and the
Appeal before it.
26. The Appellant
maintained that his retrospective membership of the pension scheme would also
affect the status of his contributions (₤33.20) from his employment with
Zedx Ltd in 2005/06. HMRC repeated that this was a matter between the Appellant
and his employer, and if the Pension Scheme Trustees informed it of his
membership arising from his Zedx Ltd employment it would implement the required
changes to the Appellant’s record.
BBC
27. The Appellant
supplied HMRC and the Tribunal with copies of contracts and remittance advices
from BBC in respect of the Appellant’s engagement as an artist supplying a
reading contribution in the tax years 1979/80 to 1983/84. The payments were
made gross with no deduction of income tax and NI contributions.
28. The payments
made were as follows:
|
Contribution
Year
|
Date of
Payment
|
Amount
(₤)
|
Weekly Lower
Earnings Rate (₤)
|
|
1979/80
|
12 May 1979
|
7.60
|
19.50
|
|
1980/81
|
8 August 1980
|
8.15
|
23.00
|
|
|
21 November 1980
|
9.30
|
|
|
|
11 December 1980
|
8.15
|
|
|
|
12 December 1980
|
9.30
|
|
|
|
3 January 1981
|
9.30
|
|
|
|
11 March 1981
|
9.30
|
|
|
1981/82
|
11 May 1981
|
9.30
|
27.00
|
|
|
11 August 1981
|
9.30
|
|
|
|
30 September 1981
|
9.30
|
|
|
1982/83
|
3 June 1982
|
10.05
|
29.50
|
|
|
7 October 1982
|
20.10
|
|
|
|
21 October 1982
|
10.85
|
|
|
|
11 January 1983
|
19.65
|
|
|
|
24 February 1983
|
10.85
|
|
|
|
15 March 1983
|
10.85
|
|
|
1983/84
|
25 July 1983
|
10.85
|
32.50
|
|
|
8 August 1983
|
10.85
|
|
|
|
1 September 1983
|
10.85
|
|
29. The Appellant
submitted that his contract with the BBC was one of employment, and that his
earnings from this source of employment should be aggregated for NI purposes with
his other sources of employment earnings from GLC & London Teachers and
ILEA during the relevant tax years.
30. HMRC contended
that the income from the BBC was self employed earnings but if it was
employment earnings, the payments made were below the lower earnings rate and
not eligible for NI contributions. HMRC pointed out that the Appellant had
adduced no evidence to support aggregation.
Royal Society of Arts (RSA)
31. There were three
payments from RSA which were ₤20 (2 July 1986), ₤60 (13 May 1987)
and ₤107 (15 July 1987). The payments were described as fees, the rate of
which was ₤20 in 1986/87 and ₤15 or ₤15.50 in 1987/88. The pay
advices produced showed deductions of tax but no NI contributions.
32. The Appellant
submitted that the fees were employment earnings and should be aggregated with
his earnings with Tower Hamlets College. RSA and Tower Hamlets College shared the same educational aims.
33. HMRC considered
the RSA payments as self employed earnings. HMRC pointed out that examiners
were a specific category of self employed earner defined by Statutory
Instrument. In any event, even the earnings were those of employment they were
below the lower earnings rate for NI contributions and the Appellant had
adduced no evidence to support aggregation.
London Borough of Tower Hamlets
34. The Appellant supplied
a P60 for 2003/04 in respect of his earnings as a translator for the London
Borough of Tower Hamlets. The P60 showed a gross pay of ₤2,710.93 with a
tax refund of ₤675.50 and nil NI contributions. The Appellant asserted
that his earnings from the London Borough of Tower Hamlets should have been
aggregated with his earnings from Tower Hamlets College.
35. HMRC argued that
there was no evidence to support the Appellant’s assertion for aggregating the
two sets of earnings. The respective P60s for the London Borough of Tower
Hamlets and Tower Hamlets College indicated that they were separate employers.
