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You are here: BAILII >> Databases >> United Kingdom Special Commissioners of Income Tax Decisions >> Wilkinson v Revenue & Customs [2006] UKSPC SPC00567 (30 October 2006)
URL: http://www.bailii.org/uk/cases/UKSPC/2006/SPC00567.html
Cite as: [2006] UKSPC SPC00567, [2006] UKSPC SPC567
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George Taylor Wilkinson v Revenue & Customs [2006] UKSPC SPC00567 (30 October 2006)

     
    SPC00567NATIONAL INSURANCE CONTRIBUTIONS - whether Appellant was in contracted - out employment from 1985 to 1991 – yes – whether Appellant was liable to pay contributions at the reduced rate applicable to contracted - out employment – yes – whether Appellant was entitled to pay contributions at the full rate – no - appeal dismissed – Social Security Act 1975 section 1; Social Security Pensions Act 1975 sections 26 and 30; Occupational Pension Schemes (Contracting-out) Regulations 1984 SI 1984 No. 380
    THE SPECIAL COMMISSIONERS
    GEORGE TAYLOR WILKINSON
    Appellant
    -and-
    THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS
    Respondents
    Special Commissioner : DR A N BRICESitting in public on 28 April 2006 and 30 August 2006
    The Appellant in personMs Jane Hodge, Appeals Unit Southern England, for the Respondents
    © CROWN COPYRIGHT 2006DECISION
  1. Mr George Taylor Wilkinson (the Appellant) appeals against a decision dated 1 March 2005 made by the predecessor of the Commissioners for Her Majesty's Revenue and Customs (the Revenue). The decision was that, for the period from 6 April 1985 to 5 April 1991, the Appellant was liable to pay primary Class 1 national insurance contributions as shown in column A of a schedule attached to the decision; that he had paid primary Class 1 contributions as shown in column B of the schedule; and that the contracted-out elements of those class 1 contributions were shown at column C.

  2. The schedule attached to the decision was in the following form:

    3. Year Employer Column A Column B Column C
    (contracted-out element)
    1985/86 Bovis £ 983.52 £ 983.52 £ 817.44
    1986/87 Bovis £1057.68 £1057.68 £ 879.84
    1987/88 Bovis £1094.88 £1094.88 £ 879.84
    1988/89 Bovis £1153.20 £1153.20 £ 960.96
    1989/90 Bovis £1149.90 £1149.90 £1026.48
    1990/91 Bovis £1154.28 £1154.28 £1106.283.
  3. The effect of the decision was that the Appellant had paid national insurance contributions at the reduced rate applicable to contracted-out employment. The Appellant appealed because he was of the view that he was entitled to pay contributions at the full rate and not at the reduced rate.

    4. The legislation
  4. At the relevant time the legislation about national insurance contributions was found in the Social Security Act 1975 (the Principal Act) and the Social Security Pensions Act 1975 (the Pensions Act 1975). Section 1 of the Principal Act provided that the funds required for paying certain benefits should be provided by means of contributions payable by earners, employers and others. Section 1(2) provided that contributions were of five classes. Class 1 contributions are relevant in this appeal and they were earnings-related. Primary class 1 contributions were payable by employed earners and secondary class 1 contributions were payable by employers. Section 1(6) provided that no person was entitled to pay class 1 contributions other than those which he was liable to pay. Other sections of the Principal Act provided for the rates at which class 1 contributions were payable.

  5. Section 26 of the Pensions Act 1975 contained provisions for the purpose of reducing the rates at which class 1 contributions were payable where an earner was in contracted-out employment and where an occupational pension scheme provided for the earner to be entitled to a minimum guaranteed pension. The provisions of section 30 changed in 1986, 1988 and 1991.. The 1988 version of section 30 provided that the employment of an employed earner in employed earner's employment was contracted-out if the employed earner was under pensionable age; his service qualified him for a guaranteed minimum pension provided by an occupational pension scheme; the scheme was contracted-out in relation to that employment; and a contracting-out certificate issued by the Occupational Pensions Board was in force. Section 30(3) provided that the existence of a contracting-out certificate for the time being in force was conclusive that the employment was contracted-out employment.

  6. Thus, where employment was contracted-out, and where an earner was entitled to a guaranteed minimum pension under an occupational pension scheme, the earner paid national insurance contributions at a reduced rate and, correspondingly, received a reduced state retirement pension.

