Mr Jan Evert Ingemar Olofsson v Revenue & Customs [2012] UKFTT 490 (TC) (03 August 2012)
[2012] UKFTT 490 (TC)
TCO2167
Appeal number: TC/2011/05696
NATIONAL INSURANCE
CONTRIBUTIONS –whether contributions paid in period preceding record of
appellant entering national insurance - whether additional contributions paid
afterwards which were not reflected on appellant’s national insurance record –no
–whether there was a duplicate contribution record - balancing weight of oral
and other evidence of appellant against record and evidence on procedures for
creation, maintenance and retrieval of national insurance contribution records-
contributions record correct – appeal dismissed
FIRST-TIER TRIBUNAL
TAX CHAMBER
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Mr JAN EVERT INGEMAR
OLOFSSON
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE SWAMI RAGHAVAN
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CHARLES BAKER FCA
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Sitting in public at the
Appeal Service Venue at Southampton on 28 March 2012
Mr Ian Mitchell for the
Appellant
Mrs Lisa Storey for the
Respondents
© CROWN COPYRIGHT
2012
DECISION
Introduction
1.
This appeal concerns whether there are national insurance contributions
missing from the appellant’s national insurance contribution record for the
period 1962 to 2006.
2.
HMRC have made a decision setting out the appellant’s contribution
record. The record starts in the contribution year 1971-2. The appellant
appeals against that decision on the basis that the contributions record does
not record any of the contributions he maintains he made during the period 1962
to 1970 and that it misses out contributions made in the period 1971-2 to
2005-6. HMRC say the contributions record is accurate.
3.
If it is established that the appellant did make the additional national
insurance contributions this would increase his entitlement to State Pension.
Evidence
4.
We heard oral evidence from the appellant and from Mr Alan Greenshields,
an officer of the Respondents who had held a number of jobs with the
Respondents and the predecessor government departments dealing with receipt of
contributions, maintenance of contribution records and training of new officers.
He gave evidence on the procedures and processes relevant to national insurance
records generally including the registration, recording and tracing processes
that were in place during the contribution years in dispute and those which are
in place currently. He also gave evidence as to searches he had made in
relation to the appellant’s national insurance record. Witness statements were
put in evidence for both of the witnesses. Their evidence was subject to cross-examination
and both witnesses assisted the Tribunal with its further questions.
5.
We had bundles of documentary evidence produced to us from both the
Respondents and the appellant which as well as containing copies of
correspondence between the appellant, the Respondents, the Tribunal and the
Pension Service included copies of:
(1)
Extracts from the book Jan Olofsson: My 60s Taschen (1994) ISBN 3-8228-8915-6 (author Bill Harry).
(2)
Wikipedia entry for programme “Ready Steady GO” giving transmission
dates of between August 1963 and December 1966.
(3)
Biographical interview of appellant by James Leavey from internet,
copyright 1999.
(4)
Extract from sleeve notes to audio CD “Joe Meek’s girls”
(5)
Sample press reports from the Daily Mail and the Independent dated 26
January 2011 concerning the accuracy of National Insurance records.
(6)
The appellant’s contribution record RF1.
(7)
Various blank form examples of national insurance forms and leaflets.
6.
We were able to inspect originals of items 1), 4) and 6) above.
Law
7.
During the period under appeal employed earners were liable to pay
weekly National Insurance contribution at the appropriate rate (Class 1). The
liability originally arose under s2 (2) of the National Insurance Act 1946, and
then subsequently under s3 (a) of the National Insurance Act 1965, s5 (1) of
the Social Security Act 1975 and s6(1) of the Social Security Contributions and
Benefits Act 1992.
8.
Self-employed earners over age 16 and below pensionable age were liable
to pay a weekly National insurance contribution at the rate applicable at the
time (Class 2). The liability originally arose under s2 (2) (c) of the National
Insurance Act 1946, and then subsequently under s3(c) of the National Insurance
Act 1965, s7 (1) of the Social Security Act 1975 and s11 (1) of the Social
Security Contributions and Benefits Act 1992.
9.
Under section 2(2)(d) of the National Insurance Act 1946 and
subsequently s3(d) of the National Insurance Act 1965 every non-employed person
was liable to pay a weekly National insurance contribution at the appropriate
rate (Class 3). From 6 April 1975 Class 3 contributions were not compulsory but
could be paid on a voluntary basis subject to certain conditions.
10.
Until 5 April 1975 every insured person had to apply for a National
Insurance card in accordance with regulation 2(1) of the National Insurance and
Industrial Injuries (Collection of Contributions) Regulations 1948.
11.
Under Regulation 6(1) of those regulations contributions were paid by
affixing a National insurance stamp to the insurance card of the insured
person. An employer was liable to affix a stamp for employed persons. The
employer was entitled to recover contributions it had paid on behalf of the
employee by means of deductions from the employee’s wages.
12.
For self-employed and non-employed persons the insured person was
liable to affix the stamp.
13.
On 6 April 1975 the National Insurance scheme was reconstructed,
employees’ contributions became earnings related and were collected alongside
PAYE.
14.
Under s8 Social Security Contributions (Transfer of Functions, Etc) Act
1999 (“SSC(ToF)A 1999”) it is for an officer of HMRC to decide:
“whether contributions of a particular class have
been paid in respect of any period”.
15.
In relation to determination of appeals against such decisions to the
Tribunal Regulation 10 of the Social Security Contributions (Decisions and
Appeals) Regulations 1999 provides:
“…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.”
16.
We were referred to the following cases:
Mrs Daphne Gutteridge –
SpC 534 [2006] STC (SCD) 315
Mrs McGough – Social Security Commissioner –
CP/3593/2006 R(P) 1/08
Thomas Joseph Beamish v HMRC SC 3009 2009
Philip Langley Rose v HMRC SpC
574 [2007] STC (SCD) 129
Background facts
History of decision / appeal
17.