The P60s did not record the same staff number. The P60 for the Borough of Tower
Hamlets showed that the Appellant’s earnings were below the lower earnings rate
resulting in no deductions for NI contributions
International Baccalaureate Office (IBO)
36. The Appellant
received regular income in connection with his engagement with IBO from 1996/97
to his retirement in 2007. The Appellant accepted that the income constituted
self employment earnings. The Appellant, however, maintained that the self
employment earnings should be aggregated with his employment earnings during
the relevant years to calculate his NI contributions. HMRC submitted that there
was no legal power to aggregate self employment earnings with employment earnings
to calculate liability for Class 1 NI contributions.
London Examinations
37. The Appellant
supplied a creditor remittance from London Examinations dated 30 August 1996
which revealed fees of ₤95.80, expenses of ₤10.58 with a tax
deduction of ₤22.99. The Appellant contended that the fees were
employment earnings which should be aggregated with his other sources of
employment earnings in that year.
38. HMRC submitted
that the remittance from London Examinations constituted self employment
earnings. If they were employment earnings, the Appellant adduced no evidence
of the earnings period and of aggregation of these earnings with other sources
of employment income.
Mary Ward Centre
39. The Appellant
supplied two payment slips in respect of his employment with Mary Ward Centre
which showed gross pay of ₤187.05 for 16 June 1997, and ₤104.40 for
14 July 1997. Each slip declared a deduction for tax but no contribution for NI.
The Appellant contended that the earnings from Mary Ward Centre should be
aggregated with his other employment earnings for that year.
40. HMRC submitted
that the earnings were below the monthly lower earnings limit for NI
contributions, and that the Appellant had adduced no evidence to substantiate
aggregation of these earnings with other sources of employed income during
1997/98.
Consideration
41. Until 1 April
1999 the Department of Social Security was responsible for the National
Insurance system. From 1 April 1999 the Inland Revenue (now HMRC) assumed the
functions associated with the income side of the National Insurance fund,
whilst the Department of Social Security (now Department of Work and Pensions)
continued to handle contributory and non-contributory benefits. Essentially
HMRC’s responsibilities in respect of National Insurance fall under the
following three categories
(1)
Collecting National Insurance contributions with particular emphasis on
ensuring full compliance by employers with payment and notification
requirements.
(2)
Maintaining about 76 million individual records of which 43 million are
active under unique National Insurance Numbers.
(3)
Providing NI-related information to government departments and pension
providers to enable benefits to be paid promptly and accurately.
42. This division of
responsibility is critical in understanding the Appeal jurisdiction of the
Tribunal. Following the transfer of NI functions to HMRC, the Social Security
Contributions (Transfer of Functions etc) Act 1999 introduced new decision and
appeals procedures for NI matters. Section 8 of the 1999 Act gives authority for
HMRC Officers to give decisions on certain NI matters. Section 11 of the 1989
Act provides a right of Appeal to the First Tier (Tax) Tribunal against a
section 8 decision, which includes a determination of the correctness of an
individual’s NI record. Appeals against decisions in respect of home
responsibilities protection (now carer's credit), contracting-out and pension
entitlement are heard by the Social
Entitlement Chamber of the First Tier Tribunal.
43. The complexities
of the Appellate jurisdiction in relation to National Insurance matters were
illustrated in this Appeal. The Appellant’s dispute regarding his entitlement
to State Pension has involved three separate Tribunals, the Social Entitlement
Chamber in respect of the calculation of his State Pension, the Employment
Tribunal regarding his retrospective admission into occupational pension
schemes, and the Tax Chamber in respect of the correctness of his record of NI
contributions.
44. This Tribunal
was dealing with the Appellant’s appeal against HMRC’s decision dated 17
September 2009 that he had paid National Insurance contributions as shown in
the attached schedules. The Tribunal’s powers on appeal are governed by
regulation 10 of the Social Security Contributions (Decision and Appeals)
Regulations 1999. Regulation 10 states that
“If on appeal it appears to the Tribunal …. that the
decision should be varied in a particular manner, the decision shall be varied
in that manner, but otherwise shall stand good”.