  7. After 6 April 1985 section 31(1) of the Pensions Act 1975 stated that regulations should provide for the issue by the Occupational Pensions Board to employers of contracting-out certificates specifying the employments to be treated as contracted-out employments and the occupational pension schemes by reference to which those employments were to be so treated. Section 30(2) stated that regulations should also provide for the cancellation, variation or surrender of any contracting out certificate, or the issue of an amended certificate on any change of circumstances affecting the treatment of an employment as contracted-out employment. Section 31(3) stated that an employment should only be included in a contracting out certificate so long as the employer elected. Section 31(5) stated that regulations might make provision for requiring an employer to give a notice of his intentions in respect of an election to employees. Section 31(7) provided that "except in prescribed circumstances, no contracting-out certificate and no cancellation, variation or surrender of such a certificate shall have effect from a date earlier than that on which the certificate is issued or the cancellation, variation or surrender is made".

  8. During the period of the Appellant's employment the regulations made under the provisions of section 31 were the Occupational Pension Schemes (Contracting-out) Regulations 1984 SI 1984 No. 380 (the contracting-out regulations). Part II (regulations 2 to 17) applied to the certification of employments. Regulation 2 provided that employers could make an election for the issue of a contracting-out certificate and regulation 3 provided for notices to be given to employees by an employer if the employer intended to make an election for the issue of a contracting-out certificate. Regulation 3(3)(a)(ii) provided that one of the ways in which such a notice could be given was by exhibiting it conspicuously at the place of work or employment. Regulation 8 provided that where the Occupational Pensions Board had determined that an employment should be treated as contracted-out employment they should issue and send to the employer a contracting-out certificate which should specify, among other things, the name of the pension scheme, the employments to which the certificate related and the date from which the certificate was to have effect "which may, where the Board consider it appropriate, be earlier than the date on which the certificate is issued, so however that it shall not be earlier than 6 April 1978". Regulation 10 provided that employers could elect to vary or surrender a contracting-out certificate. Regulation 32 provided that accrued rights could be transferred between schemes without the consent of a member if the transfer was to another contracted-out scheme which related to employment with the same employer.

    9. The issues
  9. The Appellant is satisfied with the amount of his state retirement pension but disputes the deduction from it of a sum related to a guaranteed minimum pension. He appealed against the decision of 1 March 2005 because he did not agree that he was in contracted-out employment for the period from 6 April 1985 to 5 April 1991. He argued that his occupational pension scheme was not validly contracted-out from which it followed that he had been liable to pay, and entitled to pay, contributions at the full rate. The amount of the Appellant's state retirement pension, and the issues about the guaranteed minimum pension, will be decided by the Appeals Service after the Special Commissioners have decided this appeal. Matters relating to the guaranteed minimum pension are for the Appeals Service and not for the Special Commissioners.

  10. The issues for determination in this appeal were identified in Directions issued by the Special Commissioners on 1 March 2006 as:

    11. (1) whether the Appellant was in contracted-out employment from 6 April 1985 to 31 March 1991 (as argued by the Revenue) or was not in contracted-out employment during that time (as argued by the Appellant);(2) whether, during the period from 6 April 1985 to 31 March 1991, the Appellant was liable to pay, and entitled to pay, class 1 contributions at the reduced rate applicable to contracted-out employment (as argued by the Revenue) or at the full rate (as argued by the Appellant); and(3) whether in fact the primary class 1 contributions paid by the Appellant during the period from 6 April 1985 to 31 March 1991 were at the reduced rate applicable to contracted-out employment or at the full rate.
  11. The Revenue accepted that the Appellant ceased to be in contracted-out employment on 31 March 1991 and not on 5 April 1991 and the disputed decision was treated as amended accordingly. At the hearing the Appellant accepted that he had actually paid contributions at the reduced rate applicable to contracted-out employment and so the third issue does not now require further consideration.

    12. The evidence
  12. There was a statement of facts not in dispute. Two bundles of documents were produced by the Appellant. One bundle was green and the other was first produced at the directions hearing on 1 March 2006. Two bundles of documents were produced by the Revenue. One was pink and the other was first produced at the hearing on 1 March 2006. In addition the Appellant referred to a number of letters he had written to the Clerk to the Special Commissioners and to the documents sent with those letters. The Appellant also handed in a number of documents during the course of the hearing.

    13. The facts
  13. I bear in mind that the burden of proof in this appeal is on the Appellant. From the evidence before me I find the following facts.

