Bogdan Maciej Hudziec v Revenue & Customs [2011] UKFTT 866 (TC) (30 December 2011)
DECISION
Introduction
1.
This appeal concerns the National Insurance Contributions (“NICs”)
contribution record of the Appellant. He claims to be entitled to have NICs
added to his contribution record in respect of periods of employment with four
different employers. HMRC (which term, in this decision, includes its
predecessors in administering the NIC system) do not consider that he is so
entitled.
2.
HMRC say that the first employment (at a “Farm Camp” for overseas
student workers during harvest time over three summers in the 1980’s) was under
a special scheme, the “Seasonal Agricultural Workers Scheme” or “SAWS”, which
was exempted from NICs. In any event, they say, the Appellant’s earnings from
that employment would have been below the NIC threshold.
3.
HMRC do not accept that the second or third employments (at a public
house in 1988-89 and at a cleaning company in 1995) ever took place. The
Appellant claims to have worked under an assumed name (in order to circumvent
immigration restrictions which would have prevented him from taking up those
employments). The Appellant says he pretended to be an EU citizen and was
given a temporary NI number. He claims that deductions were made from his
earnings under that NI number. HMRC can find no trace of any such
contributions being received.
4.
The Appellant alleges that the fourth employment (in which he used his
own name) was extremely short – partly because he was unable to produce the
necessary proof to his employer that he was entitled to work in the UK. HMRC say they have no record of any contributions being received in relation to that
employment either, and point out that the only evidence of it that the
Appellant has produced shows earnings below the NIC threshold.
The Facts
5.
Initially the Appellant was reluctant to go ahead with the hearing
without an interpreter being present, but he had a friend with him who was able
and willing to explain to him anything which he found difficult to understand.
In any event we found that the Appellant had adequate command of English. From
the documents produced in evidence to us, and the oral testimony of the
Appellant, we find the following facts.
Preliminary matters
6.
The Appellant is Polish. He was born on 3 June 1957. In the early
1980’s he was a student, studying Economics and Organisation of the Chemical
Industry at the Academy of Economics in Wroclaw, Poland. He graduated in June
1985 and ceased full-time study at that time. He was ordinarily resident
outside the UK at all material times for the purposes of this appeal.
Working at Friday Bridge International Camp
7.
Whilst still a student, in August 1984, he obtained entry to the UK to work at the Friday Bridge International Farm Camp, near Wisbech (“Friday Bridge”). The date
stamp in his passport shows he entered the UK on 26 August 1984, and was
granted permission to enter the UK for one month, on condition he did not engage
in any employment. A further stamp in his passport shows that he left the UK on 28 October 1984, having extended his visa (after its expiry date) on 19 October
1984. HMRC have not disputed the Appellant’s assertion that he worked at Friday Bridge, even though the terms of his visa would appear to have prevented it. We
therefore accept his evidence on the point.
8.
Three years later, the Appellant entered the UK again and for the same
purpose. He was by then no longer a student. On 16 August 1987 he was granted
permission to enter the UK for one month, on condition that he did not engage
in employment with anyone except “International Farm Camp” at Leverington,
Wisbech – which we take to be Friday Bridge. There is no departure stamp in
his passport, but he claims to have worked at Friday Bridge until he left on 22
November 1987. HMRC do not dispute this, even though he appears to have
outstayed his visa. We accept his evidence on the point.
9.
The following year, the Appellant again entered the UK for the same purpose. On 11 July 1988 he was granted leave to enter the UK for two months, on condition that he did not enter employment with anyone other than
“Fridaybridge Camp”, which we take to mean Friday Bridge. According to HMRC’s
decision letter (referred to at [40] below), he claims to have worked at Friday Bridge from 7 July 1988 (i.e. four days before he entered the UK) until 30 September
1988. His passport contains a further visa, issued in the UK on 16 December 1988, allowing him to remain in the UK until 12 January 1989, on condition that he
did not engage in employment. Again, HMRC have not disputed that he was
employed at Friday Bridge for the period he claims and we accept his evidence
on the point.
10.
We accept the Appellant’s evidence that no deductions were made from his
earnings at Friday Bridge in 1984, 1987 or 1988 on account of NICs.
11.
Included in the papers before us was a copy of an information leaflet
issued by Friday Bridge. Its front page, in addition to a picture of a smiling
student and the name of Friday Bridge, included the large number “88” and we
infer this leaflet related to the year 1988. It summarises the practical
arrangements and costs of working at Friday Bridge. It refers to an application
form to be filled out by the applicant (though no copy was included in our
papers). It makes no mention of SAWS or of NICs. It starts with the following
paragraph:
“Fridaybridge International Farm Camp offers an opportunity
for young people of all nationalities to work, live and study together. You
will have the chance to meet other young people from different countries,
improve your English and at the same time have the possibility to earn money to
offset the costs of staying at the camp. There are enough activities at the
camp to keep you occupied during your stay.”
