A special commissioner decided that, on the balance of probabilities, the contribution record RF1 produced by the Revenue for a taxpayer in relation to his state pension was accurate; that the taxpayer was awarded all credits to which he was entitled; that he was not now entitled to pay contributions not previously paid or credited; and that the Revenue had no power to accept late payment of those contributions.

Facts

The taxpayer was a research scientist who reached state pensionable age, 65, on 25 September 2000. A few months earlier, he received a pre-retirement estimate of his pension by the Pension Service of the Department for Work and Pensions (DWP). The taxpayer was in full-time education for several years after he was 16 and before he started full-time work. He undertook his two years of national service during that period. He had a full contribution record while in the Forces. But his contribution records showed that he received credits for part only of the period of education and that he had paid no voluntary contributions at the time or since. If his contribution record was correct, the taxpayer was not entitled to a full state basic pension. When he learnt that, he offered to make good the deficiency. The Revenue refused to accept any additional contributions on the basis that it was too late for him to pay additional contributions. The taxpayer appealed to the special commissioners.

The taxpayer questioned his personal National Insurance contribution (NIC) record during the period while he was undergoing education and training before he started full-time work. He challenged the accuracy of the NIC records maintained by the Revenue. He also questioned the refusal to allow him to pay additional NICs for periods during which the record showed that he neither paid, nor was credited with, NICs.

Issue

Whether the National Insurance Contributions Office (NICO) record was correct; whether the taxpayer was properly credited with contributions; and whether he was entitled to pay any missing contributions.

Decision

The special commissioner (David Williams) (dismissing the appeal) said that the Revenue, through NICO, was responsible for collecting and recording contributions and for decisions about contributions and contribution liability. The appeal was concerned only with the basic pension. An insured person working for an employer and the employer were both required to pay a Class 1 contribution for every week in which he or she was employed by the employer. An insured person who was ordinarily self-employed had to pay a Class 2 contribution every week. An insured person who was neither employed nor ordinarily self-employed had to pay a ‘non-employed’ Class 3 contribution every week.

Class 3 contributions were now voluntary but had been compulsory before 1975 unless an individual was entitled to be excused from payment, in which case they could pay contributions voluntarily if they wished. It was standard practice for NICO to inform contributors of deficiencies in their contribution records. Both DWP and the Revenue routinely issued leaflets advising all contributors about paying contributions. The Revenue had a discretion to accept late payment of Class 3 contributions.

The NIC records of all insured persons before 1975 were kept on documents called form RF1. That was a permanent record kept from the first year in which the contributor contributed until the annual records were transferred to a data store in 1975–76 or thereabouts. The old records were still kept in paper form.

The taxpayer had been required to pay a contribution for every week in each of the relevant years unless he was excused from a contribution for that week. Save for the weeks when the taxpayer was employed, he was required to pay at the Class 3 rate of contribution applying to the non-employed unless excepted from liability. He questioned whether that applied during the weeks when he was both in full-time education and not working.

It was trite law that no adverse conclusion was to be drawn from the routine destruction of documents under a proper policy for destruction, and that relevant secondary evidence as to content could be relied on. That applied unless the policy of destruction was open to challenge or unless there was evidence that records were destroyed otherwise than during routine procedures as, for example, after a specific request that they be produced had been made or during an ongoing appeal.

In this case, no adverse inference could be drawn against the Revenue because they could not now produce forms issued to the taxpayer nearly 50 years ago. The Revenue was entitled to rely on the secondary evidence it had produced and proved. The RF1 produced and explained as the taxpayer's contribution record was reliable. On the basis of the evidence produced for the Revenue and the evidence on oath, and applying the civil burden of proof, the statements in the RF1 were accurate. There was no evidence that the record was incomplete or inaccurate. As a result, the taxpayer was given notice of the non-payment and of the position of someone who did not pay.

Had the taxpayer offered to do so at the time, he could have made voluntary payment of Class 3 contributions and he remained entitled to do so for some years after the year in which the contributions were due. Once the time-limit passed, the taxpayer no longer had a right to pay. He might do so only if the Revenue agreed to accept his offer. An officer might accept payment only if the taxpayer failed to pay because of his ignorance or error and ‘that ignorance or error was not the result of the contributor's failure to exercise due care and diligence’.

The Revenue did not dispute that the taxpayer failed to pay as a result of his ‘ignorance or error’. ‘Ignorance’ sometimes had a pejorative meaning but here it meant ignoring something. That might be because the person did not know of it, or it might mean that despite knowing of it the person ignored it. In this case, he either took no action or decided not to pay. The limited evidence was that the taxpayer decided not to pay because he could not afford to do so.

The question was whether the ‘ignorance or error’ was the result of his failure to exercise due care and diligence. The evidence was that the taxpayer was aware at the time of his choices, or would have been aware of them had he read the leaflets he was sent and had he made the reasonable enquiries. He chose at that time not to enquire or not to pay and chose not to exercise due care and diligence in protecting his contribution record.

Had the taxpayer known that further payment of Class 3 contributions within the time limited would have completed his contribution record, and that otherwise he would not receive a full state pension, he would have considered paying them. But that was to use the benefit of hindsight now he was 65. His actions at that time could not be tested by reference to the effect of them now. He could now see the downside of non-payment. But the evidence clearly showed that he could not say that he was not aware at the time that he was not paying, or at least that he was not warned that his deficient pension entitlement might be a consequence of not paying. It followed both that the taxpayer could not now require the Revenue to accept any late contributions and that they had no power to accept them.

(2006) Sp C 574.
Decision released 20 September 2006.