    14. The Appellant
  14. The Appellant was born on 12 May 1937 and started paying national insurance contributions on 12 May 1952. He was a qualified electrical engineer and worked on construction sites. From 1983 to 1985 he worked in Saudi Arabia. From 6 April 1985 to 31 March 1991 the Appellant was employed by Bovis Construction Limited, a member of the Bovis Group of companies. The Bovis Group of companies formed part of the Peninsular and Oriental Steam Navigation Company (the P&O Group) which, I was informed, was incorporated by Royal Charter.

    15. 1985 – 1988 – The Bovis Pension Fund
  15. During the time that he was employed by Bovis Construction Limited the Appellant was a member of the Bovis Pension Fund which was an occupational pension scheme. On 13 March 1985 the Appellant signed an application for membership of the Fund and declared that he had received the Guide to the Rules of the Fund and authorized the deduction from his salary of his contributions to the Fund in accordance with the Rules. The then Guide to the Rules of the Bovis Pension Fund was dated April 1983. Paragraphs 1.5 and 1.6 stated that the employment was contracted out of the earnings–related part of the state pension scheme.

  16. The Bovis Group Staff Handbook 1983, which was the version of the Handbook in force when the Appellant was first employed by Bovis Construction Limited, outlined staff conditions and benefits. Paragraph 1 included a reference to the pension scheme and stated that it was a condition of employment that each employee became a member of the Bovis Pension Fund upon starting permanent full-time employment with the company; the fund was a contributory fund and each employee was required to pay 5% of his salary to the Fund by deduction from his pay; the company would pay the balance of the cost of providing benefits. Paragraph 6 dealt with the retirement pension and stated that the company pension scheme had been contracted-out of the earnings-related element of the state pension and a contracting-out certificate under the Pensions Act 1975 was in force.

  17. On 1 March 1978 the Occupational Pensions Board issued a contracting-out certificate to Bovis Limited. The certificate showed the employer's contracting-out number as E3800686H and the scheme contracting-out number as S0233252N. The certificate certified that, with effect from 6 April 1978, certain stated employments of persons who qualified for benefits under the Bovis Pension Fund were to be treated as contracted-out employments. The stated employments were employments with Bovis Limited and with the employers listed in a schedule. The list in the schedule included Bovis Construction Limited.

  18. As from 1 April 1988 a number of pension schemes in the P&O Group (including the Bovis Pension Fund) were terminated and the assets and liabilities were transferred to the P&O Pension Scheme. Bovis Limited surrendered its contracting-out certificate of 1 March 1978 with effect from 31 March 1988.

    19. 1988 – 1991 – the P&O Pension Scheme
  19. Thus, with effect from 1 April 1988, there was a bulk transfer of the contributing members of the Bovis Pension Fund to the P&O Pension Scheme. The bulk transfer was done without the consent of the members as was permitted under regulation 32 of the contracting-out regulations. Previously, the P&O Pension Scheme had been known as the P&O Group Pension Scheme but the name was changed with effect from 1 April 1988. However, the change of name was not notified to the Occupational Pensions Board until 23 September 1994.

  20. On 9 September 1988 the Occupational Pensions Board wrote to Bovis Limited and that letter contained the following statement:

    21. "Unless an earner is still contracted out under other pension arrangements, national insurance contributions at the not contracted-out rate should be paid on the first payment of earnings made after he ceased to be in contracted-out employment."
  21. On 2 June 1989 the Occupational Pensions Board issued a contracting-out certificate to P&O Steam Navigation Company. The employer and scheme numbers were left blank. The certificate certified that, with effect from 1 April 1988, certain stated employments of persons who qualified for benefits under the P&O Pension Scheme were to be treated as contracted-out employments. The stated employments were employments with P&O Steam Navigation Company and with the employers listed in a schedule. The list in the schedule included Bovis Construction Limited. 22. On 29 August 1989 the Occupational Pensions Board issued a replacement contracting-out certificate as from 1 April 1988 which was in the same terms as the certificate of 2 June 1989 save that it was issued to The Peninsular and Oriental Steam Navigation Company and the scheme name was shown as the P&O Group Pension Scheme. Again the employer and scheme contracted-out numbers were left blank. The schedule to the certificate listed the companies covered by the certificate and these included Bovis Construction Limited. The copy certificate which I saw was marked in manuscript "certificate replaced 21/11/90" and the schedule was marked "replaced 28/11/98". I was informed that despite exhaustive searching the Revenue could not trace any certificate dated 21 November 1990 or a schedule relating to any such certificate.

