United Kingdom Special Commissioners of Income Tax Decisions

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Cite as: [2006] UKSPC SPC00528, [2006] UKSPC SPC528

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Mrs Sandra Lesley Whittaker v Revenue & Customs [2006] UKSPC SPC00528 (27 March 2006)

SPC00528

NATIONAL INSURANCE – Married Woman's Election to pay Reduced Rate Contributions – Appellant's evidence that she made no election unconvincing – Respondents' evidence overwhelming despite the fact that original certificate of election had been destroyed in accordance with its Records Management Policy – Appeal Dismissed

THE SPECIAL COMMISSIONERS

MRS SANDRA LESLEY WHITTAKER Appellant

- and -

HER MAJESTY'S REVENUE and CUSTOMS Respondents

Special Commissioner: MICHAEL TILDESLEY OBE

Sitting in public in Manchester on 6 February 2006

The Appellant appeared in person

John Cormack, HM Inspector of Taxes for the Respondents

© CROWN COPYRIGHT 2006

DECISION

The Appeal

The Appellant was appealing against the decision of the Respondents dated 13 April 2005 which stated that

"From 1 July 1968 to 5 April 1975 the Appellant was not liable to pay National Insurance contributions, and from 6 April 1975 to 6 February 2005 the Appellant was liable to pay married woman's reduced rate contributions".

The Issue in Dispute

The issue in dispute was whether the Appellant made an election to pay married woman's reduced rate National Insurance contributions from 1 July 1968.

The Appellant asserted that she did not make the election in July 1968. She relied on the fact that the Respondents were unable to produce the document making the election signed by her.

The Respondents accepted that the original election document was destroyed under their "Records Management Policy" which has ministerial approval. The Respondents, however, submitted that the evidence of official records, the refunds accepted by and the Certificate of Election held by the Appellant overwhelmingly demonstrated that the Appellant freely elected to pay reduced rate contributions on 1 July 1968.

The outcome of the Appeal will depend upon whether the Appellant can satisfy me on the balance of probabilities that she did not elect to pay reduced rate contributions on 1 July 1968.

The Legislative Context

National Insurance was introduced in the United Kingdom in 1948. Under regulation 2 of the National Insurance (Married Women) Regulations 1948, married women were given a special status. A married woman who was an employed person was liable to pay Class 1 National Insurance contributions unless she elected not to pay. Under regulation 2(3)(a) a certificate was issued to a married woman who elected not to pay Class 1 contributions. She was required to give this certificate to her employer immediately.

A married woman's election not to pay contributions was made on a form (CF9). The married woman making the election would sign the CF9 which included a declaration that she had read, or explained to her the contents of leaflet NI1. The leaflet clearly set out the consequences of making the election and also confirmed that the woman could cancel her election at any time.

A married woman who made an election not to pay National Insurance contributions would not receive the same benefits as a married woman who paid class 1 National Insurance contributions. Thus a married woman who made the election was covered for industrial benefit, redundancy and maternity payments but she was not entitled to receive any contributory benefit, such as unemployment or a retirement pension in her own right.

The Social Security Pensions Act 1975 introduced a policy of equal benefits for men and women in return for equal contributions. The Act abolished a married woman's right not to pay contributions from 6 April 1977. However, regulation 102 of the Social Security (Contributions) Regulations 1979 allowed a married woman to carry forward her election to pay a reduced rate National Insurance contribution.

The Respondents conducted advertising campaigns in the mid 1970's to alert married women of the changes in the legislation regarding the married woman's National Insurance contributions. The campaign advised married women about their options regarding National Insurance contributions, including retaining the right to continue paying reduced rate contributions where an election was made prior to the legislation coming into force.

The Evidence

I heard evidence from the Appellant and Mrs Nadine Newham for the Respondents. Mrs Newham gave evidence about the National Insurance general procedures for dealing with married women who elected to pay reduced rate contributions and for refunds of contributions.

The Respondents provided me with a bundle of documents.

The Appellant has been a hard working person all her adult life, having worked almost continuously since 1959 and at one stage in her career, holding down at the same time four different jobs. The Appellant was convinced that she had been paying full National Insurance contributions and that she was entitled to a retirement pension in her own right. The Appellant at the time of the hearing was still working part-time.

The Appellant married Mr James Whittaker on 4 December 1965.

The Appellant entered the National Insurance scheme on 7 February 1960. She paid weekly class 1 National Insurance contributions up and until the contribution year 1968/69 when the Respondents' records revealed that she paid just four class 1 contributions.