On 31 May 2011 HMRC issued a decision under s8 SSC(ToF)A 1999 setting
out the contributions the appellant had paid and the period in which he had
paid them as follows:
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Contribution Year
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Class 2 (self-employed)
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Class 3 (non-employed)
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1969-1970
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NIL
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NIL
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1970-1971
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NIL
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NIL
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1971-1972
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9
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1
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1972-1973
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52
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NIL
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1973-1974
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52
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NIL
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1974-1975
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57
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NIL
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Tax year
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Class 1 (employed earner)
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Class 2 (self-employed)
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Class 3
Non-employed person
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1975-76
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53
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1976-77
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52
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1979-1980
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11
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1980-81
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26
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1997-1998
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£389.56
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1998-1999
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£253.12
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2004-2005
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£433.45
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2005-2006
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£230.15
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18.
The decision did not show any entries preceding 1969-70 and while it set
out the following years in the above table (1977-78 to 1978-79, 1981-82 to
1996-97, 1999-00 to 2003-4 and 2006-07 to 2008-09) it did not show any
contributions for these years.
19.
The appellant appealed against the decision on 13 June 2011 on the basis
that:
(1)
there were years outside of the decision (1962 to 1969) where there were
contributions and/or credits which needed to be taken into account.
(2)
For the years included in the decision where there were less than full
contributions and/or credits, there were further contributions and/or credits
that had not been taken into account.
20.
The contributions record is of significance to the appellant because it affects
the amount of retirement pension he is entitled to.
21.
The appellant was born on 16 June 1944 in Sweden and grew up there. He moved
to London in the early 1960s to pursue a career as a photographer and to break
into the music business. It is not disputed that the appellant was in the UK prior to 1969 but what is in dispute is whether any national insurance contributions
were paid in that period. The appellant reached pensionable age on 16 June 2009.
22.
On the one hand we had oral evidence from the appellant and other
evidence in the form of published material on the appellant from which we able
to make certain findings of fact (see [37] to [51] below). On the other, we had
documentary evidence presented to us by HMRC of the appellant’s contribution
record held by HMRC, the procedures in place for ensuring the accuracy of such
records and the particular searches that had been made by HMRC for further
contributions that may have been paid.
National insurance stamps and payments
23.
The Tribunal was given the following background from HMRC in relation to
the system for registering for national insurance, and for paying and recording
contributions. While the appellant did not dispute that this background was
informative as to the procedures which were in place and ought to have been
followed it was disputed whether these procedures had in fact been applied to
the appellant and his contribution record.
24.
Registration for National Insurance for a person aged 18 or over was
made by a person attending an office of the Department where they were given a
form CF8.
25.
From the information entered onto the CF8 a permanent record of National
Insurance, known as form RF1, was set up for the person. Each RF1 contained a
unique National Insurance number which was transcribed to a contribution card.
26.
The card was given to the applicant and contribution stamps were affixed
to the card each week.
27.
If the person was employed they gave the card to the employer who
purchased a National Insurance stamp from the Post Office and affixed it to the
card. The cost of the employee’s share of the stamp was deducted from their wages
and the employer paid their share of the stamp.
28.
If the person was self-employed or non-employed they were responsible
for the cost of and the purchase of the stamp and for the safe keeping of their
card. They were also responsible for exchanging an expired card for a new card
each year.
29.
Once an expired card was received at the local office of the Department
it was checked and then forwarded to Records Branch in Newcastle upon Tyne. The
number of stamps were counted and recorded on the person’s RF1. From 6 April
1975 the contributions were counted and recorded on the person’s computer based
record.
30.
From 1975 it was possible to choose to pay either self-employed rate
contributions by direct debit from a bank account or by stamp card.
31.
From 6 April 1993 the payment of self-employed rate contributions by
stamp card ceased. It was possible to pay by direct debit or by quarterly
billing.
32.
When a person registered for National Insurance he had to complete form
CF8 to apply for a National Insurance card. This asks if the person has had
British National Insurance before and asks for the date of arrival in Great Britain before and details of previous periods. It also asked for full details of any
previous social insurance record.
33.
Form CF8 was destroyed after 6 years in accordance with the department’s
record management policy (on the basis that a permanent record was noted to
show all National Insurance information.)
The appellant’s national insurance record
Form RF1
34.
We had in the bundles produced to us a copy of the appellant’s permanent
national insurance record (Form RF1). We were also able at the hearing to
examine the original document. The amounts and periods of contributions
recorded in the decision under appeal correspond to the contributions on this
record. The additional notations on the form are set out below. It should be
noted that it is a matter of dispute whether the record correctly reflects matters
relating to the appellant and in particular the appellant’s contributions which
were paid. The record carried the following notations:
(1)
The appellant’s record was prepared by Hendon local office on 11 August
1971.
(2)
The appellant entered into the National Insurance scheme on 21 July
1969. This is disputed by the appellant who claims he entered the scheme in 1961-62.
(3)
“FTE from 21.7.69 to 1971”. It was explained to us by Mr Greenshields
that FTE was the abbreviation for the contributor being in full-time education.
This is disputed by the appellant who says that although he was on journalism
course this was not full-time and he did the course much earlier than the
stated period.
(4)
“Bankruptcy” from 5 April 1971 to 13 June 1971. The appellant
acknowledged that this accorded with his recollection. He recalled the
bankruptcy had arisen because a person for whom he had acted as guarantor while
working at Olga Records (UK) Limited had defaulted on a debt.
(5)
Above the notation for bankruptcy two dates were written in (21.7.69 and
4.7.66) and crossed out. Mr Greenshields said he thought that this might have
indicated information about the start of the bankruptcy that would have been
relevant for benefit claim purposes.
(6)
“CF169” for the period 21 June 1971 to 5 March 1972. Mr Greenshields
explained this meant the department had agreed it would not pursue arrears of
contributions for this period.
(7)
For the years 1971-72 to 1974-75 the contributions had been paid late.
Computer based record
35.
The contributions paid according the computer records we were shown
reflected the contributions set out in the decision notice. The record showed
the appellant elected to pay his contributions as a self-employed earner by the
stamp card method up to 6 April 1981. The record also indicated late paid
contributions in various years and the years for which “no card notices” and
contribution statements were sent out.
The appellant’s work and education history in the UK
36.