  22. The Staff Handbook was revised in 1990 and the copy of the 1990 Handbook provided to the Appellant was produced at the hearing. It recorded that the Appellant was employed by Bovis Construction Limited. Paragraph 1 of the Handbook stated that membership of the P&O Pension Scheme was available to those who wished to join and where membership of the scheme had been offered by the employer. There was no requirement to join. The scheme was contributory and deductions were made from members' pay at source. Paragraph 7 dealt with retirement and stated that the P&O Pension Scheme was contracted-out of the earnings-related element of the state pension and a contracting-out certificate under the Pension Act 1975 was in force.

  23. Between April 1990 and January 1991 there was correspondence between the Occupational Pensions Board and the Trustees of Bovis Pension Fund about the position of the members of Bovis Pension Fund following the surrender of the contracting-out certificate on 31 March 1988. The Board appeared to be of the view that the transfer to the P&O Group Pension Scheme had not then been effected. This correspondence concluded in January 1991 by the Board granting formal approval under section 44 of the Pensions Act 1975 of the transfer of guaranteed minimum pensions of current earners, early leavers and pensioners of the Bovis Pension Fund to the P&O Group Pension Scheme.

    24. 1991 –The Appellant draws his occupational pension
  24. On 15 March 1991 the Personnel Manager of Bovis Construction Limited wrote to the Appellant to say that his employment was to be terminated due to redundancy and that his service would end on 31 March 1991. The letter outlined the financial arrangements which would be made for the Appellant The letter also stated that the Secretary of the P&O Pension Scheme had been informed of the termination of employment and would communicate with the Appellant on the pension options available to him.

  25. On 31 March 1991 (at the age of 53) the Appellant ceased to be employed by Bovis Construction Limited. He started to draw his occupational pension which was paid to him by the P&O Pension Scheme. However, the Appellant stayed with Bovis Construction Limited for two weeks after 31 March 1991 with remuneration at an hourly rate. During these two weeks he was not a member of the occupational pension scheme. For this reason the Revenue accepted at the hearing that from 31 March 1991 to 5 April 1991 the Appellant was not in contracted-out employment and the decision letter was treated as amended accordingly.

  26. On 7 June 1991 the P&O Pension Scheme wrote to the Appellant to say that an immediate retirement pension was payable at an enhanced rate as a result of the redundancy. He could decide to defer drawing his pension or he could transfer it to the pension scheme of a new employer or to a personal pension arrangement. The Appellant decided to draw his retirement pension and has been receiving a pension from the P&O Pension Scheme since 1991.

  27. After leaving Bovis Construction Limited the Appellant became self-employed. On 23 April 1991 he applied to the Revenue for a sub-contractor's certificate. He completed a Form 41(G) 1989 and stated that he had been employed by Bovis Construction Limited to 31 March 1991. He declared that he had paid any national insurance contributions due from him and authorized the Revenue to verify the information given in his application and his national insurance record. The sub-contractor's certificate was issued by the Revenue valid from May 1991.

  28. It will be recalled that from 1 April 1988 the Bovis Pension Fund was transferred to the P&O Pension Scheme. The name of the P&O Group Pension Scheme was changed with effect from 1 April 1988 to the P&O Pension Scheme but that change of name was not notified to the Occupational Pensions Board until 23 September 1994. On 9 October 1995 the Occupational Pensions Board issued a contracting-out certificate to "The Peninsular and Oriental Steam" in respect of the P&O Pension Scheme. The employers number was given as E30000862B and the scheme number was given as S1608986E. This certificate certified that, with effect from 1 April 1988, employments in respect of earners who qualified for guaranteed minimum pensions under the P&O Pension Scheme were to be treated as contracted out employments. The employments were those with the Peninsular and Oriental Steam Navigation Company and the employers listed in the attached schedule. The employers listed in the schedule included Bovis Construction Limited. The certificate was issued under the provisions of the Principal Act. The certificate of 9 October 1995 was replaced on 13 November 1995 because the employer's name had not been printed in full on the October 1995 certificate. The November 1995 certificate was also issued under the Principal Act and was effective from 1 April 1998 and was addressed to The Peninsular & Oriental Steam Navigation Company.