45. The Tribunal is
of the view that its jurisdiction in this Appeal was limited to determining
whether HMRC’s decision of 17 September 2009 was correct. The onus was on the
Appellant on the balance of the probabilities to show that the record of his
NIC payments was incorrect.
46. The schedule of
contributions included in HMRC’s statement of case and set out in paragraph 20
above replicated the information in the schedules attached to HMRC’s disputed
decision of 17 September 2009. Since that date the Appellant has supplied no
evidence substantiating payment of additional NI contributions. The Appellant
has produced a series of earnings remittances from a range of organisations,
none of which have supplied information undermining the accuracy of the record
of NI contributions on HMRC’s schedule of 17 September 2009. The Appellant’s
dispute with the record as highlighted in the comments section of the schedule
in paragraph 20 above did not challenge the accuracy of the actual payments made
and recorded.
47. The nature of
the Appellant’s dispute concerned two principal issues, namely, whether HMRC
had recorded the value of contracted out contributions and whether the earnings
from some organisations which were below the lower earnings rate should be
aggregated with the Appellant’s other sources of earnings in order to calculate
the Appellant’s NI contributions.
48. If an employee
does not belong to an occupational pension scheme, he and his employer will pay
a Class 1 NI contribution towards the State Second Pension which replaced the
State Earnings Related Pension in 2002. If an employee is a member of an
occupational pension scheme, his employer may contract him out of the State
Second Pension which means that the employee would be entitled to a rebate on
his NI contributions between the lower and upper earnings limit, and
effectively pay NI contributions at a lower rate.
49. The Appellant
argued that HMRC should have recorded a contracted out value for his NI
contributions from his employments with the Commonwealth Law College and Zedx Limited. The amounts of NI contributions involved were ₤6.05 and
₤33.20 respectively. The Appellant adduced no evidence that these
employers were members of an occupational pension scheme. HMRC’s record of the
status of the NI contributions for the Appellant’s employment with Zedx was
derived from the Appellant’s payslip. The Appellant through no fault of his own
was unable to supply HMRC with a P45, P60 or statement of earnings in respect
of his employment with the Commonwealth Law College. In its letters dated 3
July 2009 and 11 August 2009 HMRC provided the Appellant with a detailed
explanation of how it arrived at the figure for the NI contributions for the
Appellant’s employment with the College. The Tribunal considers HMRC’s
explanation well founded and not undermined by the Appellant’s evidence.
50. The schedule of
the Appellant’s record of NI contributions in respect of his employment with
the College of North East London did not record a value for contracted out
contributions which was in accordance with the information supplied in the
Appellant’s P60 for the relevant tax years. The Appellant has taken proceedings
against the College of North East London and the Secretary of State for
Education before the Employment Tribunal to resolve the question of his
membership of the occupational pension scheme for the College of North East London. The Employment Tribunal has declared that the Appellant was entitled to
retrospective membership of the pension scheme from 20 September 1993 to 3 July
1995 but has not yet made its decision in respect of the period from 4 January
1996 until 14 March 2003. HMRC has indicated that once it receives the
necessary authority from the Trustees of the Pension Scheme it would amend the
Appellant’s NI contribution record. HMRC argued that this dispute was outwith
the Tribunal’s jurisdiction and did not affect the accuracy of the Appellant’s
NI contribution record as it currently stood. The Tribunal agrees with HMRC’s
submission.
51. The Tribunal
notes that a significant part of the Appellant’s written closing submissions
involved extending the scope of the contracting out dispute in respect
of the applicable years and the number of employers involved. The Tribunal
considers its decision on the contracting out dispute applied equally to
the extended dispute set out in the closing submissions.
52. The other
principal dispute concerned whether the Appellant’s earnings in particular
years should be aggregated for the purposes of calculating his NI contributions.
53. Section 2(5) of
the Social Security Contributions and Benefits Act 1992 provides that
“for the purposes of the Act that a person shall be
treated as a self employed earner as respects any week during any part of which
he is such an earner (without prejudice to his being also treated as an
employed earner as respects that week by reference to any other employment of
his)”.
