A special commissioner upheld a decision of the Revenue refusing to allow a taxpayer to pay retrospectively voluntary Class 3 National Insurance contributions (NICs) to enable him to claim a full British pension 40 years after he left Britain to live in Australia, where he had failed to exercise due diligence and care in not making enquiries at the time about the wisdom of paying voluntary contributions to ensure that he could claim a full pension.

Facts

The taxpayer was born in 1938, and entered the NI scheme in 1954. He reached state pensionable age in the UK in 2003. His NI record sheet suggested that he was in Australia from 1951 to 1954. He was an employed earner, paying Class 1 contributions, from 1954 to 1959. His final British employment was in HM Dockyard, Chatham. He left that work, and the UK, in September 1959 when he was 21 and moved (or moved back) to Australia. It was common ground that the taxpayer had an NIC card for the year 1958-59. His NIC record on form RF1 showed some contributions paid in 1953-54, a full record of paid or credited contributions in 1954-55 to 1957-58, and 41 contributions paid in 1958-59. The taxpayer had not worked in the UK since that year, and had not paid NICs of any class in any capacity since 1959 save when he came to claim a retirement pension. He contended that he was not aware of any right to pay voluntary Class 3 NICs until he made his pension claim.

The taxpayer claimed a UK state retirement pension at the end of 2002 ahead of the date on which entitlement for it would arise. It was said that he was given the opportunity at that time to make back payments of Class 3 NI contributions for a period of six years back to 1996, and that he did so. He was then awarded what he stated to be a 30 per cent Category

A retirement pension, and his wife received a Category B pension of 60 per cent of his pension.

The taxpayer was not entitled to any higher level of UK state pension than what he was awarded unless he made additional Class 3 voluntary NICs to improve his NIC record with regard to the contribution years between 1959 and 1996. The Revenue decided formally in 2005 that the taxpayer was not entitled to pay contributions for the period from 14 April 1959 to 5 April 1996, the period between the contributions recorded on the RF1 and the start of the voluntary contributions made in 2002 or 2003. The basis for that decision was that the taxpayer did not pay the contributions during the prescribed period and that the failure to pay was due to a failure to exercise due care and diligence.

The taxpayer appealed against the Revenue's refusal to pay late NI Class 3 voluntary contributions for the period from 14 April 1959 to 5 April 1996 contending that the relevant policy and legislation was in breach of his rights under art. 6, 8, 10 and 14 of the European Convention on Human Rights.

Issue

Whether the taxpayer had the right to make additional NI contributions.

Decision

The special commissioner (David Williams) (dismissing the appeal) said that the taxpayer could not argue that he was a victim of any breach of his rights to have a fair hearing under art. 6 since the commissioner was hearing the case in the way he requested. The right to a fair hearing was a right to trial by independent judicial process. Article 6 did not give any rights to appellants or would-be appellants with regard to the procedures applied by government departments in making executive decisions. Therefore the contentions that the Revenue had broken art. 6 were unfounded. It could not have done so because the article did not apply to it. There was no evidence of any factual basis on which EU law was relevant to this appeal.

A tribunal such as the special commissioners had no power to find that primary legislation was in breach of the Human Rights Act 1998 because of a breach of a provision of the European Convention. But tribunals did have the power to make that finding about secondary legislation. It was the commissioners' duty under the Human Rights Act 1998, if they considered that secondary legislation was or might be in breach of a Convention right, to ensure that a victim of such a breach was accorded that right. If therefore reg. 48(3)(b) of the Social Security (Contributions) Regulations 2001, imposing a six-year rule on late payment of contributions with only a limited exception, was in breach of any Convention right and an appellant was a victim of that breach, then the commissioner would be required first to consider if the breach was proportionate and, if it was not, how to deal with the breach.

The taxpayer could not, on the facts, base his claim to pay on reg. 48 alone. He did not meet the residence or presence conditions. He had to pray in aid the provisions of reg. 147 (Class 2 and Class 3 contributions for periods abroad) and reg. 148 (conditions of payment of Class 2 or Class 3 contributions for periods abroad). It was assumed that the taxpayer was given the benefit of those provisions when he was invited to make contributions in 2002 or 2003. So he had already benefited from a specific exception in the legislation for those not resident or not present in the UK at the relevant times. There was also a general exception in reg. 50 to the time-limits in reg. 48 and 147. It allowed late payment to be accepted notwithstanding that the time-limit had expired in certain cases where it could be shown that the contributor was not at fault.

In fact he had been the subject of positive discrimination in being allowed to make voluntary contributions in 2002 to a scheme he effectively left in 1959 on a compulsory basis when he stopped being either employed or resident in Britain. He was not subject to adverse discrimination on those facts. Nor could any argument be founded on either family life or property rights, with or without discrimination, i.e. that the taxpayer was being prejudiced either individually or as a person of a particular status because he failed to meet the conditions of 147 and 50.

The status of being someone who had lost out under a pension or insurance scheme by not paying contributions at the right time due to a failure to act with due care and diligence and who later found that the risk against which he was or would have been insured was realised was not entitled to claim the benefit of hindsight under the European Convention.

The basic framework of international social security law, reflected in the European Union and British rules, was that individuals should become entitled to a pension in their main residence or place of work if and when they reach pensionable age there, and not in every place where they might have worked.

As regards the test of due care and diligence in reg. 50, the taxpayer knew that the British state pension was contributory. He contributed for several years before he left the country. There was some evidence that he was told of the need to make further voluntary contributions. There were warnings on contribution cards and readily available leaflets. It was clear that if he had enquired he would have been given all the necessary information readily. In any event, there was no reason in law or fact why his employer, the Inland Revenue or anyone else should be expected to tell him in 1959, without enquiry on his part, of the wisdom of paying Class 3 contributions in case he wished to claim a full British pension 40 years in the future.

The taxpayer could not reasonably expect, without making any enquiries, to receive a full British pension over 40 years after leaving Britain when he had paid only five years' contributions to the British scheme.

He had failed to show a good case for being within the exception to the general time-limit for paying voluntary contributions set by reg. 50.

(2008) Sp C 677.

Decision released 4 April 2008.