    29. 2002 – the Appellant claims his state retirement pension
    30. The Appellant became 65 on 12 May 2002 and claimed his state retirement pension on 22 April 2002.
  29. In the light of the facts which I have found I first consider the two outstanding issues for determination in the appeal and then go on to express my views on a number of more general arguments put forward by the Appellant.

    30. Reasons for Decision – Issue 1 - Was the Appellant in contracted-out employment?
  30. The first issue for determination is whether the Appellant was in contracted-out employment from 6 April 1985 to 31 March 1991 (as argued by the Revenue) or whether he was not in contracted-out employment during that time (as argued by the Appellant).

  31. I begin my consideration of this issue by referring to the relevant legislation. At the relevant time section 30 of the Pensions Act 1975 provided that the employment of an employed earner in employed earner's employment was contracted-out if the employed earner was under pensionable age; his service qualified him for a guaranteed minimum pension under an occupational pension scheme; the scheme was contracted-out in relation to that employment; and a contracting-out certificate issued by the Occupational Pensions Board was in force. Section 30(3) provided that the existence of a contracting-out certificate was conclusive that the employment was contracted-out employment.

  32. I consider whether the factors mentioned in section 30 of the Pensions Act 1975, which determine whether employment was contracted out, were present as far as the Appellant was concerned. .

    33. Did the Appellant's service qualify him for benefits under an occupational pension scheme?
  33. It was not disputed that, at the relevant time, the Appellant was under pensionable age. The next question for consideration is whether his service qualified him for benefits under an occupational pensions scheme. In my view, it did. At first his service qualified him for benefits under the Bovis Pension Fund and, after 1 April 1988, under the P&O Pension Scheme. It is also relevant that, since March 1991 the Appellant has in fact been receiving benefits from the P&O Pension Scheme.

  34. It is convenient at this stage to consider arguments by the Appellant that, when he retired, he had not been a member of the P&O Pension Scheme because he had never received a notice about, and had not given any consent to, moving out of the Bovis Pension Fund to the P&O Pension Scheme. The Appellant argued that at the construction sites where he had worked it was not possible to have a notice board and that no notices were given. He also argued that he had not been informed of the transfer from the Bovis Pension Fund to the P&O Pension Scheme. He also argued that the 1983 Staff Handbook stated that membership of the Bovis Pension Fund was compulsory but the 1990 Staff Handbook stated that membership of the P&O Pension Scheme was available to those who wished to join if membership of the Scheme had been offered by their employer. He also referred to a document entitled "All You Need to Know" about the P&O Pension Scheme which, he said, had been given to him in 1991. This stated that membership was dependent upon completion of an application form. He argued that he had not completed any application form and that he had not received an invitation to join the P&O Pension Scheme.

  35. In considering these arguments I recall that the Bovis Pension Fund was contracted-out in 1978. The contracting out regulations came into force on 17 April 1984. The Appellant joined the Fund in 1985. Regulations 2 to 10 apply to new elections. There is no provision that, after a scheme has become contracted-out, notification has to be given on a notice board every time a new earner joins an existing Fund.

  36. As far as the 1988 transfer is concerned, regulation 11 of the contracting-out regulations provides that, where there is a surrender of a contracting-out certificate; and the Occupational Pensions Board are satisfied that earners will continue to qualify for benefits when the election takes place; and that the right to benefits will be unaffected; and that the employment of the earner will continue to be in contracted-out employment, then such an election may be made without compliance with the provisions for notices.

  37. Turning to the information given to the Appellant I have found as a fact that the Appellant received a copy of the 1990 Staff Handbook which made it clear that the relevant scheme was the P&O Pension Scheme.

  38. Thus the Appellant was a member of the P&O Pension Scheme between 1 April 1988 and 31 March 1991. On 1 April 1988 all the contributing members of the Bovis Pension Fund were transferred to the P&O Pension Scheme and the consent of the members was not required. In 1991, when the Appellant was made redundant, his pension arrangements were made by the P&O Pension Scheme and since 1991 he has been in receipt of a pension from the P&O Pension Scheme. Finally, the Bovis Pension Fund was discontinued after 31 March 1988.

  39. I therefore conclude that, throughout the time the Appellant was employed by Bovis Construction Limited, his service qualified him for benefits under an occupational pensions scheme.