We found the appellant to be a credible witness who assisted the
Tribunal in giving very open and full answers. Where he was not able to
recollect a matter he was frank about this. We had no doubts that he was honest
in putting forward his recollections. But, we must nevertheless take into
account that there are inevitably going to be some concerns of accuracy in
making recollections going back so far in time. We were able to make the following
findings from the evidence put forward by the appellant which as well as his
witness statement and his answers to questions put to him by the Respondents
and the Tribunal included certain written biographical materials.
37.
The appellant was born on 16 June 1944 in Sweden. In the mid-1950s, as a
teenager, he was a rock and roll performer who then moved on to managing and
promoting music performers in Sweden. He was intent on moving to London to further his career in the music business. After some abortive attempts he was
given to leave to enter the UK for a period of time to get himself established.
38.
We accept the appellant’s evidence that in the years 1963-64 to 1964-65
he found employment as a commis waiter at the Piccadilly Hotel in London and that this was a full-time position. In making this finding, in addition to the
lucidity of the appellant’s recollection of the working environment, the types
of customers he served, and the reason why he had been employed there (there
was a Scandinavian restaurant on the premises) we were assisted by the fact
that the appellant’s evidence was consistent with a reference to that
employment in a book published on the appellant’s life and to an excerpt from
sleeve notes to a CD which referred to him working as a waiter.
39.
Although both these documentary sources derive from information that
the appellant would have given to the author we think they do carry some,
albeit limited, weight. First, they would have recorded recollections closer in
time to the relevant events. Second, because they are unlikely to have been self-serving
in the sense that they were produced well in advance of the appellant’s work
history being relevant for his appeal on national insurance contributions payments.
40.
With money he saved from this employment the appellant was able to buy a
camera and began working as a free-lance photographer taking photographs of TV
and music stars of the day on location at music events and TV studios. He wrote
a monthly column for a Swedish pop magazine. He got paid for each photo
published. The money was insufficient to live on so he had to supplement this
income with other income from other work. He worked as a kitchen hand for the
Stockpot, a restaurant in London.
41.
We accept the appellant’s evidence that at some time prior to 31
December 1965 he undertook a part-time journalism course. This enabled him to
get a press card, a copy of which appears in the extract from the “My 60s
book”. The expiry date set out there is 31 December 1965.
42.
Some time between 1965 and 1967 the appellant also took on work as a
general assistant to a flower shop run by a George Gillette in the East End of
London. The appellant could not remember his pay but he did get use of the
delivery vehicle and petrol which helped him with his photography business and
free accommodation.
43.
From 1967 to sometime in 1969 the appellant worked full-time for 2 and
half years as an employee of Olga Records (UK) Limited. A friend of the
appellant in Sweden had a record label and wanted to branch into the UK. The appellant was a director and was head of promotion and international matters. The
company employed around 5 people.
44.
From 1969 to 1971 the appellant started his own record label, Green
Light Records. We noted this chronology was consistent with excerpts in the “My
60s” book which referred to the appellant running his own record label in 1969.
The business involved acquiring rights and arranging releases in the Benelux countries. The appellant recollected that the income for this venture came from the
Netherlands.
45.
It was not until 1969 that the appellant had an accountant to assist him
with his tax and contribution affairs.
46.
In April 1971 the appellant joined Young Blood Record Co. Ltd as their
international manager and worked there until around 1975.
47.
In the period 1970 to 1974 the appellant was also involved with a night
club in London’s West End, Club Flicka. He was remunerated according to a
percentage of the takings.
48.
From 1975 onward the appellant concentrated on his music publishing
business “Olofsong” which owned rights to various songs.
49.
From 1980 onwards the appellant helped his wife with a catering business
she had started following the appellant’s idea to market Scandinavian style
open sandwiches and with the help of contacts he had in the TV business. His
wife funded the business with redundancy money she had obtained. He helped out
with the business but he was not on its payroll.
50.
From 1985 to 1987 the appellant was unemployed.
51.
From November 2001 to 2004 the appellant was responsible for the care of
his youngest daughter. He took up employment a wine adviser some time in 2004
and in the summer of 2006 he relocated permanently to Sweden.
52.
One of the contentions made on behalf of the appellant was in relation
to possibility of errors arising in national insurance records because of
language barriers. While as a general proposition there is no reason to think
that might not increase the risk of misunderstandings leading to errors, we
noted that the appellant’s answers and understanding of questions put to him displayed
a strong command of English. The appellant told us he thought his standard of
English was “pretty good” back in 1971.
The National Insurance record and the procedures for
updating it
53.
Mr Greenshields gave evidence on the general administrative procedures
and practices which existed in bringing contributions to account and the
maintenance of the records of the insured population, including the security
checks in place and the accuracy of the records. We found Mr Greenshields to be
an informed and credible witness and made the following findings on the basis
of his evidence. We were conscious that his evidence was as to procedures and
practices that ought to have been followed at the relevant times and was not
direct evidence of the actual creation and maintenance of records relating to
the appellant in particular.
54.
Between 1948 and 1975 National Insurance contributions were paid by
buying a stamp of the relevant value from the Post Office and affixing it to a
stamp card each week.
55.
To obtain the stamp card a person had to register themselves into the
scheme. There was a network of National Insurance offices which existed in most
towns throughout Great Britain. A form CF8 had to be completed and presented to
the office with proof of identity for example a birth certificate or passport.
56.
The Department relied on the person providing accurate information as
this was the only source from which such information was obtained.
57.
Once the office was satisfied the local office prepared a form RF1 and
RF2 and a contribution card.
58.
We heard about the arrangements for creating numbers. The local office
would be provided with a list they could use. The documents were sent in sealed
pouches with transit sheets which were checked upon receipt. The procedures for
delivery were designed with security in mind.
59.
The RF1 was a permanent record of insurance. It had the person’s
identity details along with other relevant information transcribed from the
CF8.
60.
There are around 50 million Forms RF1 held in total.
61.
