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	United Kingdom Special Commissioners of Income Tax Decisions
You are here: BAILII >> Databases >> United Kingdom Special Commissioners of Income Tax Decisions >> Norman Tansley Clements v Revenue & Customs [2008] UKSPC SPC00677 (04 April 2008) URL: http://www.bailii.org/uk/cases/UKSPC/2008/SPC00677.html Cite as: [2008] UKSPC SPC00677, [2008] UKSPC SPC677

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Spc00677

National Insurance Contributions – Whether contribution record accurate – Whether actions of HMRC in breach of European Convention on Human Rights – Whether contributor entitled to pay additional Class 3 contributions – No

THE SPECIAL COMMISSIONERS

NORMAN TANSLEY CLEMENTS Appellant

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents

Special Commissioner: DR DAVID WILLIAMS

Sitting in London on 7 December 2007

© CROWN COPYRIGHT 2008


 


DECISION

1. Mr Clements, who lives in Australia, is appealing against the refusal by the Respondents ("HMRC") to pay late National Insurance Class 3 voluntary contributions ("NI contributions") for the period from 14 04 1959 to 5 04 1996.
2. As Mr Clements lives in Australia, and his representative Mr Yates lives in Canada, steps were taken to establish a video link hearing before me. This proved not readily possible. The parties agreed that I hear the matter on the papers. I have received an agreed bundle of documents and authorities and skeleton arguments and responses from both parties.

The facts

3. Mr Clements was born on 18 08 1938, and entered the NI scheme on 17 05 1954. He reached state pensionable age in the United Kingdom on 18 08 2003. His NI record sheet suggests 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 United Kingdom, in September 1959 when he was 21 and moved (or moved back) to Australia.
4. In so far as it is relevant, I am told that he is an EU national. I have no other details of his nationality or resident status. I assume, but have not been told, that Mr Clements remained resident in Australia throughout the rest of his working life and that if he did work in any capacity he did so in Australia. I mention that because Mr

Yates seeks to assert rights on behalf Mr Clements under European Union law. I cannot see any evidence that Mr Clements was at any time a "worker" or a resident in any of the European Union member states at any time after the United Kingdom joined the European Communities.

5. It is common ground that Mr Clements had an NI contribution card for the year 1958-59. His NI contribution record on form RF1 was produced to me. It shows 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. [Mr Clements' agent states these were Class 2 contributions, but the record shows that they were Class 1 contributions. There is also no evidence that Mr Clements was self-employed at any relevant time.] Mr Clements has not worked in the United Kingdom since that year, and has not paid NI contributions of any class in any capacity since 1959 save when he came to claim a retirement pension. It is his contention that he was not aware of any right to pay voluntary Class 3 NI contributions until he made his pension claim.
6. Mr Clements claimed a UK state retirement pension at the end of 2002 ahead of the date on which entitlement for it would arise. That claim will have been made to the Department for Work and Pensions. I have none of the relevant documents before me. I am told 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 this. He was then awarded what he states 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.
7. There is limited documentary evidence. I have a copy of the standard RF1 form record of Mr Clements' contributions. I discussed the details of this form of record in my decision in Rose v HMRC (4 12 2006, SC 3001 2006). I do not repeat that here, as Mr Clements and his agent are fully aware of the decision. The copy form, which I accept as an accurate record, shows an address for Mr Clements in Gillingham, Kent added to the record in 1954. It is noted that he was "abroad Sept 59" but no Australian or other address appears on the record. Nor does the record show that he went to Australia at that time.
8. The records for 1958-59 and 1959-60 in the RF1 Read:

58/9: 41 (Class 1 contributions) 41 (total contributions) then RF172 [followed by something unreadable that looks like a date]

59/60: the line is blank apart from the word "No" in the column "contribution record issued."