    40. Was the scheme contracted-out in relation to the Appellant's employment?
  40. The third factor mentioned in section 30 of the Pensions Act 1975 is that the scheme must be contracted-out in relation to the Appellant's employment. The Appellant's employment was with Bovis Construction Limited. The contracting-out certificate issued on 1 March 1978 related to employment with Bovis Limited and with other employers listed in a schedule and the schedule included Bovis Construction Limited. The contracting-out certificate issued on 2 June 1989 (effective as from 1 April 1988) related to employment with P&O Steam Navigation Company and other employers listed in a schedule, The list in the schedule include Bovis Construction Limited. The contracting-out certificate issued on 29 August 1989 was in the same terms as that of 2 June 1989. The contracting-out certificate issued on 9 October 1995 (replaced on 13 November 1995) related to employment with the Peninsular and Oriental Steam Navigation Company and the employers listed in a schedule. The list in the schedule included Bovis Construction Limited.

  41. I therefore conclude that, if the Bovis Pension Fund and the P&O Pension Scheme were contracted-out, then they were contracted-out in relation to the Appellant's employment with Bovis Construction Limited.

    42. Was a contracting-out certificate in force?
  42. The fourth factor mentioned in section 30 is that a contracting-out certificate issued by the Occupational Pensions Board must be in force. I have found it convenient to consider this requirement in two stages.

  43. The first stage is from the start of the Appellant's employment in 1985 until 31 March 1988. From 1 March 1978 a contracting-out certificate was in force for the Bovis Pension Fund and this was surrendered on 31 March 1988. I therefore find that a contracting-out certificate was in force from 1985 to 31 March 1988.

  44. The second stage is from 1 April 1988 and here the position is not quite so clear. On 1 April 1988 two things happened. The P&O Group Pension Scheme changed its name to the P&O Pension Scheme and the members of the Bovis Pension Fund were transferred into the P&O Pension Scheme. However, the change of name of the P&O Group Pension Scheme was not notified to the Occupational Pensions Board until 1994. After 1 April 1988 at least three contracting-out certificates were issued, namely:

    45. (1) on 2 June 1989 a certificate was issued with effect from 1 April 1988 to P&O Steam Navigation Company and this certificate mentioned the P&O Pension Scheme; (2) on 9 August 1989 a replacement certificate was issued also with effect from 1 April 1988 to The Peninsular and Oriental Steam Navigation Company and the scheme name was shown as the P&O Group Pension Scheme; and. (3) on 9 October 1995 a certificate was issued also with effect from 1 April 1988 to "the Peninsular and Oriental Steam" in respect of the P&O Pension Scheme; this certificate was corrected on 13 November 1995 with a certificate which stated the full name of the company..
  45. The Appellant argued there was no valid contracting-out certificate after the transfer in 1988 until 1995 which was four years after he had ceased his employment. He also argued that the 1995 certificate referred to "The Peninsular and Oriental Steam" and there was no such company. He also argued that the 1995 certificate was invalid because it was issued under the Pensions Act 1975 and in 1993 the Pensions Act 1975 had been replaced by the Pensions Schemes Act 1993 which repealed sections 26 to 52 of the Pensions Act 1975

  46. I first consider whether a contracting-out certificate could be said to be "in force" at an earlier date if it is given at a later date but effective from the earlier date. The relevant statutory provisions are in section 31(7) of the Pensions Act 1975 and regulation 8 of the contracting out regulations. Section 31(7) provided that "except in prescribed circumstances, no contracting-out certificate and no cancellation, variation or surrender of such a certificate shall have effect from a date earlier than that on which the certificate is issued or the cancellation, variation or surrender is made". Regulation 8 of the contracting-out regulations provided that where the Occupational Pensions Board had determined that an employment should be treated as contracted-out employment they should issue and send to the employer a contracting-out certificate which should state the date from which the certificate was to have effect "which may, where the Board consider it appropriate, be earlier than the date on which the certificate is issued, so however that it shall not be earlier than 6 April 1978".

  47. In my view the provisions of regulation 8 are the "prescribed circumstances" mentioned in section 31(7) and that, so long as the provisions of regulation 8 are complied with, a contracting out certificate can take effect from a date earlier than the date of its issue so long as it does not take effect earlier than 6 April 1978.