12.
On the question of earnings and costs, it says the following:
“The work generally consists of fruit picking and market
gardening. Normally you will be paid according to how much you pick, so the
harder you work the more you earn. Usually you should be able to earn enough
money to pay the accommodation costs and to provide some pocket money. However
due to the uncertainty of the English climate and in the event of crop-failure
WORK CANNOT BE GUARANTEED. It is important therefore to bring enough money
with you to insure against all eventualities.”
....
“The weekly charge for accommodation covers breakfast, packed
lunch and evening meal; use of all the camp facilities including English lessons....”
“The accommodation charge is £39 per week which you must pay
in advance.”
13.
HMRC contacted Friday Bridge in 2009 in seeking to establish the full
facts of the case. They enquired whether Friday Bridge had any records of the
Appellant’s employment there, and they asked for confirmation that Friday Bridge participated in SAWS at the relevant time.
14.
The text of Friday Bridge’s reply dated 29 June 2009 was as follows:
“Dear Mr Dunn,
Further to your letter of 22nd June, I can confirm
that unfortunately we no longer have any records relating to Mr Bogdan
Hudziek’s period of employment at the above address, and specifically to any NI
Contributions he or the company may have paid.
I can however confirm that during the periods concerned,
Friday Bridge International Farm Camp Ltd was part of the SAW Scheme, and as
such Mr Hudziek would have had to comply with criteria that would exempt him
from being liable for NIC. I therefore think it extremely unlikely that he
would have had any NIC deducted from his earnings.
Should you require any further information, please do not
hesitate to contact us.
Yours sincerely”
Working at the Duke of York pub
15.
When the seasonal work ended in the autumn of 1988, the Appellant
decided to seek employment in London illegally in breach of the terms of his
visa. He also enrolled in an English language school. Included in the
evidence was a copy of a letter dated 8 December 1988 from that school to the
Home Office, confirming that the Appellant had enrolled on a course running
from 2 January 1989 to 24 March 1989. We infer that this letter was written in
support of the Appellant’s application for permission to remain in the UK, which resulted in the extension of his visa referred to at [9].
16.
The Appellant decided to pretend to be Danish, in order to improve his
chances of obtaining work. Denmark being a member of the EEC (as it then was),
its citizens would not require any permit to work in the UK and he hoped this would enable him to work undetected. He went to an employment agency
in Regent Street and, without checking his passport, they accepted his story
and placed him in a job.
17.
There was included in our bundle of evidence a copy of a form headed
“Staff-starter/P46 – Employees Copy” dated 4 October 1988 filled out in the
name of “Benny Peterson” with a date of birth of 3 June 1961 (precisely four
years later than the Appellant’s date of birth). An address in Mortimer Road, Kensal Green, London was given. The form records a starting date of 4
October 1988 at the “Duke of York”, doing “catering” work for 39 hours a week,
spread over 6 days. Under “ethnic origin”, the code is inserted which denotes
“UK or other EEC”. No National Insurance number was filled in. This is the
form which the Appellant says he filled in to obtain the job at the Duke of
York, using the false name he had chosen.
18.
The only other evidence of this employment was a copy of a single wage
slip also in the name of “Benny Peterson”, with the address “Duke of York, 66 Mortimer Road, Kensal Green, London”. The address is odd, as 66 Mortimer Road Kensal
Green is an ordinary mid-terrace Victorian or Edwardian private house, and
other correspondence from the Appellant refers to the Duke of York pub as being
in London WC1. When referring back to the P46, however, the layout of that
form is such that the Mortimer Road address appears immediately opposite the
name of the Duke of York pub, which seems to us to establish a further link
between the payslip and the P46. In addition, the payslip (which relates to a
pay date of 12 November 1988) refers to the employee as having worked 38 hours,
very close to the 39 hours recorded on the P46.
19.
The gross pay for the week shown on the payslip is £89.30 (at an hourly
rate of £2.35). It also shows deductions for the week of £9.75 tax and £6.26
NI. It also shows cumulative figures. The cumulative gross pay shown is
£378.35, which would equate to a little over four weeks at the weekly rate
given, whereas the date of signature of the P46 was around five and a half
weeks before this pay date. No explanation was given for this apparent
discrepancy. It could possibly be attributable to the Appellant working “a
week in hand”, or it may be that the Appellant did not actually start working
for a week or so after signing the P46. The cumulative total of £25.30 was
given for employee’s NICs (and the same for employer’s NICs).
20.
The payslip records a temporary national insurance number TN030661M
(this was the method used at the time to deal with employees whose National
Insurance number was unknown – “TN” meaning “temporary number”, “M” meaning
“male” and the digits representing the employee’s date of birth) but also
includes the message “Please supply your NI number”, so clearly the employer
was well aware that it was operating a temporary NI number.
21.