After completion forms RF1, RF2 and CF8 were sent to Records Branch New
Registrations Section at Newcastle upon Tyne where the forms were checked for
accuracy. Where there was an indication on the CF8 of previous insurance
investigations were made to establish if a National Insurance Record already
existed for that person, if it was the registration process stopped and the
person was informed of their original National Insurance number.
62.
If there were no discrepancies the RF1 was then sent to Graduated Record
section who put the National Insurance number and the identity details into the
computer and created a corresponding computer record used for the recording of
Graduated Contributions. This computer record started from 1961.
63.
The RF1 was then sent to a Records Branch Ledger Section. They were
responsible for maintenance of the record, recording contributions and other
notations to the person’s insurance liability and keeping a record of benefit
claims.
64.
The RF1 was filed in a numeric sequence based on the National Insurance
number.
65.
Form RF2 was an index slip which showed only the person’s identity
details, date of birth and address which corresponded to form RF1.
66.
Once New Registrations had checked the RF2 it was sent to Records Branch
General Index. It was filed in an alphabetical sequence based on the person’s
surname, first names and date of birth. The CF8 was retained for a certain
length of time but then destroyed in line with the Department’s retention of
documents policy.
67.
It was necessary to know a person’s National Insurance number to get
access to their record. If a person’s number was not known or it was incorrect
it was possible to trace the correct number from the RF2’s in the General
Index.
68.
General Index identified cases where a duplicate RF2 was received for
the same person but where this showed a different National Insurance number to
the original. They then arranged for the records to be amalgamated and one of
the records to be cancelled. The person was then informed which National
Insurance number they were required to use.
69.
Computer based records were subsequently created from each RF1. It was
possible to search this from a computer based alphabetical index. The service
began in November 1981.
70.
The same importance was given to identifying duplicate NI numbers and
the computerised system was programmed accordingly.
71.
If a contributions card could not be matched to a National Insurance
record it was referred to General Index Special section who tried to trace the
correct number, investigating with the local office where the card had been
surrendered if necessary. If the tracing was unsuccessful a record with a
National Insurance number with the prefix “CR” for “constructed record” was
created and the person who had provided the card was informed of the number.
72.
Where an employer submits a return bearing no National Insurance number or
the identity details are so vague that the record cannot be found the
contributions are transferred to a suspense file until such time as the correct
record is found.
Attempts to track down the missing contributions-
searches performed of different name permutations
73.
We heard from Mr Greenshields about the searches he had made, without
success to find any unallocated contributions or records relating to the
appellant.
74.
These searches were performed by Mr Greenshields personally on 20
September 2010. Mr Greenshields performed a large number of different searches
with various different spellings of the appellant’s name and combinations of
his surname and first names including and excluding his date of birth. These
included “relaxed search” with first three letters of surname and without date
of birth which would have come up with different permutations of the
appellant’s surname. Under cross-examination Mr Greenshields stated that his
searches had not been double checked by anybody else.
75.
The Tribunal asked HMRC whether it had been able to make any searches
against the employer records for employers which the appellant had named and
was told this was not possible as they were in accordance with records retention
policy only kept for 6 years.
Appellant’s arguments
76.
The appellant entered into National insurance before 21 July 1969 (6
April 1962).
77.
He paid National Insurance between 1962 and 1969 but these contributions
have not been taken into account.
78.
Insufficient contributions / credits have been taken into account in
calculating the appellant’s entitlement for periods after July 1969.
79.
Between his entry into National insurance in 1962 and his departure from
the UK in July 2006 the appellant should be regarded as having a full National
insurance contribution record.
80.
As a result of error the appellant has a National Insurance record for
periods prior to 1969 that cannot now be traced. It is likely the appellant had
a different National Insurance number which cannot now be located. There is a
reasonable possibility of there being a second RF1 under a different National
Insurance number on which there are further contributions and given that the appellant
should be credited with those contributions accordingly.
(1)
The appellant’s name is prone to being misspelt – see for example errors
in the Respondents’ Statement of Case – incorrectly spelt on no fewer than five
occasions. Similarly there may be errors in how national insurance numbers have
been written down (a form sent from the Inland Revenue to the appellant
provides an example of this). Anglicising of a foreign name must provide
further scope for errors in transcription.
(2)
It is not uncommon especially amongst visitors from abroad who may have
made different visits, and because of language barriers, that there is a failure
to understand the system and that there might be errors in records or multiple
NI numbers.
(3)
There are 100s of local offices and a number of staff in each qualified
to deal with new persons registering and therefore obvious scope for
inconsistency in practice.
(4)
Forms RF1 are filed in NI number order – no means of finding them
without NI number. The RF2 cross references filed in name order were destroyed
in 2004.
(5)
It is an impossible task without the NI number to find a specific form.
(6)
Without checking each RF1 and this is not possible to do we can never be
sure there is not a second record.
81.
In relation to the onus of proof, while the onus rests on the appellant
to show the decision should be varied, the appellant needs to prove he did not
enter National Insurance on 21 July 1969 which put him in the position of
trying to prove a negative. On this point the onus of proof rests with HMRC and
it is for them to demonstrate the robustness of the records and systems on
which their decision depends.
82.
The Respondents have not put any direct evidence forward:
(1)
There is no CF8 which forms the basis of the RF1.
(2)
There is no evidence from anyone who has worked on the appellant’s
record.
(3)
The evidence is of procedures which should have happened, that is not
evidence of what happened.
(4)
There are no copies of correspondence; statements etc. that HMRC say
were sent to the appellant.
(5)
There are no copies of minutes of meetings that appellant may have
attended.
83.
While the destruction of records may be in accordance with a policy the appellant
should not be penalised for a decision which is adverse to him on record
destruction.
84.
The appellant has his own evidence and secondary evidence as to his
employments pre 1969 in the UK – this is stronger than HMRC’s reliance on form
RF1 which is not supported by any other corroboration.
85.
The other cases before the Tribunal to which we were referred were
decided on their facts. The appellants were in such cases unrepresented and it
is possible there is a question over the level of openness in what was placed
before the Tribunal.
Respondents’ arguments
86.
There is no evidence to suggest the RF1 is wrong and nothing to indicate
any errors of law. There is no evidence he paid National Insurance contributions
before the 1971-72 contribution year.