  48. Thus the certificate of 2 June 1989 was in force from 1 April 1988 and it related to the P&O Pension Scheme. That was the correct name of the Scheme of which the Appellant was a member and so there was a certificate in force from 1 April 1988. However, on 9 August 1989 the replacement certificate was issued and it appears that this withdrew the effect of the certificate of 2 June 1989. However, the certificate of 9 August 1989 was in relation to the P&O Group Pension Scheme and not the P&O Pension Scheme and that discrepancy was not cured until the certificate of 9 October 1995. However, the certificate of 9 October 1995 took effect from 1 April 1988. Accordingly, in my view the certificate in force when the Appellant retired in 1991 was the certificate of 29 August 1989. In my view the fact that the old name of the pension scheme was used rather than the new name did not invalidate the certificate because the error could be cured by rectification. That was done by the certificate of October 1995 which was also effective from 1 April 1988.

  49. The Appellant also argued that the 1995 certificate was invalid because it was issued under the Pensions Act 1975 and in 1993 the Pensions Act 1975 had been replaced by the Pensions Schemes Act 1993 (the 1993 Act) which repealed sections 26 to 52 of the Pensions Act 1975. I note that the 1993 Act was mainly a consolidating measure and Schedule 6 paragraph 2(1) provided that the substitution of the 1993 Act for the repealed enactments did not affect the continuity of the law. The fact that the 1995 certificate was given on stationery appropriate to the Pensions Act 1975 does not, in my view, render it invalid, especially bearing in mind my conclusion that the 1995 certificate rectified the 2 August 1989 certificate which was given under the Pensions Act 1975.

  50. The Appellant also argued that the contracting-out certificates were not valid because they were not executed under seal. My attention was not drawn to any provision which required contracting-out certificates to be executed under seal.

  51. Having considered all the requirements of section 30 of the Pensions Act 1975 I conclude that the Appellant was in contracted-out employment from 6 April 1985 to 31 March 1991.

  52. Section 30(3) of the Pensions Act 1975 provides that the existence of a contracting-out certificate is conclusive that the employment is contracted–out employment and so the conclusion that contracting-out certificates were in force also leads to the conclusion that the Appellant was in contracted-out employment from 1985 to 1991.

    53. Reasons for Decision Issue (2) – Was the Appellant liable and entitled to pay reduced or full rate contributions?
  53. The second issue for determination in the appeal is whether, during the period from 6 April 1985 to 31 March 1991, the Appellant was liable to pay, and entitled to pay, class 1 contributions at the reduced rate applicable to contracted-out employment (as argued by the Revenue) or at the full rate (as argued by the Appellant).

  54. Section 1(6) of the 1975 Act provides that no person is entitled to pay Class 1 contributions other than those which he is liable to pay. As I have concluded that the Appellant was in contracted-out employment, it follows that he was liable to pay class 1 contributions at the reduced rate applicable to contracted-out employment and from section 1(6) it follows that he was not entitled to pay contributions at the full rate.

  55. The Appellant argued that he had thought that the national insurance contributions which he had paid while employed by Bovis were at the full class 1 rate and not at the reduced rate applicable to contracted-out employment.

  56. In my view the terms of the Staff Handbook, in both its 1983 and 1990 versions, make it quite clear that both the Bovis Pensions Fund and the P&O Pension Scheme were contracted-out of the earnings-related element of the state pension. That meant that the national insurance contributions payable by the Appellant while employed by Bovis Construction Limited must have been at the reduced rate applicable to contracted-out employment and not at the full Class 1 rate. It may be that the Appellant did not read the Handbooks, or it may be that he may have misunderstood their meaning, but that could not alter the rate at which national insurance contributions were payable.

  57. The Appellant also argued that the letter of 9 September 1988 from the Occupational Pensions Board to Bovis Limited indicated that after 31 March 1988 national insurance contributions should have been paid at the non-contracted out rate. I do not agree. The letter stated that the not contracted-out rate applied "unless an earner was contracted out under other pension arrangements" After 31 March 1988 the Appellant was a member of the P&O Pension Scheme which was contracted-out and so he was contracted-out "under other pension arrangements". Accordingly the not contracted-out provision did not apply to him.

  58. I conclude that, during the period from 6 April 1985 to 31 March 1991, the Appellant was liable to pay, and entitled to pay, class 1 contributions at the reduced rate applicable to contracted-out employment and was neither liable nor entitled to pay contributions at the full rate.

    59. Reasons for decision - the Appellant's general arguments
  59. In addition to his arguments about the issues in the appeal the Appellant put forward some more general arguments about the duty of the Revenue to have checked the position earlier; about errors in his contributions record; about human rights; and about the amount of the state retirement pension paid to him.

