United Kingdom Special Commissioners of Income Tax Decisions

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You are here: BAILII >> Databases >> United Kingdom Special Commissioners of Income Tax Decisions >> Morgan v Revenue & Customs [2008] UKSPC SPC00722 (20 November 2008)
URL: http://www.bailii.org/uk/cases/UKSPC/2008/SPC00722.html
Cite as: [2008] UKSPC SPC00722, [2009] STI 90, [2009] STC (SCD) 93, [2008] UKSPC SPC722

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Margaret Ann Morgan v Revenue & Customs [2008] UKSPC SPC00722 (20 November 2008)

Spc00722

NATIONAL INSURANCE — married woman paying contributions at reduced rates — whether she had elected to do so — challenge to decision by HMRC that she had done so — election, if made, destroyed — other evidence considered — on balance of probabilities, election made — appeal dismissed

THE SPECIAL COMMISSIONERS

MARGARET ANN MORGAN Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Special Commissioner: Colin Bishopp

Sitting in public in Belfast on 27 October 2008

The taxpayer in person

John Daley, HM Inspector of Taxes, for the Respondents

© CROWN COPYRIGHT 2008


 


DECISION

1. This is an appeal by Mrs Margaret Ann Morgan against a decision, set out in a notice dated 16 January 2007, that from 9 October 1967 to 8 April 1975 she was not liable to pay national insurance contributions, and that from 6 April 1975 to 5 April 1980 she was liable to pay contributions at the married women's reduced rate. HMRC contend that in October 1967 Mrs Morgan signed an election by which she chose to pay contributions at the special rate then available to married women while Mrs Morgan contends that she did not. HMRC also contend that Mrs Morgan revoked that election in April 1980 and, again, Mrs Morgan says she did not. What is clear is that Mrs Morgan did in fact pay married women's contributions throughout the relevant period, in those weeks in which she was working. What is, in reality, in issue is the measure of Mrs Morgan's entitlement to state retirement pension.
2. From 1948 to 1975 married women were permitted, by the National Insurance (Married Women) Regulations 1948, to elect to pay a much reduced national insurance contribution – reduced, that is, by comparison with the full rate of contribution they would otherwise have paid. The amount was flat rate of a few pence per week. A married woman who chose to pay the reduced rate of contribution received also limited benefits, I believe only industrial injuries benefit. Particularly, there was no entitlement to state retirement pension; a married woman who elected to pay the reduced rate became dependent on her husband's contributions for her pension. The eligibility requirements and the consequences of making an election were spelt out in Leaflet NI1, published by the then Ministry of Pensions and National Insurance. At the end of the leaflet was a form of election, identified as CF9, which a married woman was required to complete and return to her local social security office, in order to indicate whether she wished to pay contributions at the full or the reduced rate. Although the form indicated that it was to be returned whatever the election made, I did not hear evidence about the Ministry's practice in those cases in which it was not.
3. In 1975 the system changed in some respects, in particular by the replacement of the former flat-rate contributions by a contribution linked to earnings. A married woman who elected to do so was required to pay at a rate of 2% of earnings while those paying the full rate contributed an amount which varied from one year to another but was typically about 6.5%. A married woman who had elected, before the changes in 1975, to pay reduced rate contributions was treated as having elected to continue doing so, and did not need to make another election. Indeed, it seems women in that position were not invited to reconsider elections they had already made. In 1977 the right to make an election to pay reduced contributions was abolished, but those who had already made one were allowed to continue paying at the reduced rate.
4. It was common ground that Mrs Morgan, who was born in 1947, began her working life, while still single, in 1962. I was shown the records of the Ministry which record that she was issued with a national insurance number and a contribution card on 26 July 1962. On 25 March 1967 Mrs Morgan married; she is still married to the same husband. It was at that time obligatory for a woman who married to inform the Ministry of her marriage, and I deduce that Mrs Morgan did so. I was told by John Daley, the inspector who represented HMRC before me, that the practice, on receipt of such notification, was to send Leaflet NI1 to the woman concerned, with an invitation to read it and then return the form of election. The Ministry's record of Mrs Morgan's working history, form RF1, shows that she returned the election on or about 9 October 1967 in as much as she is recorded to have chosen to pay reduced rate contributions from that date.
5. Form RF1 deals only with Mrs Morgan's history to 1975, when the records were computerised. A computer-produced record relating to the period from 1975 was shown to me. It reveals that Mrs Morgan elected to pay the full rate with effect from 5 April 1980, but no further detail is provided. Mr Daley told me that, in order to revoke her original election, Mrs Morgan would have been required to complete and submit a second election, using the same form, CF9, as she had used for the first. It was, he said, departmental policy to destroy documents such as form CF9 after six years, and it was therefore no longer possible to produce either of the forms Mrs Morgan had signed.
6. HMRC's case, as Mr Daley put it, was that the record on form RF1, compiled from Mrs Morgan's election on form CF9, should be treated as reliable evidence that she had indeed made an election to pay the reduced rate of contribution. He was able to produce copies of her contribution cards and end-of-year certificates for the relevant years, showing that she had paid the reduced rate until 1980. He also pointed to Mrs Morgan's several changes of employment during that period when, he said, she must have received from her former employer her contribution card or a similar record, which would have made it clear to her that she was paying at the reduced rate. The documents she received from a former employer also included an authority to deduct contributions at the reduced rate. She had plainly handed that authority on to her next employer since each of her employers in the relevant period had made deductions from her pay at the reduced rate, a course which could not have been adopted without that authority. She had also received from the Ministry and its successor departments periodic statements of the amounts of national insurance contribution she had paid, from which she could also have determined that only reduced rate contributions were being paid.