87.
The appellant’s National insurance records both pre and post 6 April
1975 are correct. The records show he first registered for National insurance
on 11 August 1971 and was treated as having entered into insurance on 21 July
1969.
88.
Despite extensive searches having been carried out it has not been
possible to trace an earlier National Insurance contribution record which
relates to the appellant.
89.
The appellant’s date of entry into the National Insurance scheme of 21 July
1969 was based on information he provided on form CF8. If he had completed the
form to say he had been in the UK previously and had previous insurance a trace
for his previous record would have been made and if not found his record would
be been noted to the effect “previous insurance declared but not found”.
Discussion
90.
The issue for the Tribunal’s determination is whether contributions have
been paid in the period 1962 to 2006 additional to those which are set out on
the appellant’s permanent record as put forward by the Respondents in their
decision under s8 SSC(ToF)A 1999 (“the HMRC decision”), and against which the
appellant has appealed.
91.
Under the relevant legislation, if it appears to the Tribunal that the
decision should be varied, the Tribunal may vary it but otherwise the decision
shall stand good.
Onus of proof
92.
In relation to onus of proof it was put to us by Mr Mitchell that while
in general terms it was accepted that the onus lay on the appellant to show why
the decision should be varied, here, because the appellant was required to
prove a negative, in the sense that he had to show he did not enter the
national insurance system in 1969, the onus should pass to HMRC to demonstrate
the robustness of the records and systems on which their decision depends.
93.
We do not accept that argument. The HMRC decision set out the
contributions it maintains the appellant has paid and it is for the appellant
to demonstrate why HMRC’s decision should be varied. The appellant argues that
he has in addition to extra contributions post 1969 paid contributions in an
earlier period. He is not required to prove that he was not registered for the
first time from 1969; rather he must show that he paid contributions in an
earlier period. As part of that it is open to the appellant, as he has done so
in this appeal, to lead evidence to suggest the appellant was in the national
insurance scheme earlier than 1969 and making payments of contributions before
then. That does not require proof of a negative.
Other Tribunal’s decisions and approach to evidence
94.
We were referred to a number of decisions where other tribunals had had
to consider evidence in relation to the written record in relation to national
insurance kept by the Department on the one hand and evidence from the appellant
on the other. Gutteridge concerned the issue of whether the appellant
had made an election available to married women not to pay contributions. Beamish
concerned the issue of whether contributions had been paid and so deals
with similar issues to this appeal. Similarly Rose and McGough
amongst other matters deal with the accuracy of the appellant’s
contribution record. Apart from McGough which was before a Social
Security Commissioner all three cases were before the Special Commissioners.
While none of the decisions are binding on this tribunal it is possible for
them to be of persuasive value.
95.
In each of those cases, detailed evidence was led, as in this case, on
the national insurance record and the procedures for maintaining it. In this
appeal Mr Mitchell drew our attention in his submission to the lack of primary
evidence. We do not for instance have evidence of various communications and
documents passing between the appellant and HMRC and the predecessor
Departments. We do not have the appellant’s CF9, the stamp cards relating to
contributions paid, shortfall letters / statements sent to the appellant. We
noted that there was a similar lack of primary evidence in the other cases but
that the Special Commissioners and Social Securtiy Commissioner nevertheless
found themselves able to make findings of fact on the basis of secondary
evidence and that they did this having duly considered the relevance and weight
of other evidence brought on behalf of the appellant.
96.
It seems to us that the persuasive value of these cases is limited in
that those cases turned on the particular weight the Special Commissioners and
Social Secruity Commissioner were able to attribute to the evidence before
them. While those decisions are helpful in providing examples of the fact that
it is open in principle for tribunals, to make findings of fact from secondary
evidence, and also of the balancing that must be undertaken in assessing
evidence they do not provide us with any short-cut around the exercise of
assessing and weighing the particular evidence put before us. Given this we do
not need to deal with Mr Mitchell’s submission that limited weight should be
put on these other cases because the appellants there were unrepresented. We
would nevertheless remark that there is nothing in those other decisions which
struck us as suggesting the Commissioners’ evaluation of HMRC’s evidence, was
materially less robust or their consideration of relevant arguments for the
appellant was materially less comprehensive due to the lack of the appellants’
representation in those cases.
The appellant’s evidence
97.
As mentioned above we found the appellant to be a credible witness and
we had no doubts that his account of his recollections were genuine and honest.
His oral evidence together with certain documentary evidence in the form of
biographical material, which we accept, given the circumstances of its genesis
does not give rise to concerns that the evidence is self-serving, has enabled
us to make certain findings of fact in relation to the appellant’s work in
periods preceding 1971. The relevance of such findings is that they lay a
preliminary foundation for a contention that contributions were paid in respect
of such employments and self-employments. They do not of themselves provide
direct evidence of payment of contributions however.
98.
While we have been able to make some findings of fact the limitations of
relying on the appellant’s recollections from matters from 40 to 50 years ago
must be acknowledged. We think distinctions may be drawn between the types of
information one might reasonably remember over that length of time with some
types of information being more amenable to recollection and therefore given
with greater lucidity than others. Places of work, who a person worked with and
the sequence of a person’s different jobs /activities are we think more likely
to stick in the mind, the legal status of whether a person was working as an
employee, a partner, or self-employed maybe less so. We are less confident
about relying on a person’s recollections of visits to contributions offices,
indeed the appellant was frank about, quite understandably, not remembering the
details of when these took place and what was said. The appellant’s evidence
covers recollections of deductions being made from certain employments in
respect of contributions, and of payments being made in relation to certain
self-employment income. We were of the view these recollections could be given very
limited weight. We are not suggesting the appellant was in any way dishonest
about these recollections but we suggest these are the sorts of matters it
would not be reasonable to expect a person to necessarily remember one way or
the other with any degree of certainty over the length of time in issue here.
99.
The limited weight attached to such recollections does not of itself
mean the contributions were not paid. The likelihood of them being paid needs
to be assessed in the light of all the evidence that has been put forward.
