A special commissioner decided that the different treatment of employed and self-employed taxpayers as regards the cessation of the payment of National Insurance contributions (NICs) at the age of 65 was not discriminatory.

Facts

The taxpayer appealed against a decision of Revenue and Customs that he was not exempt from paying Class 4 National Insurance contributions (NICs) in respect of his profits for the year to 5 April 2004 and that he was liable to pay the sum of £1,021.36. The taxpayer had been born on 19 April 1938 and attained the age of 65 on 19 April 2003. He was self-employed during the relevant period and filed a self-assessment tax return showing a profit from his self-employment of £17,382. The taxpayer contended that as a self-employed person he was discriminated against compared to employed persons who ceased paying their NICs on attaining 65 whereas he had to pay Class 4 contributions throughout the year in which he attained 65.

The Revenue contended that the charge was in accordance with the law, which was correctly summarised in the notes on self-employment accompanying the tax return (note to box 3.94), Leaflet CA 72 on deferring payment (page 9) and Manual NIM 24510.

Issue

Whether the treatment of self-employed taxpayers was discriminatory.

Decision

The special commissioner (Dr John Avery Jones) (dismissing the appeal) said that there was no doubt that Parliament had permitted the exception from Class 4 contributions for those of a prescribed age at the beginning of a tax year and the Revenue had done just that, specifying the age as pensionable age (65 for men). Since Class 4 contributions were payable ‘in the same manner as any income tax which is, or would be, chargeable in respect of those profits . . . in accordance with assessments made from time to time under the Income Tax Acts’ (s. 15(2) of the Social Security Contributions and Benefits Act 1992), that was entirely logical as it would not be possible to have different rules for Class 4 applicable to part of a tax year when the income tax assessment had to relate to the whole tax year (Social Security Contributions and Benefits Act 1992, s. 17 and the Social Security (Contributions) Regulations 2001, reg. 91 made pursuant to that Act).

The taxpayer had also raised a question whether the charge was contrary to art. 1 of Protocol 1 to the European Convention on Human Rights which entitled every natural or legal person to the peaceful enjoyment of his possessions. An argument that Class 4 contributions discriminated against self-employed persons on the ground that no benefits were received from such contributions was put forward in National Federation of the Self-Employed v UK, Application No. 7995/77, which the European Commission on Human Rights held was inadmissible on the ground that the difference in treatment between employed and self-employed was justified as being based on the legislator's appreciation of the way in which the costs of the National Insurance scheme should be shared between the persons eligible to the different benefits available under the scheme. It was held in that case that such a difference which was to be found in many spheres of the law was legitimate and any inequality was not out of proportion to the purposes of the National Insurance scheme concerned. Consequently in that respect there was no discrimination within the meaning of art. 14 of the Convention.

Application No. 9793/82 complained about the non-deductibility of NICs by the self-employed, which was also declared inadmissible on the ground that a self-employed person was not in a comparable position to an employer. Juby v UK, Application No. 11592/85, was similarly treated.

Therefore, the authorities in Strasbourg had already considered similar arguments and found them to be inadmissible. By s. 2 of the Human Rights Act 1998 the tribunal was bound to take those decisions into account. If, in the National Federation of the Self-Employed case, the Commission had found the whole system of Class 4 contributions not to be discriminatory, it was inconceivable that they would regard one aspect of it as discriminatory. In any event, as that decision showed, in order to determine whether the difference in treatment between the employed and self-employed concerning when contributions ceased was discriminatory, it would be necessary to take into account all differences in contributions and benefits to determine whether there was any discrimination. There was no any evidence of that, but it was relevant that the Treasury's figures showed ‘reduced contributions for self-employed not attributable to reduced benefit eligibility’ of £1,700m for 2003–04 (Tax Ready Reckoner and Tax Reliefs, December 2004, Table 7). Therefore it seemed likely that if there was any discrimination in relation to National Insurance as a whole it was in favour of the self-employed.

(2006) Sp C 552. Decision released 3 July 2006.