The Appellant stated in a letter dated 5 April 2007 to HMRC that his “typical
day”, once he had started at the language school, started at 7 am, to attend
language school from 9 am to 11.45 am. He would then work at the Duke of York
from 12 pm to 4.30 pm and then at MacDonalds from 5 pm to 8 pm.
22.
The Appellant also produced at the hearing a sweatshirt with the “Duke
of York” pub name on it. He said he was given this to wear at work.
23.
There was also produced in evidence a copy of what purported to be an
undated letter from Spirit Group which read as follows:
“LETTER FROM EMPLOYER
This is to certify, that Mr.Bogdan Hudziec who was born on 3rd.June
1957, living 43-300 Bielsko-Biała,Kierowa 10/51 Poland, his full permanent
NiNo: SG 241302 C worked for our company at Pub “Duke of York” in London. He
was recognized by former pub manager John Gordon as a Benny Peterson and his
insurance contribution was collected under temporary NiNo TN 030661
STATEMENT OF EARNINGS
Duration of work: from 4th
October.1988 to 31st March.1989
Position: kitchen assistant
Tax code: 260 LW1
38 hours weekly, rate Pound 2.35
Total earnings in this period: pound
2.143,00
Tax paid 189,00
[Signature]
Ann Stait
Payroll Admin”
24.
This letter was sent by the Appellant to HMRC under cover of a letter
which they received on 24 December 2007.
25.
HMRC were understandably suspicious of this letter. They contacted the
owners of Spirit Group, Punch Taverns, to ask about it much later in the course
of their enquiries. Punch Taverns replied by letter dated 16 July 2009,
stating that they had no record of either the Appellant or Benny Peterson
working at the Duke of York in 1988-89. They also said they could not find any
copy of the Spirit Group letter that the Appellant had supplied and since Ann Stait
had left the company in March 2008 they were unable to confirm whether the
signature on the letter was hers. They also said that John Gordon the pub
manager mentioned in the letter had left their employment in July 2006.
26.
In evidence, the Appellant said that he had gone to the Duke of York pub
in December 2007 and someone there advised him to write to Spirit Group to
obtain the confirmation he was seeking as to his previous employment there. So
he had written to Spirit Group, and received the letter in reply which he had
passed on to HMRC.
27.
It is obvious to us that the undated letter from Spirit Group is a
complete fabrication. We are satisfied that it was produced by or under instruction
from the Appellant in a foolish, desperate and misguided attempt to provide
some evidence that would satisfy HMRC that he genuinely had been employed at
the Duke of York. In doing this, he has very nearly undermined his whole case.
He has certainly significantly damaged his credibility on matters for which
there is no corroborating evidence.
28.
We are however satisfied that he did work as he says for a period of
time. We accept the payslip which shows he worked up to 12 November 1988 and
we further find that he continued to work 38 hours per week at the hourly rate
given in the payslip until 1 January 1989, whereupon he reduced his hours to
four and a half hours per day (equating, in a six day week, to 27 hours per
week reflecting his time commitment to his English language course) at the same
hourly rate.
29.
We therefore find that the Appellant was employed under the assumed name
of Benny Peterson at the Duke of York pub from an unknown date in October 1988
up to 12 November 1988, during which time his earnings (and associated NIC
deductions) were as set out in the payslip. Accordingly his primary class 1
NICs during the period up to 12 November 1988 were £25.30. He continued in
employment up to 1 January 1989, during which time he earned £89.30 per week
for seven weeks, and deductions were made from his earnings at the appropriate
rate. He then continued in employment from 1 January 1989 to 25 March 1989
(the day before Easter Sunday and the day after completing his English Language
course), during which time he earned £63.45 per week for a period of exactly 12
weeks, and deductions were made from his earnings at the appropriate rate.
30.
We do not accept the Appellant worked right up until the day of his
departure for Poland on 3 April 1989 (when his passport shows he left Dover);
he withdrew all his savings from his building society (a copy of the final page
of his pass book was included in the correspondence) on 30 March 1989 as an
obvious preparation for his departure and we consider it most likely he would
have finished work at the end of the previous week, when his language course
ended. The Appellant said that his reason for departure was that his mother
was very ill. We express no view as to whether this is true, but it is not
material in any event.
Working at Madonalds Hamburgers Limited (“Macdonalds”)
31.
The Appellant also held employment under his own name with Macdonalds in
the spring of 1989, at the same time as he was working at the Duke of York. He
held this employment only for a very short time.
32.