9. On the basis of the evidence I recorded in Rose at paragraph 28, that should mean that Mr Clements was sent a reminder in form RF 172 to return his NI card after the end of the contribution year ending in 1959. It is not clear from the copy record before me whether the illegible part of the record for 1958-59 is a note that he did so. The "No" means that he voluntarily returned his card in 1959-60 and that the NI Records Branch was satisfied that no compulsory contributions were due for that year. There is a copy of the form RF 172 in the form issued in 1959 in the papers. It emphasises that NI cards are the property of the Ministry and that the form is a notice officially requiring it to be returned.
10. If that is correct, then there appears to be a conflict between the evidence of the RF1 and the assertions made for Mr Clements that he was not given any notice about contributions in 1959. I have received no formal evidence from either party on this point, and do not now invite it. It is nearly 50 years ago and further direct evidence of probative value is now unlikely from any source. But there is at least some indication that Mr Clements may have had relevant post or documents forwarded to him in 1959 or 1960 from his address in Gillingham about his NI position at that time. I also have had no evidence about any formal or informal arrangements that Mr Clements might reasonably have been expected to make in 1959 to have post or other documents forwarded to him at his new address from the address he left in Gillingham, or from his former employer.
11. I have also been given a copy of the front page of the official leaflet NI 38, National Insurance for Persons Abroad. This was available to, and may have been

issued to, Mr Clements in 1959 or 1960.

The relevant laws

12. I take judicial notice (as neither party has drawn my attention to the fact) that Australia terminated the bilateral social security agreement between Australia and the United Kingdom on and from 1 03 2001. Mr Clements therefore has rights to his United Kingdom retirement pension by reference only to United Kingdom law and not by reference to any mutual agreement or reciprocal recognition of contributions made, or rights obtained, in Australia. And as necessary I also take judicial notice of the steps taken by both governments and by other bodies to give warning to all concerned in and since 2001 about the effects of the ending of that agreement. It is for this reason also, as Mr Clements notes, that his pension is paid at the level awarded in 2002 and not uprated from year to year.
13. I conclude, based on the facts found above, that European Union law is not relevant to this case. Mr Nawbatt asserts this position in his skeleton argument for HMRC but does not explain why. As Mr Yates has set out specific European Union measures in his skeleton argument that is not a sufficient reply. The answer lies in Mr Yates' failure to note that everyone asserting European Union rights must show that he or she is within the personal scope of the relevant treaty provision, regulation or directive. An unidentified EU nationality is not enough. Nor would it be enough if it were identified. There is no evidence in the papers of any link such as residence or employment between Mr Clements and any European Union member state or employer between 1959 and his claim in 2002. I conclude that Mr Yates has not satisfied me on the evidence of any relevance of European Union law to Mr Clements' case.
14. Mr Yates also sought to rely on various aspects of the European Convention on Human Rights. Again, it is not immediately obvious why Mr Clements should be entitled to rely on European Rights given the factual basis for his claim, but I must consider that issue with regard to the specific rights asserted, and do so below.

The issues in the appeal

15. Mr Clements is not entitled to any higher level of United Kingdom state pension than that he was awarded unless he has the power to make, and does make, additional Class 3 voluntary NI contributions to improve his NI contribution record with regard to the contribution years between 1959 and 1996. I am not concerned in this appeal with the extent of any additional entitlement to pension that would result from any further contributions, but only about whether Mr Clements has a right to make additional contributions.
16. An officer of HMRC decided formally on 16 05 2005 that Mr Clements was not entitled to pay contributions for the period from 14 April 1959 to 5 April 1996. This is the period between the contributions recorded on the RF1 and the start of the voluntary contributions made in 2002 or 2003. The officer gave as the reason for that decision that Mr Clements 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.
17. Mr Yates raised four formal issues in response to that decision. These are, in his order of presentation:

(1) HMRC policy in requiring Mr Clements to make his own enquiries about his position and also in denying him the right to make further contributions are both in breach of the European Convention of Human Rights, and specifically Articles 6, 8, 10 and 14 of that Convention;

(2) Section 12(1), requiring the appellant to send his notice of appeal to HMRC and not directly to the Special Commissioners, is in breach of Article 6 of the Convention;

(3) Regulation 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, is in breach of article 8 and article 1 of Protocol 1 to the Convention when read with Article 14 of the Convention; and

(4) Regulation 48(3)(b) is also in breach of the relevant European Union law.

Mr Yates buttressed his fourth point by indicating that he would ask for a reference to the European Court of Justice on that point.