Completeness of HMRC’s record of contributions / procedures in place for
recording contributions and retrieving records
Was there a duplicate record / unallocated contributions?
100. The appellant
puts forward an explanation for why the national insurance records we were
shown, both the permanent RF1 form and computer based records are not
reflective of the contributions the appellant has paid. He suggests there is a
reasonable possibility that there is a duplicate record or records which if
found would show the missing contributions. The system for recording and
tracing contributions and for identifying and amalgamating duplicate records is
susceptible to error. The likelihood is increased where a contributor has a
surname such as the appellant’s which is prone to being misspelt.
101. We heard from Mr
Greenshields that a search would be made for a prior record if the contributor
had stated on the form CF2 that they had previously been subject to insurance.
But, if they did not state this, the implication we draw from this is that a
search would not be made. From Mr Greenshield’s evidence a search for a
duplicate would be picked up when the RF2 was sent in as the General Index section
would pick up if someone with the same name had two different national
insurance numbers. We did not hear evidence as to what extent this search would
look only at identical names or whether it would be broader so as to capture
misspelt names.
102. We were told
that there is now a computer based system for tracing National Insurance
records from an alphabetical index, that there is a computer record for each
RF1 and that the same importance is given to identifying duplicate NI numbers.
Mr Greenshields explained how extensive searches had been performed on the
computer using various different possible spellings of Mr Olofsson’s name and a
“relaxed search”.
103. Mr Greenshields
accepted that these searches were not double checked. We recognise that
tracking down unallocated contributions is a task that must be executed in a
fully comprehensive and diligent manner given the effects the outcome of the
searches may have on a contributor’s entitlements. We noted Mr Greenshield’s
experience with contributions records, and the serious approach he took their
maintenance and were satisfied that Mr Greenshields had carried out all the
searches he could reasonably be expected to perform and that he had executed
and recorded his searches with the necessary degree of care. We note that even
if a duplicate record had not been identified by the General Index search for
duplicates because the appellant’s name had been spelt different (see [101]), the
duplicate record would we think have been identified by these computer
searches.
104. Apart from his
evidence in relation to the searches he has performed, Mr Greenshield’s
evidence is of course only evidence of what ought to have happened in terms of
procedures and checks. We do not have direct evidence of what actually happened
in relation to how those procedures and checks were operated in fact and in
particular in relation to the appellant. Nevertheless it is open to the
Tribunal to draw inferences from evidence on what ought to have happened and
find that on the balance of probabilities that is in fact what happened.
105. In relation to
the destruction of original contributions records and forms (which it is not
disputed has been in accordance with policy) Mr Mitchell argues the destruction
of records is adverse to the appellant and the appellant should not be
penalised for the policy decision to destroy original records.
106. In this regard we
note the discussion on retention of records in the Rose case where the
Special Commissioner considered the approach of Social Security Commissioner
decision of Commissioner Mitchell in R(IS) 11/92. The point in the
Social Security Commissioner case covered whether an appellant should be entitled
to the benefit of an adverse assumption against the Secretary of State
responsible for social security records because the Secretary of State had
organised the destruction of the appellant’s records. The Special Commissioner
in Rose refined the Social Security Commissioner’s approach and rejected
the argument that HMRC should have an adverse inference drawn against them
because forms issued to the appellant could not be produced, those forms having
been destroyed in accordance with a documents retention policy.
107. While Mr
Mitchell has framed his argument slightly differently, taking account of the above,
we can see no basis for either ignoring secondary evidence which has quite
reasonably been put forward given the absence of the primary evidence, or making
any presumptions in favour of the appellant due to the destruction of primary
records. The task remains that of considering all the available evidence and
making findings of fact on the balance of probabilities. We would add that
without the benefit of the primary records it cannot necessarily be assumed that
their absence is in any case wholly adverse to the appellant.
Accuracy of record / newspaper cuttings
108. The Tribunal had
before it newspaper articles put forward by the appellant which suggest that there
are 9.3 million individual records that have not been matched up since 2004.
109. We noted the
article contains a quote to the effect that where the contributions cannot be
matched the contributions are retained until such time as they can be matched.
110. Mr Greenshields’
evidence covered how records were subject to audit checks. Nevertheless he accepted
in cross-examination that errors could be made. He put the possibility of this
as low “say 1%”. Mr Mitchell made the point that even if there was an error rate
of 1% when dealing with 50 million records would give rise to a significant
number of records with errors (500,000).
111. The appellant
also highlighted that there had been errors on the RF1 certainly in relation to
information given in relation to dates the appellant was said to have been in
full-time education and ambiguity about the notations in relation to his
bankruptcy.
112. Mr Mitchell
contends that without checking each RF1 which is not possible to do we can
never be sure there is not a second record. We do not disagree with that from the
point of view that a search of all the RF1s in existence while possible in principle
would be hugely disproportionate as a matter of practice, but we do not think
this argument means we must find that there is a duplicate record. The standard
of proof we must employ, and we do not understand this to be a matter of
contention between the parties, is one of a balance of probabilities.
113. Putting to one
side the relevance and weight of the appellant’s evidence which we consider further
below, we would be satisfied, on the basis of HMRC’s evidence that on the
balance of probabilities the procedures for identifying duplicate records did
operate as described in the relevant period and it more likely than not that a
duplicate record would have been identified by the general index and
subsequently the computer checks. Even if the appellant’s name was misspelt, or
it was possible that somehow there was a record of the appellant’s where there
was a transposition error in the appellant’s national insurance number, we
think it is more likely than not that this would have been picked up in the
comprehensive computer based checks for different name permutations that Mr
Greenshields performed.
114. While it cannot
be ruled out that there were errors in sending RF1s from local offices to
Longbenton, given what we have heard about the security procedures in place for
sending and logging documents between the offices, and audit processes, we
think it is more likely than not that any RF1 completed in respect of the
appellant prior to 1969 would have been sent to Longbenton.
115. Come 1975 and
the move to the new computer system, while it cannot be ruled out that there
might be errors transposing the RF1s to the computer record it is more likely
than not in our view that if there was a duplicate RF1 it would be included in
the transposition to the computer and would then have been picked up by the
computer search.