He had joined Macdonalds under his own name because they required to see
his passport before employing him. He told Macdonalds that he was in the
course of obtaining a work permit. Included in the evidence were copies of two
items issued by Macdonalds. The first was a form P45, which gave his date of
joining as 1 February 1989 and his date of leaving as 19 February 1989. It
showed “total pay to date” of £16.05, no deductions and no NI number. The
second was a payslip dated 4 March 1989 which showed the payment of £76.33
gross less tax of £19.00 (and no NIC deduction) in respect of “period 25”. Tax
was deducted at basic rate (25%) under tax code BR W1 – which is consistent
with the Appellant having received his pay after leaving employment – we infer
this was on the basis, as the Appellant said, that Macdonalds refused to
continue to employ him when he was unable to produce his work permit, and the
payslip represented the balance of his unpaid salary up to termination, which
was paid after he left. If he worked (as the P45 says) from 1 February (which
was a Wednesday) until 19 February (which was a Sunday) and his normal payday
was a Saturday (as 4 March was) then his total earnings of £92.38 would have
been spread across three weeks and we are satisfied that his earnings in none
of those three weeks would have exceeded the NIC threshold of £41 per week
which was in force at that time.
33.
We therefore find that the Appellant was employed by Macdonalds for
between two and three weeks in February 1989, but no deductions were made from
his wages on account of NICs.
Working at J Simons Cleaning
34.
The Appellant provided copies of some wage slips purporting to show that
he had worked from some time in June 1995 until 11 August 1995 for a cleaning
company in Putney called J Simons Cleaning Limited.
35.
The payslips show the name “Benny Peterson” and the same temporary NI
number as on the earlier payslip.
36.
The wage slips, on close examination, show total taxable pay over a
period of some 7 weeks (including one week with no pay) of £373.74. During the
tax year 1995-96, the lower earnings limit was £58 per week. Below that level,
no NICs would have been payable in any event. The amounts of deductions shown
on the payslips for NICs total £9.29 (shared amongst just four of the
payslips).
37.
We also saw a copy of a page from the Appellant’s passport showing a
stamp dated 12 June 1995 when the Appellant entered the UK at Dover and was granted a six month visa but with a prohibition on employment.
38.
We accept that the Appellant held the employment he claimed with J
Simons Cleaning Limited under the alias “Benny Peterson” and that £9.29 of
deductions were appropriately made from his earnings on account of NICs.
The Appeal
39.
The Appellant applied to HMRC for a certificate in form E205 addressed
to the Polish authorities setting out his UK NIC history, and the present
dispute initially arose from HMRC’s unwillingness to reflect the above periods
of employment and/or contributions on their records and, accordingly, in the
certificate provided to the Polish authorities. There also appears to be an
outstanding claim of some sort for invalidity benefit, but we have no details
of that and are not concerned with it.
40.
This dispute culminated in a formal decision being issued by HMRC dated
20 November 2008 in which they stated that “you have only paid National Insurance
Contributions as shown in the attached schedule”. In the schedule, nothing was
included in respect of any of the four employments referred to above.
41.
That is the decision against which the Appellant formally appeals. We
should say that we have also taken the appeal to extend to the question of
whether the Appellant should be credited with further NICs beyond those shown
on the schedule – that was certainly the basis upon which both the Appellant
and HMRC argued the appeal.
The law
Introduction
42.
The provisions set out in the Social Security Act 1975 (“SSA 75”) which
set out the basic structure of National Insurance Contributions are not
disputed. Both parties are agreed that in the absence of some exclusion,
primary (employee’s) and secondary (employer’s) class 1 NICs would have been
payable in respect of all the earnings of the Appellant.
43.
HMRC were unfortunately unable to provide proper copies of the
legislation and, whilst we accept the extracts which they quoted as accurate
(with one slightly concerning exception – see [49] below), we note that in some
cases they have quoted the 1992 legislation and merely asserted that the
previous legislation was the same, or simply glossed over the point.
44.
We think it is important to make the point that if a dispute were to
arise in some other case as to the exact content and meaning of those
long-repealed provisions, we would expect HMRC to provide full and accurate copies
of them as they stood at any relevant date. This point has arisen before, and
HMRC need to address it. When dealing with a field such as NICs, where the
precise terms of legislation in force at any time in a worker’s working life
may be crucial to assessing the correctness of his contribution record (thus
potentially going back fifty years or more) it is incumbent upon HMRC to be
able to produce the relevant legislation (of which they and their predecessor
bodies have been the guardians) to the Tribunal when necessary. The
legislative sources available to the Tribunal do not include such long-repealed
provisions. It is unfortunate that in this case HMRC do not appear to be able
to provide comprehensive and accurate copies of relevant legislation going back
only some 24 years – a much shorter period than in many other NIC appeals heard
by this Tribunal.
45.
In refusing to accept that NICs would have been paid by the Appellant, HMRC
rely on two exemptions from NIC. They also rely on the provisions concerning
the crediting to a worker’s NIC contribution record of contributions not
actually received by them from an employer.
First exemption claimed by HMRC – the Seasonal Agricultural Workers Scheme
46.