Around May 1968 the Appellant gained employment with Bemore Press Limited as a printer and book-binder. Whilst in this employment the Respondents asserted that the Appellant elected to pay the married woman's National Insurance contribution rate. The Appellant's permanent record of National Insurance (RF1) was endorsed with "MW1/NP 1/7/68" which meant "Married Woman in Class 1 employment Not Paying". A certified copy of the Appellant's RF1 was produced to me at the hearing. Each individual's RF1 was contained in a ledger which was kept under secure conditions in the Respondents' offices at Newcastle.

According to Mrs Newham the entry on the RF1 would have been generated by the completion of a form CF9 by the Appellant. The CF9 evidenced the Appellant's election not to pay class 1 National Insurance contributions because of her married woman's status. The CF9 incorporated a declaration by the signatory that she had read or explained to her the contents of leaflet NI1 which set out clearly the consequences of not paying class 1 National Insurance contributions on future benefit claims and pension entitlement.

The details of a married woman's election would be transferred to a machine card by the local social security office, which would then send the card to the National Insurance office in Newcastle. The machine card would have on it the married woman's full name, her national insurance number and date of birth. The RF1 for the married woman would then be updated with the details on the machine card. The National Insurance office returned the machine card to the local social security office which would note on the married woman's CF9 the recording of the married woman's election on the RF 1. Mrs Newham confirmed that the entries on the machine card and the RF1 would have been the subject of rigorous independent checks by supervisory staff.

The machine card and the CF9 would have been retained by the local social security office for six years and then destroyed. The destruction was authorised under the Respondents' "Record Management policy" which had Ministerial approval. This policy was made in response to the requirements of the Public Records Act 1958 and 1967 which urged all government departments to review stringently the cost effectiveness of their arrangements for document storage. The Respondents considered that there was no need to retain indefinitely the CF9 and the machine card because the RF1 contained a permanent record of the individual's history of National Insurance contributions. The RF1 was kept under secure and safe conditions. The Respondents were not, therefore, in a position to produce the originating documents for the entry on the Appellant's RF1 relating to her purported married woman's election on 1 July 1968 not to pay class1 National Insurance contributions. According to the Respondents the documents including the CF9 would have been destroyed after six years in accordance with their "Record Management policy".

The Appellant stated in evidence that she had not signed any Government form to pay no class I National Insurance contribution because of her status as a married woman. The Appellant had every reason to pay the class 1 contribution because she was earning good money.

The Respondents in their letter to the Appellant dated 22 March 2005 set out some of the reasons why married women elected not to pay class 1 contributions:

(1) There was a marked difference in the rate of contribution that was paid by a married woman. In 1975 the weekly class 1 contribution for a woman was 62 pence; a weekly exempt contribution for a married woman was four pence.

(2) If a married woman was in low paid work, it was financially attractive to her not to pay the class 1 contribution.

(3) It was possible in some cases that payment of class 1 contributions would not necessarily give the married woman a retirement pension. This was because of an additional condition known as the "married woman's half test" which had to be satisfied before a pension could be paid. The half test required the married woman to make class 1 contributions in at least half the number of weeks between the date of her marriage and the year preceding her 60^th birthday,

(4) A married woman may qualify for a retirement pension because of her husband's contributions. In these circumstances the married woman would be entitled to a pension equal in value to 60 per cent of her husband's entitlement.

The Appellant's RFI had the following entries apart from her married woman's election:

(1) In 1968/69 there were four class 1 contributions and 31 exempt contributions.

(2) No contributions had been credited to the Appellant's National Insurance record for the contribution years 1969/70 to 1974/75.

(3) On 16 July 1970 the Appellant was sent a statement of her contributions, form RF170.

The Appellant was in employment throughout the contribution years recorded on her RF1. Around February 1969 she left her employment with Bemore Press Limited and had jobs with Cameron Industrial Services Limited and Gardner Merchant Limited. In July 1970 the Appellant gained employment with Cheshire County Council where she remained until 1980.

The Respondents pointed out that the Appellant's employers during this period were obliged to deduct class 1 National Insurance contributions from her wages unless the Appellant provided them with proof that she made a married woman's election.. The proof would have been either a special National Insurance card or a label to be attached to an existing card which would have allowed her employers to purchase and affix exempt rate National Insurance stamps to the Appellant's National Insurance card. In the Respondents' view, the fact that the Appellant's RF1 showed either exempt or no contributions from 1968/69 to 1974/75 whilst she was in employment was persuasive evidence that the Appellant had supplied her employers with evidence of a married woman's election.