54. Section 6 (5) of
the 1992 Act provides that
“Except as provided by this Act, the primary and
secondary Class 1 contributions in respect of earnings paid to or for the
benefit of an earner in respect of any one employment of his shall be payable
without regard to any such payment of earnings in respect of any other
employment of his”.
55. The effect of
section 2(5) of the 1992 Act is that a person’s self employment earnings should
be kept separate from his employment earnings for the purposes of NI
contributions. Thus it is not possible in law to aggregate self employment
earnings with employment earnings to calculate a single NI contribution. The
1992 Act allocates separate categories of NI contributions for self employment
earnings and employment earnings, which was reflected in the Appellant’s NI
contribution record with the division between Class 1 (employed) and Class 2
(self employed) contributions.
56. Section 6(5)
sets out the principal rule governing the NI contribution regime for earnings
from multiple employments which is that a person must pay a NI contribution for
each employment provided the earnings for each employment exceed the lower
earnings rate. Paragraph 1(1) of schedule 1 of the 1992 Act, however, permits
in certain circumstances the aggregation of earnings from multiple employments
for the purposes of determining whether Class 1 contributions are payable.
Regulations 14 and 15 of the Social Security (Contributions) Regulations 2001 defines
the circumstances under which aggregation is possible. The two main situations
are employments under the same employer, and different employments involving different
secondary contributors who, in respect of those employments, carry on business
in association with each other. Aggregation under these two situations is
subject to the impracticability exception which is that aggregation is not to take place if such aggregation is
not reasonably practicable.
57. The Appellant
contended that aggregation applied in three sets of circumstances. The first
concerned his earnings from IBO during 1996/97 to 2006/07 which the Appellant
said should be aggregated with his employment earnings during the said years. The
Appellant accepted that he was engaged with IBO as self employed. The
Appellant’s contention has no foundation in law. As indicated earlier the
aggregation of self employment earnings and employment earnings for the
purposes of NI contributions is contrary to section 2(5) of the 1992 Act.
58. The second set
involved his earnings from BBC (1979/80 – 1983/84), Royal Society of Arts (1986/87
& 1987/88), and London Examinations (1996/97). The Appellant argued that he
was an employee of the three separate bodies. HMRC was of the view that he was
self employed. The issue of employment status has been raised relatively late
in the proceedings. The Tribunal was not in a position to deal with the issue,
although it held strong doubts about the validity of the Appellant’s assertions
of employed status,
particularly in respect of his engagements as an examiner which are classified
as self employment by the Social Security (Categorisation of Earners)
Regulations 1978.
In view of the time taken to deal with this Appeal, the Tribunal proceeded on
the alternative argument of HMRC, that if the Appellant was an employee there
were no grounds to aggregate the Appellant’s earnings from BBC, Royal Society
of Arts and London Examinations for the purposes of NI contributions.
59. The Tribunal finds
that during the relevant years the earnings from BBC, the Royal Society of Arts
and London Examinations
were below the lower earnings threshold for NI contributions, and that those
earnings were not connected with earnings from the same employer. Further the
Tribunal finds that the Appellant has failed to establish that the three
organisations carried on business in association with the other employers
during the relevant years.
60. The third set of
circumstances concerned the Appellant’s earnings from the London Borough of
Tower Hamlets and the Mary Ward Centre. The Tribunal finds that during the
relevant years the earnings from the London Borough of Tower Hamlets and the
Mary Ward Centre were below the lower earnings threshold for NI contributions,
and that those earnings were not connected with earnings from the same
employer. The Appellant suggested that the London Borough of Tower Hamlets and Tower Hamlets College carried on business in association with each other. According to the
Appellant the same persons were on the management boards for the two
organisations. The Tribunal considers the Appellant’s submission was without
foundation. On the evidence the two organisations carried on different
businesses and had separate payrolls. The Appellant adduced no evidence that
the Mary Ward Centre carried on business in association with the Appellant’s
other employers in 1996/97.
61. The Tribunal is
satisfied that the Appellant has failed to establish that the legal requirements
were met for aggregation of earnings during the relevant periods. The Tribunal,
however, makes two further findings in respect of the aggregation dispute.