    60. The Revenue's duty to check
    62. First the Appellant argued that the Revenue had a duty to check the position earlier. He referred to a publication called IR109: Employer Compliance Reviews and Negotiations which summarized the procedure adopted in employer compliance reviews of PAYE, national insurance contributions and deductions from sub-contractors. He also referred to the Revenue's Code of Practice COP3; Reviews of Employers' and Contractors' Records. It was his argument that, when he applied for a sub-contractor's certificate, the Revenue should have checked his national insurance records and carried out negotiations as mentioned in IR109 For the Revenue Ms Hodge accepted that the Appellant's national insurance position would have been checked at the time he applied for a sub-contractor's certificate.
  60. IR 109 deals with employer compliance reviews. It states that if the review shows that the employer has incorrectly operated PAYE, national insurance contributions or deductions from sub-contractors the Revenue would ask the employer to pay the amount that should have been deducted and a settlement could be negotiated. However, in my view IR 109 does not apply to the Appellant because he was at not at any time an employer. COP3 deals with the records of employers and contractors and gives guidance and information about reviews. Reviews are undertaken so that the Revenue can make sure that employers and contractors understand their obligations and responsibilities to deduct and account for PAYE, national insurance contributions and/or subcontractor deductions. However, in my view COP3 does not apply to the Appellant because he was not at any time an employer or a contractor (although he did become a sub-contractor).

  61. In any event, because the view of the Revenue throughout has been that the Appellant was liable and entitled to pay contributions at the reduced rate applicable to contracted-out employment, any earlier checks would have revealed that reduced rate contributions had been paid.

    62. Were there errors in the Appellant's contributions record?
  62. The Appellant argued that his contributions record was incorrect because it showed his national insurance contributions for the period under appeal as being made in respect of employer number E30000862B (which was the employer number of the P&O Pension Scheme) instead of the employer number of the Bovis Pension Fund which was E3800686H. The Appellant referred to a statement headed "National Insurance Recording System 2 (NIRS2)" published by the Revenue. This stated that the NIRS computer system had been replaced with NIRS2 because NIRS was ageing and did not support future business and legislative changes, in particular those associated with the 1995 Pensions Act. The new system was designed, among other things, to calculate contributory benefits.

  63. For the Revenue Ms Hodge informed me that NIRS2 had been completed in 1999 and it had then been easier for the computer to record all the contributions for the period in dispute under the employer number of the P&O Pension Scheme. The reason was because the P&O Pension Scheme had taken over the assets and liabilities of the Bovis Pension Fund on 1 April 1988 when the Bovis Pension Fund ceased to exist. In any event, even if contributions were recorded under the name of the wrong scheme, it would not follow that the Appellant had paid the wrong amount of contributions as the amount payable varied depending upon the income of a member and not on his membership of a particular contracted-out scheme. I accept the comments of Ms Hodge.

    64. Human rights
  64. The Appellant argued that the Revenue had written to him on 25 April 2006 in threatening and oppressive terms which were in breach of Article 3 of the Convention in Schedule 1 of the Human Rights Act 1998. He referred to the second Edition of a Study Guide to the Human Rights Act 1998 published in October 2002 by the Department for Constitutional Affairs at paragraph 3.21 which indicated that Article 3 gave an absolute right not to be tortured nor subject to treatment or punishment that was inhuman or degrading.68. I have read the letter of 25 April 2006 and do not agree that it is either threatening or oppressive.

    65. The amount of the state retirement pension paid to the Appellant
  65. The Appellant argued that the Revenue had since 12 May 2002 incorrectly deducted from the state retirement pension payable to him the amount of £42.51 each week as a contracted-out deduction and argued that that disproportionately interfered with his pension. However, the amount of pension paid to the Appellant is matter for the Appeals Service and is not an issue in this appeal.

  66. In addition to these general arguments the Appellant made a number of other more wide ranging submissions which I have considered but which do not alter my view on the main issues in the appeal.

    67. Decision
  67. My decisions on the issues for determination in the appeal are:

    68. (1) that the Appellant was in contracted-out employment from 6 April 1985 to 31 March 1991; and
    (2) that during the period from 6 April 1985 to 31 March 1991 the Appellant was liable to pay, and entitled to pay, class 1 contributions at the reduced rate applicable to contracted-out employment and was neither liable nor entitled to pay contributions at the full rate.
  68. The appeal is, therefore, dismissed.

    69. DR A N BRICE
    SPECIAL COMMISSIONER
    RELEASE DATE : 30 October 2006

    SC 3296/2005

  69. 10.06

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