116. Similarly we
find that on the balance of probabilities any unallocated contributions would,
if not on the computer system, have been transferred to the computer system and
would be picked up by the searches conducted.
117. Neither the
newspaper cuttings, (even discounting any issues as to the limited evidential
weight to be attached to them), Mr Greenshield’s concession on accuracy, or the
errors and ambiguities in relation to the notations in relation to the
appellant’s periods in full-time educations and bankruptcy persuade us the
position is otherwise.
118. In relation to
the newspaper cuttings even if it were to be assumed that this level of
unmatched contributions subsisted in the period 1961-2 onwards we take into
account that in this matter we have heard evidence about the specific attempts
that have been made to find contributions not on the appellant’s record. We are
satisfied on the balance of probabilities that there are not unmatched
contributions recorded elsewhere and if there were they would have been found
by the searches undertaken.
119. In relation to
error rates we approach Mr Greenshield’s percentage estimate of error with
caution as no evidence was given supporting how the percentage was derived. The
relevance of a general error rate however that is defined also has to be
considered in relation to the issue here which is whether there was an error which
led to the creation of at least more than one record and the attribution of
contributions to that other record. On the evidence before us, although not
impossible we were satisfied that the likelihood of an error leading to an
additional record being made was extremely low.
120. While, having
heard the appellant’s evidence we find it more likely than not that the
notation on his record about his period of full-time education was incorrect
because he was in education, but not full-time in an earlier period, we find,
taking Mr Greenshield’s evidence into account, that the information would only
have been as accurate as the information given by the appellant. The appellant
understandably is not in a position to recollect in any detail his attendance
at the interview of what was said. When asked why he had felt the need to
register in 1971 if he had already been registered previously he thought this
may have been because the finance/ accountancy person at Youngblood Records had
suggested this. Without evidence to the contrary we find that on the balance of
probabilities the notation on full time education reflected the interviewer’s
understanding of information provided by the appellant. The fact it is
incorrect does not in our view throw into doubt the accuracy of contribution
record in so far as it records contributions paid given the system that was in
place for recording contributions received. The inaccuracy does not in our view
make it any more likely that there is a duplicate record or unallocated
contributions. Similarly any issue over whether the period of the appellant’s
bankruptcy was correctly recorded or not does not in our view make it more or
less likely that there is a duplicate record or unallocated contributions.
121. Before moving on
to balance the weight of the respective pieces of evidence we need to deal with
certain issues raised by the Respondents which we have considered but which we
think are of limited relevance in determining whether contributions of a
particular class were paid.
Relevance of letters being sent highlighting shortfalls
122. Despite there
not being direct evidence of the actual letters sent from HMRC and its
predecessors to the appellant, given the systems in place for logging the
letters on the RF1 and computer records we find it more likely than not that
the letters that the RF1 stated were sent to the appellant were actually sent. These
letters appear to request return of contributions cards. We heard how the
computer based record showed that a statement informing the appellant of his
benefits position for 1977/78 was issued and we were shown an example of the
sort of letter that would have been issued. We noted this related to the
specific contribution year and not the full contribution record. For the
remaining years in dispute the computer record showed letters had been issued
either requesting the return of the contribution card or that a statement was
issued.
123. There was
nothing to suggest any of these letters would have highlighted to the appellant
that his contributions record only started in January 1971. We therefore think
they are of limited relevance to the question of whether contributions were
paid or not paid certainly in the periods prior to 1971. They may be of more
relevance for contribution periods after 1971 in the sense that where a letter
highlights deficiencies in contributions to a contributor for a year that has
recently passed, it might be expected that a contributor who disputed that
would query the matter then. Even then, on the facts of this case and given what
we have heard about the appellant’s focus on his music business and photography
career, his reliance on others to handle his financial affairs from 1969, and
that the appellant might not have appreciated the significance of deficient
records, it would not surprise us if the shortfall letters did not prompt a
response from the appellant even if the record of contributions paid was
incorrect. We therefore place limited weight on the shortfall letters for the
issue of whether the record is correct for post 1971 periods.
Relevance of paying contributions late
124. We were referred
to the judgment in Beamish that the appellant had been a slow payer, and
asked to note the appellant was a slow payer. We do not see how that helps
establish one way or the other whether the contributions pre 1971 were paid or
not or whether additional contributions to those shown on the appellant’s
record were paid post 1971. Certainly in relation to periods when the appellant
was employed it is irrelevant as it would be for the employer to deduct amounts
in respect of contributions and pay over the contributions.
Absence of notation on record “previous insurance
declared but not found”
125. HMRC submitted
that if the appellant had completed his form CF8 to show that that he had been
in the UK previously and had had previous insurance a trace would have been
carried out, and if unsuccessful a note of this would have been made. No such
note was made. Mr Greenshield’s evidence did not deal with the particular
notation but even if it had done and we had made a finding of fact that this
was the notation that would have been made its primary assistance would be in
showing that it was more likely than not that the appellant had not declared
previous insurance in the UK.
126. In relation to
whether the absence of such a notation makes it more likely than not that
previous contributions were in fact paid, we think such absence would have been
of only limited relevance. The relevance of such absence to whether previous
contributions were paid is dependent on making an assumption that the appellant
would be more likely to declare previous insurance if previous contributions
had been paid than to have not declared previous insurance. While that
assumption does not seem unreasonable as a general proposition particularly
given the example form of the application for national insurance form CF8
alerts the reader to the importance of giving this information given the effect
on benefit claims, we did not have sufficient evidence before us to establish
that it necessarily followed that any lack of declaration by this particular
appellant indicated it was more likely than not that contributions had not been
paid previously.
Weighing up the evidence
127. We have on the
one hand the appellant’s own oral evidence of his periods of employment and
self-employment and recollections of deductions of contributions being made,
and in the case of self-employment of contributions being paid. Some of the
employments and self-employment are also mentioned in biographical material
about the appellant. On the other hand we have HMRC’s record of the
contributions it maintains the appellant has paid, evidence from an officer of
HMRC as to the procedures surrounding the creation, maintenance and retrieval
of national insurance contributions records, and the officer’s own evidence of
the attempts he has made to locate any missing contributions.