The first is that embodied within the “Seasonal Agricultural Workers
Scheme” or “SAWS”. This title is an umbrella name for a scheme which
encompasses both the immigration law aspects and the NIC aspects of allowing UK farmers to employ cheap temporary foreign workers to help with seasonal peaks of work in
the agricultural sector. It has been in existence for many years, and has
changed much over that time. We are concerned only with the NIC aspects of the
scheme as it existed in 1984 to 1988.
47.
In the case of individuals who work under a contract of service (ie
employees), NICs are essentially payable by any person who is “gainfully
employed in Great Britain”. However, this is subject to certain requirements
as to “residence or presence in Great Britain”. These basic rules have been
unchanged since before August 1984.
48.
From 1984 to 1988 (covering all periods of the Appellant’s employment at
Friday Bridge), the relevant legislation on “residence or presence in Great
Britain” was contained in Regulation 119 of the Social Security (Contributions)
Regulations 1979 (“the 1979 Regulations”) which, so far as relevant, provided
as follows:
“(1) Subject to the following provisions of this regulation,
for the purposes of section 1(6) of the Act (conditions as to residence or
presence in Great Britain for liability or entitlement to pay Class 1 or Class
2 contributions or entitlement to pay Class 3 contributions) the conditions as
to residence or presence in Great Britain shall be—
(a) as respects liability of an
employed earner to pay primary Class 1 contributions in respect of earnings for
an employed earner's employment, that the employed earner is resident or
present in Great Britain (or but for any temporary absence therefrom would be
present therein) at the time of that employment or is then ordinarily resident
in Great Britain;
(b) as respects liability for
secondary Class 1 contributions, that the person who, but for any conditions as
to residence or presence in Great Britain (including the having of a place of
business therein), would be the secondary contributor (in the following
provisions of this Case referred to as “the employer”) is resident or present
in Great Britain when such contributions become payable or then has a place of
business in Great Britain, so however that nothing in this provision shall
prevent the employer paying the said contributions if he so wishes;
....
(2) Where a person is ordinarily neither resident not
employed in the United Kingdom and, in pursuance of employment which is mainly
employment outside the United Kingdom by an employer whose place of business is
outside the United Kingdom (whether or not he also has a place of business therein)
that person is employed for a time in Great Britain as an employed earner and
but for the provisions of this paragraph the provisions of sub-paragraph (a) of
the last preceding paragraph would apply, the conditions prescribed in that
sub-paragraph and in sub-paragraph (b) of that paragraph shall apply subject to
the proviso that no primary or secondary Class 1 contribution shall be payable
in respect of the earnings of the employed earner for such employment after the
date of the earner's last entry into Great Britain and before he has been
resident in Great Britain for a continuous period of 52 contribution weeks from
the beginning of the contribution week following that in which that date falls.
(3) Where a person to whom the said sub-paragraph (a) would
otherwise apply is not ordinarily resident in the United Kingdom and is not a
person to whom the provisions of the last preceding paragraph apply, the
proviso specified in that paragraph shall nevertheless apply if either—
(a) during a vacation occurring
in a course of full-time studies which that person is pursuing outside the
United Kingdom, that person is gainfully employed under a contract of service
in Great Britain in temporary employment of a nature similar or related to that
course of studies; or
(b) there exists between him and
some other person outside the United Kingdom a relationship comparable with the
relationship between an apprentice and his master in Great Britain and that
person is gainfully employed under a contract of service in Great Britain in
employment which began before he attained the age of 25 and which is of a
nature similar or related to the employment under the said relationship outside
the United Kingdom.”
49.
The text of Regulation 119 of the 1979 Regulations is slightly different
from its current replacement (in Regulation 145 of the Social Security
(Contribution) 2001 Regulations (“the 2001 Regulations”)). HMRC in their
written submission to the Tribunal set out the current Regulation 145 in full
and stated that “Regulation 119(3) of the Social Security (Contributions)
Regulations 1979 preceeded Regulation 145(3) of the Social Security
(Contributions) Regulations 2001 and the text is the same.”
Fortunately, the Tribunal was able to obtain independently a copy of Regulation
119 of the 1979 Regulations and establish the inaccuracy of this assertion.
This emphasises the point that HMRC must produce proper copies of relevant
repealed legislation rather than rely on careless assertion as to its content.
It is for the Tribunal, not for HMRC, to assess the significance of any change
of wording that may have taken place, however apparently minor.
50.
Regulation 119 of the 1979 Regulations, as set out above, is the
legislation (in particular sub-paragraph (3)) upon which HMRC rely in relation
to the Appellant’s employment with Friday Bridge.
Second exemption claimed by HMRC – earnings too low to qualify
51.
Section 5 of the Social Security Contributions and Benefits Act 1992 (“SSCBA
92”) (apparently re-enacting without change section 4 SSA 75) provided as
follows:
“Earnings limits for Class 1 contributions
(1) For the purposes of this Act there shall for every
tax year be –
(a) a lower earnings limit
for Class 1 contributions, being the level of weekly earnings at which employed
earners become liable for such contributions in respect of the earnings from
their employments;”
52.