18. I can deal with arguments (2) and (4) immediately. Mr Clements cannot argue that he is a victim of any breach in his rights to have a fair hearing under Article 6 for the simple reason that I am hearing the case in the way he requested. The right to a fair hearing is a right to trial by independent judicial process. Article 6 does not give any rights to appellants or would-be appellants with regard to the procedures applied by government departments in making executive decisions. I therefore reject as unfounded the contentions that HMRC has broken Article 6. It cannot have done so because the Article does not apply to it. I have already stated that I can see no evidence of any factual basis on which European Union law could be made relevant to this appeal. In the absence of any relevant evidence there is no point of law to be referred to the European Court of Justice.
19. Arguments (1) and (3) deserve a fuller response. The simple assertion in the skeleton argument by Mr Nawbatt that they are "without merit" without any supporting argument beyond the statement that the time limit applies to everyone is not that response.
20. The first point that must be made is that a tribunal such as the Special Commissioners has no power to find that primary legislation is in breach of the Human Rights Act 1998 because of a breach of a provision of the European Convention. But tribunals do have the power to make that finding about secondary legislation. I therefore reject as misplaced Mr Nawbatt's suggestion that these matters might be for judicial review but are not for a Special Commissioner. It is my duty under the Human Rights Act 1998, if I consider that secondary legislation is or may be in breach of a Convention right, to ensure that a victim of such a breach is accorded that right. If therefore I were to find regulation 48 to be in breach of any Convention right and that an appellant is a victim of that breach, then I would be required first to consider if the breach was proportionate and then if it was not how to deal with the breach. Mr Yates has set out the relevant legislation and I need not repeat it.
21. Having said that, I can see no argument for any breach in this case. The rules about the final dates for payments of NI contributions at various times between 1959 and 2002 are set out in the papers. The interpretation and application of those rules have not been challenged in detail in this case, and I do not therefore need to set out again what has been clearly set out by HMRC on a number of occasions.
22. The specific challenge is to regulation 48(3)(b) of the 2001 Regulations. The relevant part of regulation 48 (Class 3 contributions) is:

(1) … any person who is over the age of 16 and fulfils the conditions as to residence or presence prescribed in regulation 145 may, if he so wishes,

pay Class 3 contributions.

…

(3) The conditions are that the person specified in paragraph (1) shall

either –

(a) … , or

(b) subject to regulation 50 and Part 6, pay the contribution

(i) where the contribution is payable in respect of any year before 6^th April 1982, before the end of the second year following the year in respect of which it is paid; and where the contribution is payable in respect of any year after 5^th April 1982, before the end of the sixth year following the year in respect of which it is paid …

23. I am not entirely clear why Mr Yates has sought to single out this provision for attack. It has to be read in context, and there are two important elements to that context of direct relevance here. The first is that Mr Clements cannot, on the facts, base his claim to pay on regulation 48 alone. He does not meet the residence or presence conditions. He can only meet them by praying in aid the provisions of article 147 (Class 2 and Class 3 contributions for periods abroad) and article 148 (conditions of payment of Class 2 or Class 3 contributions for periods abroad). I assume that Mr Clements was given the benefit of those provisions when he was invited to make contributions in 2002 or 2003. So he has already benefited from a specific exception in the legislation for those not resident or not present in the United Kingdom at the relevant times. Far from being the subject of negative discrimination under regulation 48, he has already benefited from positive discrimination in his favour under regulation 147.
24. The second point is that there is a general exception in regulation 50 to the time limits in regulation 48 and regulation 147. This is the provision that allows late payment to be accepted notwithstanding that the time limit has expired in certain cases where it can be shown that, put simply, the contributor is not at fault. Mr Yates has sought to argue that Mr Clements is entitled to the benefit of regulation 50. I must consider whether he makes good that argument. If he does, then he does not have to rely on his challenge to regulation 48. But at the same time account must be taken of that regulation in assessing the challenge to regulation 48.
25. The scheme that emerges is:

(a) basic British state retirement pension is contributory

(b) contributions are compulsory for most of those employed or self-employed in Great Britain

(c) contributions paid to, or membership of, contributory schemes elsewhere in the European Union or other states with which the United Kingdom has a bilateral agreement may also be counted as if made in Great Britain

(d) contributors are permitted to make voluntary contributions for periods

where they are in, but not employed or self-employed in, Great Britain within a defined time after the period of insurance

(e) this opportunity is extended to those that have been in Britain but are then abroad

(f) the time limit applying to the exercise of this opportunity can be extended on an individual basis where failure to pay in the time limit is not the fault of the would-be contributor