7. Mrs Morgan told me that in mid-June 1967, less than three months after her marriage, she had undergone serious abdominal surgery, which kept her in hospital for six weeks, and that she then spent some months convalescing at her parents' home – her husband was then a serving member of HM forces. She had not, she said, resumed work for some six months after her discharge from hospital, that is in early 1968. She was not in work in October 1967, when it was said she had signed the original election, and she was quite sure she had not signed such an election. Similarly she was quite sure she had not signed a second election; she had no need to do so since she believed at all times that she was paying full contributions. She told me she had no recollection of ever seeing a form CF9.
8. She also challenged some of the details of her working history presented by Mr Daley. These details showed, in addition to various employments which Mrs Morgan accepts are accurately recorded, four which she denies. All of the four occurred, if they occurred at all, in the period when Mrs Morgan told me she was convalescing. The evidence supporting the first of the four disputed periods was almost non-existent, consisting only of a computerised record of the employer's name, against which no contribution payment is recorded. There is, however, rather better evidence of the other three, consisting in each case of a deduction card recording Mrs Morgan's surname, one or both of her initials, and her national insurance number. Two of the employments must have been very short-lived since in one Mrs Morgan (if it was she) earned less than £13 and in the other less than £28; even at 1968 earnings levels those amounts imply a very short-term engagement. In the third Mrs Morgan earned just over £152, which suggests only a slightly longer engagement.
9. Mr Daley acknowledged that errors occur from time to time in national insurance records but, he said, the error rate was low, to the extent that in Gutteridge v Revenue and Customs Commissions [2006] STC (SCD) 315 and Whittaker v Revenue and Customs Commissioners [2006] STC (SCD) 271, both cases in which married women were challenging the Commissioners' claims that they had elected to pay reduced rate contributions, other Special Commissioners had accepted that HMRC's records were reliable. He urged me to the same conclusion as was reached in those cases, that the department's contemporaneous record was more reliable than the taxpayer's recollection of events some 40 years ago, and that I should conclude on the balance of probabilities that, despite her belief to the contrary, Mrs Morgan had signed an election in 1967. He pointed to the consistency of all the available documentary evidence, showing that every employer in the relevant period had deducted contributions at the reduced rate, and to the fact that, despite her many opportunities to do so, Mrs Morgan had not challenged or even questioned the fact that she was paying reduced contributions.
10. Those are compelling arguments and, were I deciding this appeal on documentary evidence alone, I would almost certainly find them conclusive. I had, however, Mrs Morgan's oral evidence which, albeit unsworn, I also found persuasive. Her description of her stay in hospital and subsequent convalescence struck me as a vivid recollection of what was plainly a very traumatic episode in her life. On that I found Mrs Morgan a convincing witness and her protestations that she had signed no election, and had not entered into the four disputed periods of employment, were convincing in as much as I am satisfied that they do properly represent Mrs Morgan's belief.
11. However, even though she must establish a negative, it is for Mrs Morgan to satisfy me, on the balance of probabilities, that the decision against which she has appealed is wrong. I therefore have to balance the evidence available to me and decide where the truth is more likely to lie. It is indeed possible that a clerk dealing with Mrs Morgan's election mistakenly recorded that she had chosen to pay contributions at the reduced rate, rather than the full rate, but while it is easy to understand how the clerk may simply have misread or mis-recorded the election, I find it implausible that an election would have been recorded, whether or not correctly, in October 1967 if, as she said, Mrs Morgan made no election at all at that time. It seems to me more likely than not that, despite her medical condition, Mrs Morgan did return the form CF9 in or about October 1967. I do not understand that an election could be made only by a woman in employment, and I am accordingly not persuaded that Mrs Morgan's convalescence is significant evidence against her having made an election at that time. It is difficult to understand, too, how a further error occurred when a clerk recorded that Mrs Morgan had changed her election, in 1980, when, again, Mrs Morgan says she made no such election. I also find it surprising that, on as many as three occasions (I disregard the employment for which there is minimal evidence), Mrs Morgan is shown to have worked for employers for whom she believes she did not work, yet who have correctly recorded both her name and her national insurance number. It is conceivable that someone has masqueraded as her, though it is by no means clear to me what the purpose of doing so might be. Though I do not believe that Mrs Morgan was trying to mislead me, I am satisfied that her recollection is not so reliable that I must prefer it to the available documentary evidence.
12. I cannot say, on the totality of the evidence before me, that Mrs Morgan has discharged the burden of satisfying me that the decision was wrong. It seems to me more likely than not that HMRC's records reflect what actually happened. That being so, I must dismiss the appeal.

COLIN BISHOPP

SPECIAL COMMISSIONER
Release Date: 20 November 2008

SC/3085/2008