128. We have outlined
above the limitations of relying on the appellant’s recollections given the
length of time that has passed, and the points of detail that it would be
reasonable to expect him to remember with any degree of reliability. In
particular we have not from the appellant’s evidence been able to make a
finding of fact that deductions of contributions were made or that the
appellant paid self-employed contributions.
129. While
employment and self-employment are pre-requisite to payment of employed earner
or self-employed earner contributions, any inference that as a result
contributions were in fact paid has to be weighed against the documentary
evidence held by HMRC, and the evidence around the record creation, maintenance
and retrieval.
130. It is our view that
the documentary evidence on the appellant’s national insurance record and the evidence
on procedures surrounding it should be given significant weight. We are
satisfied that while not failsafe, the procedures that would have been place
for recording contributions payments were highly robust. The documentary
evidence and surrounding evidence on national insurance procedures outweighs the
inferences that might otherwise be drawn from the fact of the appellant’s
employments and self-employments prior to 1971 (which facts are themselves
based on recollections going back 40 to 50 years ago). We disagree with the
appellant’s submission that there is a reasonable possibility that there is a
duplicate RF1. While the possibility of a duplicate record cannot be ruled out,
we find the likelihood of that to be the case to be extremely low and on the
balance of probabilities we find that there is no duplicate record.
131. It is possible
to be in employment but not have had deductions, or to have had deductions but
not have had them paid over by the employer. While those situations, which
would involve an abdication of responsibility, intentional or otherwise on the part
of the employer and for that reason would not necessarily be that common place
we think it is more unlikely, given the robustness of the processes surrounding
the national insurance record that, contributions having been paid, there was
an error in failing to create a contribution record. Similarly we think it is
more unlikely than the scenario of a remiss employer that a duplicate national
insurance record was created which was not then picked up in the extensive
searches made and more unlikely that contributions were paid but then not
recorded on a suspense file or recorded but then not traced. The absence of a
record of payment of contributions when viewed against the backdrop of the
procedures for creation, maintenance and retrieval of records suggests to us
that on the balance of probabilities no payment was made.
132. In relation to
periods of self-employment, where it would be up to the self-employed
contributor to make the payment, it strikes us as being quite possible that the
contributor might fail to make the payment. Again, given the robustness of
record-keeping the absence of a record of payment suggests to us that on the
balance of probabilities no payment of contributions was made.
Missing contributions post 1971
133. The appellant
maintained that the record for the 2 years 1977 and 1978 was incorrect in that
he had continued to work for Young Blood Record Co Ltd, and the record for 1980
through to 1986 were incorrect because he was involved in his wife’s catering
business Kathie’s Kitchen Ltd. We noted however that it was not clear from the
appellant’s oral evidence that his work with Young Blood Records Co Ltd did
continue past 1976. In relation to the catering business our understanding of the
appellant’s role was in generating the idea for the business, and that it was
not one in which had an active ongoing financial or other role that would
suggest it was likely that full contributions were paid during 1980 through to
1986.
134. For the
contribution years 1990 to 1991 the appellant queries why these are incomplete
on the record given his recollection that contributions were accounted for in
relation to income from publishing rights of his songs held through Olofsong
Music.
135. Weighing up the
appellant’s recollections as to contributions being paid in the post 1971
period against the appellant’s national insurance record, and procedures
governing their creation and maintenance of that we give greater weight to the
record. The periods in issue are still a significant way in the past and we are
not persuaded the appellant’s recollections of contributions being paid,
although truthfully recollected, can be given as much weight as the record.
136. In relation to
periods of employment and self-employment post 1971 it seems even more
improbable to us (than in relation to the pre 1971 period) that the appellant
having registered for national insurance, and a national insurance record
having been created, and some contributions having been recorded on that
record, that further contributions which had been paid would not have been put
onto the record.
137. We find that on
the balance of probabilities no additional contributions were paid by the
appellant.
What if appellant suffered deductions as an employed
earner but amounts were not paid over? Regulation 60 of the Social
Security (Contributions) Regulations 2001
138. Given we have
been able to make findings for the purposes of this appeal as to some of the
employments the appellant held but have found that contributions were not paid
we hope it will be useful to mention the following regulation, to which were
alerted to in the Gutteridge case.
139. Regulation 60
of the Social Security (Contributions) Regulations 2001 covers the treatment of
unpaid primary Class 1 contributions where there is no consent, connivance or
negligence on the part of the primary contributor, for the purposes of entitlement
to contributory benefits.
140. The regulation
is only available where contributions have not been paid. That is the finding
here. The appellant worked in a number of places. From the detail of his evidence
we were satisfied that he was in full-time employment as a waiter at the
Piccadilly hotel, and later with Olga Records (UK) Limited for the periods set
out in our background findings.
141. While it seems
more probable than not that the work at the Stockpot as a kitchen hand and at
the flower shop as a general assistant were on an employed earner basis we were
unable on the evidence before us to make any specific findings as to the period
over which the work took place and the number of hours worked. Furthermore, the
nature of the work, the casual hours and likely rates of pay suggests that
primary contributions might not have been due in any event. That is
particularly the case with the work for the flower shop which seems to some
extent to have been on a “favour given for a favour received” basis.
142. On the evidence
before us we think it is more likely than not that the appellant’s work as a
photographer and in running the label Green Light records was not on an
employed earner basis.
Conclusion
143. We are not satisfied
that on the balance of probabilities that contributions pre 1971 were paid or
that there were contributions paid post 1971 which are not reflected on the
record. The contributions record is an accurate record of the contributions
which have been paid by the appellant. Accordingly the appeal is dismissed.
144. In view of our
findings and Regulation 60, the appellant may wish to ask HMRC to consider
whether there is any scope to treat any unpaid contributions from the
appellant’s periods as an employed earner as paid.
145. 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.
SWAMI
RAGHAVAN
TRIBUNAL JUDGE
RELEASE DATE: 3 August 2012