It is not disputed that the legislation then went on to set out how
Class 1 contributions were to be calculated on earnings above the lower
earnings limit.
53.
These provisions remained unchanged in any material respect until after
August 1995.
54.
The lower earnings limit for the tax year 1984-85 was £34 per week. For
1987-88 it was £39 per week. For the tax year 1988-89 it was £41 per week.
For the tax year 1995-96 it was £58 per week.
Crediting of NICs which have not been received by HMRC
55.
Regulation 60 of the 2001 Regulations is headed “Treatment
for the purpose of contributory benefit of unpaid primary Class 1 contributions
where no consent, connivance or negligence on the part of the primary
contributor” and paragraph (1) of that Regulation provides as follows:
“(1) If a primary Class 1
contribution payable on a primary contributor's behalf by a secondary
contributor is not paid, and the failure to pay that contribution is shown to
the satisfaction of an officer of the Board not to have been with the consent
or connivance of, or attributable to any negligence on the part of the primary
contributor, that contribution shall be treated—
(a) for
the purpose of the first contribution condition of entitlement to a
contribution-based jobseeker's allowance or short term incapacity benefit as
paid on the date on which payment is made of the earnings in respect of which
the contribution is payable; and
(b) for
any other purpose of entitlement to contributory benefit, as paid on the due
date.”
56.
HMRC submit (and we accept) that it is appropriate to apply the current
version of this regulation (rather than the version which was current at the
time when the contributions in question should have been paid).
57.
HMRC have not disputed that the Tribunal has power to overrule HMRC’s
tacit decision not to operate Regulation 60 for the benefit of the Appellant.
We take them as accepting that the Tribunal has such power.
Submissions and our findings
The SAWS exemption claimed by HMRC
58.
HRMC did not refine their submissions on the point, simply asserting
that the Appellant was a participant in SAWS and therefore he was exempt from
NICs under this provision.
59.
The Appellant asserted that he was simply a worker and therefore should
have been subject to NICs like any other employed earner in the UK.
60.
We have already found that, as required under Regulation 119(3) of the
1979 Regulations, the Appellant was not ordinarily resident in the United Kingdom (see [6]). It is also clear from the facts that (as also required by
Regulation 119(3)) the provisions of Regulation 119(2) did not apply to the
Appellant. It can readily be seen therefore that in the Appellant’s case, the
key requirements are those in Regulation 119(3)(a) at [48] above, which require
(i) the Appellant to have been working at Friday Bridge “during a vacation
occurring in a course of full-time studies” which he was pursuing outside the
United Kingdom, and (ii) that his contract of service in Great Britain was “in
temporary employment of a nature similar to or related to that course of
studies.”
61.
The Appellant’s first period of employment at Friday Bridge in 1984
clearly took place during a vacation in his full-time studies, but although it
was obviously temporary in nature, it could not be said to be employment which
was “of a nature similar to or related to” his course of studies – he was
studying Economics and Organisation of the Chemical Industry (see [6])..
62.
During his further periods at Friday Bridge in 1987 and 1988, he was also
not working during a vacation in his full-time studies, as he had graduated in
June 1985.
63.
It follows that, as a matter of fact, we find the Appellant did not
satisfy the requirements for exemption from NICs on the basis of Regulation 119(3)
of the 1979 Regulations in relation to his periods of employment at Friday Bridge. This exemption therefore did not, as a matter of law, apply to those
periods of employment.
64.
The Appellant also argues that the SAWS provisions exempting him from
NICs are invalid under the European Convention on Human Rights, on the basis
that they discriminate against him on grounds of nationality. We disagree.
The SAWS arrangements seem to us to be designed as a very simple and
straightforward easement of NIC rules to cover a period of temporary casual
work in the UK and apply equally to non-resident UK citizens as they do to
non-UK citizens. We also doubt whether the Human Rights Act 1998 could be
called upon to question the validity of rules in place at least ten years
before the commencement of that Act. In any event, this point is not relevant
in view of our finding at [63] to the effect that the Appellant did not fall
within SAWS even whilst working at Friday Bridge.
65.
The SAWS provisions are not relevant to the other employments held by
the Appellant.
Were the Appellant’s earnings below the lower earnings limit?
Earnings at Friday Bridge
66.
HMRC argued that, whatever the position under SAWS, on a balance of
probabilities the Appellant would only have earned enough to “provide some
pocket money” after paying his accommodation costs (as set out in the Friday Bridge leaflet mentioned above) and therefore his earnings would have been below the
lower earnings limit.
67.
The Appellant argued that he had earned £2 per hour on average, for an
eight hour day and six day week, equating to £96 per week. This would have
placed him well above the lower earnings limit in each of the three years he
worked there (see [53])..
68.