The RF 170 notice sent to the Appellant on 16 July 1970 would have advised her of her contributions during 1968/69 which according to her RF1 would have been four class I contributions and 31 exempt contributions. In the Respondents' view the Appellant would have queried the contents of the RF 170 if she had not elected to make the married woman's National Insurance contribution rate. The Respondents referred to the RF 170 notice as a deficiency notice in correspondence with the Appellant dated 22 March 2005. In subsequent correspondence with the Appellant dated 13 April 2005, the Respondents accepted that they were wrong to refer to the notice as a deficiency notice, it was merely a statement of contributions. The Appellant relied on this error to demonstrate that the Respondents were prone to make mistakes and that they made a mistake in relation to the recording of her married woman's election.

From 6 April 1975 the Appellant's record of National Insurance contributions was maintained on a computer file known as the "Technical Copy of Account" instead of the manual record RF1. The Appellant's technical copy of account contained the notation "MW/Widows Reduced Rate Authority from PRE-RNI". PRE-RNI meant pre-reconstruction of the National Insurance system. The notation on the technical account was generated by the married woman's special card and indicated that the Appellant had made the married woman's election.

The Appellant's National Insurance record from 6 April 1975 revealed the following:

(1) From 1975/76 to 1979/80 the Appellant was employed by Cheshire County Council which deducted category B National Insurance contributions from the Appellant's wages. Category B contributions indicated that the Appellant had made a married woman's election to pay a reduced rated contribution. The category B deduction was recorded on the Appellant's pay slip and P60.

(2) From 1981/82 to 1989/90 the Appellant's employer was NW Gas. In 1981/82 to 1985/86 the Appellant's employer deducted category A contributions (class 1) from her wages. The Respondents carried out an investigation because the category A deductions were not consistent with a married woman's election. The outcomes of the investigation were that NW Gas deducted category B contributions from the Appellant's wages and the Appellant was offered a refund of the excess contributions, evidenced by replacement vouchers contained in the bundle. The Respondents also asserted that they would have enquired at the time with the Appellant about whether she wished to continue with her married woman's election. The Respondents would not have advised NW Gas to deduct category B deductions or offered refunds unless the Appellant had indicated that she wanted to continue with her election.

(3) From 1990/91 to 1994/95 the Appellant held two employments at the same time with British Gas North West and Initial Contract Services. British Gas deducted category B National Insurance contributions from the Appellant's wages. Initial Contract Services did not appear to make deductions for National Insurance contributions, probably because the Appellant's earnings from this employment were below the earnings threshold for contributions.

(4) In 1995/96 the Appellant held four employments at the same time with British Gas North West, Mitie Cleaning Services Limited, British Gas Property and West Cheshire NHS Trust. British Gas North West deducted category B contributions from the Appellant's wages. British Gas Property deducted category A. The records for Mitie cleaning showed category A classification but no deductions were made because the Appellant's earnings were below the National Insurance contributions threshold. The West Cheshire NHS Trust deducted both category A and B contributions from the Appellant's earnings. The Respondents expressed the view that the Appellant had not given Mitie Cleaning and British Gas Property the certificate of election exempting her from category A contributions which explained why they deducted category A contributions. In the Respondents' view the Appellant's principal employer British Gas North West held the certificate of election which was then given to West Cheshire NHS Trust during the tax year which explained why the Trust deducted both category A and B contributions in that tax year.

(5) From 1996/97 to 2003/04 the Appellant held two employments with West Cheshire NHS Trust (later reformed as Cheshire and Wirral Partnership NHS Trust) and Mitie Cleaning Services Limited. The West Cheshire Trust continued to deduct category B contributions from the Appellant's earnings. Mitie Cleaning, however, deducted category A contributions from the Appellant's wages for the tax years 1997/98 to 2000/01.

(6) In June 2001 the Respondents refunded £264.45 to the Appellant. This sum represented the overpayment in National Insurance contributions for the category A deductions in the years 1995/96, 1997/98 to 1999/2000. Further on 25 June 2002 the Respondents issued a further a refund of £233.65 for the overpayment in contributions in the tax year 2000/01. The Respondents' records show that these refunds were cashed on 4 July 2001 and 11 February 2001 with the Appellant telling the Respondents by telephone on 25 March 2005 that she deposited the refunds in her bank account.