26. Mr Yates contends that this scheme is in breach of Mr Clements' rights under Article 8 (family life) and Article 1 of Protocol 1 (property rights) read if necessary with Article 14 (discrimination). I have read Mr Yates' argument about these contentions, and I am prepared to assume in considering them (though it has not been argued) that Mr Clements is within the personal scope of the rights protected by the Convention and is a "victim". But I cannot see any shadow of an argument that Mr Clements is of a status subject to adverse discrimination. The reverse is true. He has 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. I fail to see how he has been subject to adverse discrimination on those facts.
27. Nor can I see how any argument can be founded on either family life or property rights, with or without discrimination, in the situation for which Mr Yates must argue. This is that Mr Clements is being prejudiced either individually or as a person of a particular status because he fails to meet the conditions of regulations 147 and 50. In other words, notwithstanding that he has not worked or lived in Britain since leaving it in 1959 and notwithstanding also that he failed to do anything about his British pension - not only in the six years provided generally but for many years subsequently - through a failure on his part to exercise due care and diligence, he should nonetheless be entitled now to pay the necessary premiums (or contributions) to receive the same benefits as those compelled to pay or those who did exercise due care and diligence and who did paid contributions for compensation against the risk of living to retirement age. I simply cannot accept that the status of being someone who has 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 has later found that the risk against which he was or would have been insured is realised is entitled to claim the benefit of hindsight under the European Convention. Additionally, I have no information about any other pension rights that Mr Clements may have in Australia or elsewhere. Was he a "victim" if he was required to, or chose to, pay contributions into some other pension scheme instead of the British scheme? The basic framework of international social security law, reflected in the European Union and British rules, is 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 may have worked.
28. I therefore reject as without foundation all the grounds put forward for this appeal save that of considering the question on which HMRC decided it. Was Mr Clements entitled to the benefit of regulation 50?

Due care and diligence

29. The test of due care and diligence is in regulation 50. Its application to the payment of voluntary contributions was discussed by Owen J in Walsh v Secretary of State for Social Security (unreported, 28 03 1994) and by Dr Avery Jones, Special Commissioner, in Adojutelegan v Clark (17 09 2004, SC 2004 30). Mr Yates also cited my decision in Rose on this point, but I did not discuss the authorities in that case and decided the matter very much on the evidence I had heard from Dr Rose himself. I do not consider that it assists Mr Clements' very different claim.
30. I follow those decisions in identifying as the issue here whether Mr Clements can offer a satisfactory explanation to show that his (assumed for these purposes, as it has not been proved) ignorance or error in not paying the voluntary contributions within the time limit was not by reason of his own failure to exercise due care and diligence. The argument for Mr Clements was that he did not know that he could pay the voluntary contributions, that others should have told him about the right to pay voluntary contributions, that as they did not do so it was not his fault that he did not know, and (implied as the final step) that there was no reason why he should have enquired about the right to contribute when he was not aware of it.
31. I have not had the benefit of any direct evidence from Mr Clements, but my starting position is this. Mr Clements did know that the British state pension was contributory. He contributed for several years before he left the country. His argument appears to be that when he left the country he should have been told of the need to make further voluntary contributions. I am not entirely satisfied that he was not put on notice by the relevant ministry at the time. There is some evidence that he was told the position. There were warnings on contribution cards and readily available leaflets. It is clear that if he had enquired he would have been given all the necessary information readily.
32. Aside from that, I fail to see any reason in law or fact why his employer, the Inland Revenue (only relevant at that time if Mr Clements was paying British income tax), 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 into the future. I have been offered no evidence at all about what Mr Clements did or did not know about pensions. I suspect, from my own knowledge of the position in Australia, that he would have had some knowledge of them because of the way that the compulsory Australian "super" system works. Certainly there is no evidence that Mr Clements experienced any specific personal problem that would prevent him from understanding that contributory pensions require contributions to be paid or of a nature that prevented him from enquiring about any need to pay additional contributions to the British scheme if he wanted to receive a full British pension. Could he reasonably expect, without making any enquiries, to receive a full British pension over 40 years after leaving Britain when he had paid only 5 years contributions to the British scheme? I think not. Can he reasonably expect to make good the contributions many years after they should have been paid only when he knew he would live to receive a pension? Mr Yates has sought valiantly to place the blame on others for Mr Clements' inactivity and lack of curiosity, but I am entirely unconvinced by his arguments. It was plainly reasonable for Mr Clements to make enquiries, and I can see no explanation why he did not do so.
33. I find that on this aspect of the appeal also I am not satisfied that Mr Clements has shown a good case for being within the exception to the general time limit for paying voluntary contributions set by regulation 50.
34. I must therefore dismiss the appeal on all grounds.

DAVID WILLIAMS

SPECIAL COMMISSIONER

RELEASED: 4 April 2008

SC 3194/2006