We find that on a balance of probabilities the Appellant would have
earned somewhat more than the cost of his accommodation while he worked at Friday Bridge, and accordingly would have earned above the lower earnings limit. To cover his
accommodation costs alone, he would have needed to earn £39 per week (in 1988)
and we note that the lower earnings limit that year was £41 per week. We do
not accept that his earnings would have been as high as £96 per week, but
because of the view we take on the “Regulation 60” argument (below), it is not
necessary for us to reach a decision on what the level of earnings actually
was. We note that the Appellant has disclosed a copy only of the last page of
a building society savings book, and the earlier pages of that book would have
been potentially significant evidential material if this issue had been
relevant.
Earnings at Duke of York
69.
Given our findings as to the levels of earnings by the Appellant while
he was working at the Duke of York under the name Benny Peterson, which were
well in excess of the lower earnings limit of £41 per week (see [29]), there is
no question of his earnings during that period from the Duke of York falling
below the lower earnings limit. We find that they did not.
Earnings at Macdonalds
70.
Given our findings as to the level of earnings by the Appellant whilst
he was working at Macdonalds (see [33]), we find that he was clearly earning
less than the lower earnings limit for each week in the very short period he
was employed by them.
Earnings at J Simons Cleaning Limited
71.
Given our findings in relation to his earnings at J Simons Cleaning
Limited in 1995 (see [38]), and given that the lower earnings limit at that
time was £58 per week, we find that (save in relation to the one week where the
earnings were £40 and the other week where there were no earnings) the
Appellant did earn above the lower earnings limit, and the aggregate Class 1
contributions made by him totalled £9.29 during that employment.
Should the Appellant be credited with contributions under Regulation 60?
72.
Regulation 60 of the 2001 Regulations provides that if certain
conditions are met, HMRC must (and not, as they maintained both at the hearing
and in their subsequent written submissions, “may”) treat the relevant Class 1
contributions as having been made.
73.
HMRC do not dispute that, as a general proposition, the main obligation
to pay over the primary (ie employee’s) Class 1 contributions falls on the
employer (who is entitled to recoup that cost by deduction from the employee’s
earnings). In addition, of course, the employer is also directly obliged to
pay over the secondary (ie employer’s) contribution.
74.
In terms of Regulation 60, this means that whatever the underlying
reason for the failure to pay (i.e. because the employer has failed to deduct
the employee’s contribution from his earnings, or because the employer has
simply retained any deduction so made), an employee is entitled (if the
conditions of Regulation 60 are satisfied) to be credited with the
contributions which the employer should have made on his behalf.
75.
The Appellant maintains that he did suffer NIC deductions in two of his
employments (which his employers wrongfully failed to pay to HMRC), and his
employers in the other two employments wrongfully failed either to deduct NICs
or to pay them to HMRC.
76.
HMRC cannot trace receipt of any contributions from any of the
Appellant’s employers. Either they have been received by HMRC but “lost” or
they were never received. HMRC say (and we accept) that their normal tracing
processes to find the right home for unallocated contributions received by them
are robust but have not unearthed any contributions by the Appellant’s
employers. We therefore find, on a balance of probabilities, that they were
never paid. Regulation 60 is therefore engaged. The question we must therefore
decide is whether any failure on the Appellant’s employers’ part to pay primary
Class 1 contributions of the Appellant over to HMRC (or its predecessor body)
can be shown to have been “with the consent or connivance of, or attributable
to any negligence on the part of” the Appellant.
77.
That question must be decided separately in relation to each of the
employments.
Employments at Friday Bridge
78.
It is unfortunate that we have not been supplied with a copy of the
application form which the Appellant would have had to fill in to apply for
work at Friday Bridge. That might have clarified matters greatly.
79.
The reason why Friday Bridge did not account for NICs on the Appellant’s
earnings was clearly because they considered him to fall within the SAWS
exemption. As we have found above, he did not in fact qualify for that
exemption. The question is whether their failure to pay was with the
Appellant’s “consent” or “connivance”, or was “attributable to any negligence”
on his part.
80.
Not having seen the application forms which the Appellant submitted to Friday Bridge (or to the Home Office or British Consulate or Embassy) in connection with his
three employments with Friday Bridge, there is no direct evidence as to what
the Appellant told them or what information he was given about NICs. This
point was not touched upon at the hearing, so we have no evidence from the
Appellant on the point (though in view of our findings in relation to the
“Spirit Group letter”, we would have treated any uncorroborated statements from
him with great caution in any event).
81.
We consider it highly likely, however, that an application form for a
post falling within a special scheme such as SAWS would have required the
prospective employee to confirm the personal circumstances which made him
eligible for that scheme. Friday Bridge were clearly significant operators of
the SAWS and well aware of its requirements; as such we find on a balance of
probabilities that they would not have employed anyone to work under SAWS
unless they obtained confirmation from the individual in question that (i) he
was a full-time student overseas, applying for temporary work during his
vacation and (ii) his prospective employment in the UK was “of a nature similar
or related” to his overseas studies.