62. HMRC compiled
its record of the Appellant’s NI contributions from the information supplied by
the Appellant and his employers. The information provided made no reference to
the question of aggregation or put HMRC on notice that aggregation was a
potential issue. In this respect HMRC’s record was correct and in accordance
with the information supplied.
63. The Tribunal
questions whether it has jurisdiction to deal with the aggregation dispute,
which formed no part of HMRC’s determination on 17 September 2009. It would
appear that the Appellant did not raise the question of aggregation with the
various organisations involved at the time of his “employment” with them, and
has not requested HMRC to make a formal determination of the issue. The
question of aggregation impacted not only upon the Appellant but also on the
various organisations which paid the earnings, and presumably they would be a
party to any proceedings. The length of time which has elapsed between the
Appellant’s cessation of “employment” with the various organisations would also
cast doubt on whether any such action by the Appellant would be in time.
The Appellant’s Other Grounds of Appeal
64. The Tribunal’s
findings on the Appellant’s other grounds of Appeal are as follows:
(1)
HMRC failed to determine accurately appropriate earning factors:
the calculation of earnings factor is a matter for the Department of Work and
Pensions (The Pension Service) and falls within the Appellant’s appeal to the
Social Entitlement Chamber of the First Tier Tribunal.
(2)
HMRC failed to assess any entitlement to NI contributions and
appropriate adjustments in relation to the Appellant’s child care: the
Tribunal understands that home responsibilities protection makes no difference
to the Appellant’s NI contribution record because he already had the requisite
maximum NI contributions for the years when the protection applied. It would
also appear that jurisdiction for determining home responsibilities protection
rests with the Social Entitlement Chamber not the Tax Chamber of the First Tier
Tribunal.
(3)
HMRC failed to assess entitlement to NI contributions in relation
to employers’ non-payment of pay increases in 1993, 1994, 1995 etc: the
Tribunal is satisfied that HMRC’s record of the Appellant’s NI contributions
was accurate and based upon the statements of earnings provided by the
Appellant and his employers. The question of non-payment of pay increases was
not a matter for this Tribunal.
(4)
No investigation report has been submitted by HMRC in spite of the
Appellant’s repeated requests: the Tribunal is satisfied that HMRC has
supplied the Appellant with a full explanation of the decisions that it has
reached on his NI contribution record, and has responded promptly to the
Appellant’s enquiries. This, however, is a matter which falls within HMRC’s
care and management responsibilities, and is dealt with under HMRC’s complaint
procedures not by the Tribunal.
(5)
HMRC failed to comply with directions of the Tribunal:
HMRC’s purported failure related to the directions of the Social Entitlement
Chamber not of this Tribunal.
(6)
HMRC was in breach of Human Rights Act 1997: the Appellant
failed to substantiate HMRC’s purported breach of the Human Rights Act 1997.
Decision
65. The Tribunal’s
principal findings in this Appeal are as follows:
(1)
HMRC has thoroughly investigated the Appellant’s claims regarding the
inaccuracy of his National Insurance contribution record. HMRC has examined the
information supplied by the Appellant and given its reasons why the information
has had no effect on his record or amended the record if appropriate.
(2)
The additional information supplied by the Appellant since the disputed
decision of 17 September 2009 has not provided any new evidence of National
Insurance contributions which have not been included in his record.
(3)
The Appellant’s National Insurance contributions record kept by HMRC was
an accurate reflection of the information of the National Insurance
contributions made by the Appellant supplied by the Appellant and his
employers.
(4)
The Appellant’s current disputes with his National Insurance record
concerned the legal basis for how his former “employers” recorded his contributions.
The Tribunal has given its full reasons why these disputes were not relevant to
this Appeal.
66. For the reasons
given above and in the body of the decision the Tribunal is satisfied that
HMRC’s record of the Appellant’s payment of NI contributions is correct. The
Tribunal dismisses the Appeal and that HMRC’s decision dated 17 September 2009
stands good.
67. 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.
TRIBUNAL JUDGE
RELEASE DATE: 27 SEPTEMBER 2011