(7) At the hearing the Appellant suggested that she did not know that the refunds related to repayment of National Insurance contributions. Mrs Newham's evidence, however, stated that the Appellant would have received a letter explaining the reason for the refund, and that the Appellant would have had to sign the refund form before she received the money payment order for the overpayment in contributions.

(8) In 2004/05 the Appellant's employer was Cheshire and Wirral Partnership NHS Trust which deducted category A contributions from the Appellant's wages. The Trust admitted in a letter dated 3 August 2005 that the Appellant was put onto category A contributions in error when she started on her bank post. The Trust amended the Appellant's records in week 40 of the tax year when she was put onto category B contributions.

The Respondents produced a copy of the Appellant's certificate of election issued on 9 March 1987 obtained from the Appellant's employer, Cheshire and Wirral NHS Trust. The Appellant gave this certificate to her present employer when she left British Gas. The certificate clearly stated that it may be accepted as evidence that the Appellant was liable for a married woman's reduced rate National Insurance contribution. The date of the certificate indicated that it was issued following the Respondents' investigation in 1987 and provided corroboration of the Respondents' assertion that the Appellant was asked at the time about whether she wished to continue with her married woman's election.

The Respondents mentioned three claims for unemployment benefit on 29 December 1995, 11 January 1996 and 24 June 1996 in their correspondence with the Appellant. The Appellant was adamant that she never made a claim for unemployment benefit. She did, however, attend the employment office in connection with her insurance claim for redundancy protection following the ending of her employment with British Gas.

Reasons for My Decision

I make the following findings of fact:

(1) The Appellant's permanent National Insurance record (RF1) recorded her election on 1 July 1968 to pay the married woman's reduced rate National Insurance contributions.

(2) The Respondents were unable to produce the originating documents (the election form CF9 signed by the Appellant and the machine card) which generated the entry on the Appellant's RF1 regarding her election. The originating documents were destroyed in accordance with the Respondent's Record Management policy. I draw no adverse inference from the destruction of these documents as it was not done with the intention of destroying evidence.

(3) I am satisfied that the Respondents had procedures in place to ensure that the entries recorded on the Appellant's RF1 were accurate, in particular the independent checking by supervisors of entries in the RF1 against the originating documents.

(4) From 1 July 1968 to 5 April 1975 the Appellant made no National Insurance contributions whilst she was in full-time employment. From 1975/76 to 1979/80 the Appellant paid reduced rate contributions. The Appellant's contribution history during this period was consistent with her making a married woman's election on 1 July 1968.

(5) The Appellant paid class 1 National Insurance contributions in respect of her employment with NW Gas from 1981/82 to 1985/86. However, the Respondents carried out an investigation which concluded that the payments were made in error and offered the Appellant refunds of the excess contributions. The Appellant's employers amended their records to ensure that they only deducted reduced rate contributions from the Appellant's earnings. I am satisfied that the Appellant paid class 1 National Insurance contributions in error during this period.

(6) I am further satisfied that at the conclusion of their investigation, the Respondents confirmed with the Appellant that she wished to continue with her election to make reduced rate contributions, which was evidenced by the certificate of election dated 9 March 1987 supplied to the Respondents by the Appellant's current employers, Cheshire and Wirral Partnership NHS Trust.

(7) From 1986/87 to 1994/95 the Appellant continued to pay reduced rate National Insurance contributions which was consistent with the Appellant making a married woman's election on 1 July 1968.

(8) From 1995/96 to 2003/04 the Appellant continued to pay reduced rate National Insurance contributions in respect of her principal employment. However, during this period the Appellant held other employments where her employers deducted class 1 National Insurance contributions because they did not have a copy of the Appellant's certificate of election. The Appellant was subsequently refunded the sums of money she paid in respect of the Class I National Insurance contributions. I am satisfied that the Respondents made the Appellant aware of the reason for the refunds, namely that she elected to make reduced rate National Insurance contributions.

(9) In 2004/05 the Appellant's employer, Cheshire and Wirral Partnership NHS Trust deducted in error class 1 National Insurance contributions from the Appellant's earnings. This error was put right by the employer in week 40 of the tax year when they reverted to deducting reduced rate contributions.