82.
It follows that we consider, on a balance of probabilities, that the
Appellant misled Friday Bridge as to his eligibility for employment under SAWS.
83.
The Oxford English Dictionary defines “connivance” as follows:
“The action of conniving; the action of winking at, overlooking
or ignoring (an offence, fault, etc.); often implying secret sympathy or
approval: tacit permission or sanction; encouragement by forbearing to condemn.”
84.
It seems to us that this is a fair description of the Appellant’s
actions in misrepresenting his personal eligibility for SAWS to Friday Bridge. His objective was to visit the UK and obtain casual work. He could only do
so by misrepresenting his eligibility for SAWS. He therefore chose to do so
and must be regarded as “conniving” in Friday Bridge’s consequent wrongful
failure to account for NICs on his behalf.
85.
Even if the Appellant were not guilty of connivance in this way (eg
because he simply did not understand that the question of his personal
eligibility for SAWS was crucial), we consider that he must at the very least have
been negligent in giving the “SAWS eligibility” confirmations which we find
were required from him.
86.
It therefore follows that we find that any failure of Friday Bridge to account for NICs on the Appellant’s behalf was either “with the connivance of”
the Appellant or was attributable to his negligence. Accordingly, there is no
basis upon which he can be credited with such contributions under Regulation
60.
Employment at the Duke of York
87.
There is no “SAWS” aspect to this employment. It was certainly in
breach of the terms of the Appellant’s entry visa, but HMRC have not argued
that this illegality takes the employment outside the scope of NICs. Indeed,
they have specifically accepted that the legality or otherwise of the employment
has no bearing on the question of whether NICs arise from it.
88.
HMRC’s only objection in relation to this employment was that they could
simply find no trace of any contributions from the Appellant’s alleged employer
for it.
89.
We can only speculate as to the reasons for this, but since HMRC said
they have robust processes for tracking down “unallocated” NIC payments from
employers, we can only assume that the employer never paid over to HMRC the
contributions which were referable to the Appellant’s employment with them.
90.
Having found that the contributions were due, we must therefore consider
whether the Appellant gave “consent or connivance” to his employer’s
non-payment of them, or whether such non-payment was “attributable to any
negligence” on his part.
91.
All that the Appellant appears to have done is to tell his employer that
he did not have a National Insurance number. This resulted in them allocating
a temporary NI number to him in line with what we understand to have been the
usual procedure at that time. He then saw deductions being made from his
earnings on account of NICs and he had no reason to believe those contributions
were not being paid over to HMRC (along with the employer’s secondary
contributions). We do not therefore consider that his employer’s failure to
pay over the contributions could be regarded as having happened with his
consent or connivance, or as being attributable to his negligence.
92.
It follows that we can see no basis upon which HMRC can now refuse to
credit the appropriate contributions to his NIC record under Regulation 60 for
the tax year 1988-89.
Employment by Macdonalds
93.
As already mentioned (see [33] and [70]), we see no basis for any NICs
to have arisen from this employment. Therefore the question of crediting such
contributions to the Appellant’s record does not arise.
Employment by J Simons Cleaning Limited
94.
Similar observations apply here as in the case of the employment at the
Duke of York (above). We therefore consider there is no basis upon which HMRC
can refuse to credit £9.29 of primary contributions to the Appellant’s record
for the year 1995-96 (see [71]).
Decision
95.
We find that the Appellant neither paid nor is he entitled under
Regulation 60 to be credited with, Class 1 National Insurance contributions in
respect of:
(1)
his periods of employment with Friday Bridge in 1984, 1987 and 1988 (see
[10] and [86]); or
(2)
his short period of employment with Macdonalds Hamburgers Limited in
1989 (see [33], [70] and [93]).
96.
The appeal is therefore dismissed insofar as it relates to those
matters.
97.
We find that the Appellant paid (and is entitled to be credited under
Regulation 60 with):
(1)
Class 1 National Insurance contributions during the year 1988-89 in
respect of his employment with Spirit Group at the Duke of York pub in London, as follows:
(a)
£25.30 in respect of the period up to 12 November 1988;
(b)
the appropriate amount which would have accrued on weekly earnings of
£89.30 per week for the following seven weeks; and
(c)
the appropriate amount which would have accrued on weekly earnings of
£63.45 for the following twelve weeks.
(See [29] and [91]).
(2)
£9.29 of Class 1 National Insurance contributions during the tax year
1995-96 with J Simons Cleaning Limited (see [38] and [94]).
98.
The appeal is therefore allowed in principle to that extent.
99.
Once HMRC have calculated the precise amounts to be credited under [97(1)(b)
& (c)] and notified them to the Appellant, the parties are at liberty to
apply to the Tribunal for a final determination of those amounts in the event
of any disagreement.
100.
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.
KEVIN POOLE
TRIBUNAL JUDGE
RELEASE DATE: 30 December 2011