(10) Throughout the period from July 1968 to 2004, I am satisfied that the Appellant was made aware through a variety of sources, including wages slips, P60's, direct contact from the Respondents and media advertising campaigns that she was paying reduced rate National Insurance contributions.

(11) I am satisfied that the reliability and the accuracy of the married woman' election entry on the Appellant's permanent record of National Insurance (RF1) were confirmed by the Appellant's payment record of either exempt or reduced rate contributions, the receipt of refunds of excess contributions by the Appellant, and the existence of a certificate of election dated 9 March 1987.

(12) I make no findings of fact on the question whether the Appellant claimed unemployment benefit because it was not relevant to the disputed issue

The Appellant stated that she did not sign the married woman's certificate of election and that throughout her working life she paid class 1 National Insurance contributions. The Appellant's statement, however, was not supported by my findings of fact. My findings demonstrated unequivocally the Appellant was liable to make no contributions from 1 July 1968 to 5 April 1975 and thereafter reduced rate contributions. When she made class 1 National Insurance contributions, the Respondents repaid the contributions to the Appellant. My findings regarding the Appellant's National Insurance liability and the repayment of National Insurance contributions were consistent with the making of a married woman's election by the Appellant. Further my findings on the outcomes of the 1987 investigation, the documents connected with the refunds, the media campaigns and the information on her wage slips confirmed that the Appellant knew that she was liable for National Insurance contributions at either the exempt or reduced rate.

The Appellant stated that the Respondents were prone to making mistakes but the only evidence of a mistake was their reference in correspondence to the statement of contributions issued on 16 July 1970 as a deficiency statement. The Respondents in subsequent correspondence admitted of their own volition that it was not a deficiency statement. I found that the Respondents took the utmost care to minimise mistakes. They put in place procedures to ensure the accuracy of entries on the Appellant's permanent record of National Insurance (RF1). The Respondents carried out thorough investigations when the Appellant's National Insurance contribution rate did not match with the married woman's election recorded on the RF1.

The Appellant intimated at the hearing that her employer at the time of the married woman's election may have misled her about the implications of the election and that she did not knowingly make an election. The Appellant produced no evidence to substantiate her intimation. My finding that the Appellant knew that she was liable for National Insurance contributions at the exempt or reduced rate undermined her intimation that she did not knowingly make an election. In addition, the Appellant did not take the opportunities presented to her by the Respondents at various stages in her working life to reverse the married woman's election, which casted further doubt on the validity of her intimation.

The Appellant relied on the fact that the Respondents could not produce the original document upon which she indicated her election because they destroyed it in accordance with their Record Management policy. The Respondents referred me to the decision of the Social Security Commissioners of 30 April 1992 CIS/620/1991 where the Commissioner considered the evidential consequences arising from the routine destruction of documents in the context of the Privy Council decision in The Ophelia [1916] 2 AC 206. The Ophelia case was about the admissibility of secondary evidence when the original documentary evidence had been wrongly destroyed with an improper motive. The Ophelia case had no bearing upon this Appeal either in fact or in law. The Respondents did not destroy the original document with the intention of destroying the evidence. I, therefore, drew no adverse inference from its destruction. Moreover in law, my powers to receive evidence are governed by rule 17(6) of the Special Commissioners (Jurisdiction and Procedure) Regulations 1994 which allows me to receive evidence of any fact which appears to be relevant, notwithstanding that such evidence may be inadmissible in proceedings before a court of law. Thus the destruction of the original document did not preclude me from considering the Respondents' evidence about the Appellant's married woman's election.

The reality of this Appeal was that the Appellant's evidence comprised of unsubstantiated statements which carried no weight when judged against the overwhelming evidence of the Respondents supporting their contention that the Appellant made a married woman's election on 1 July 1968. My findings of fact reflected the strength of the Respondents' evidence.

I am satisfied that the entry on the Appellant's permanent record of national insurance recording the Appellant's married woman's election on 1 July 1968 was accurate.

Decision

For the reasons set out in paragraphs 30 to 36 I determine that

(1) On 1 July 1968 the Appellant made a married woman's election not to pay class 1 National Insurance contributions.

(2) From 1 July 1968 to 5 April 1975 the Appellant was not liable to pay National Insurance contributions, and from 6 April 1975 to 6 February 2005 the Appellant was liable to pay married woman's reduced rate contributions.

I, therefore, dismiss the Appeal and make no order for costs.

MICHAEL TILDESLEY

CHAIRMAN

RELEASE DATE :27 March 2006

SC 3308/2005