An actress turned journalist who has been fighting HMRC’s refusal to allow her to make backdated National Insurance contributions (NICs) has lost her appeal to a First Tier Tribunal (FTT), and is now unable to increase her pension entitlement
The case concerned Beth Porter, an American who came to the UK in the 1960s and married a Scottish actor, Peter Reid. She worked in experimental theatre groups during the 1970s and in BBC TV dramas in the 1980s and 1990s before becoming a critic and journalist. [Ms Beth Porter and the Commissioners for Her Majesty’s Revenue and Customs, [2016] UKFTT 0792 TC0 5517].
The FTT was told that Porter’s financial means are very limited. Her sole income is her £85 a week pension and her lawyers at the tribunal were acting on her behalf pro bono. If her appeal was successful, she would be able to make back dated payments, which were described as ‘modest’ and would be funded by a charity. These would mean she had 35 ‘qualifying years’ for NICs purposes which would increase her weekly income to £155.
The tribunal heard that Porter had made a ‘married women’s election’ and so was not liable to pay NICs between February 1971 and April 1975. She was liable to pay reduced rate NICs between April 1975 and April 1980. As a consequence, she was not entitled to pay voluntary Class 3 NICs for the period up to April 1980.
She was liable to pay full NICs from April 1980 but did not pay NICs for three periods in 1980-81, 1993-95 and 1998-99. HMRC held the failure to pay NICs for the disputed periods was attributable to her ignorance or error and that was the result of her failure to exercise due care and diligence. Accordingly, she was not entitled to have any Class 3 contributions backdated to make up her contribution record.
The judge pointed out ‘The law is not in dispute although it is complex and has changed a number of times over the period under consideration.’
Porter’s argument was that throughout her working life, since her arrival in the UK, she satisfied all her financial obligations including those relating to tax and National Insurance. She denied that she made a married women’s election and contended that throughout the periods in dispute NICs were paid by her or on her behalf by various means.
The tribunal was told HMRC had discovered two different NIC records for Porter, under two numbers, which had been amalgamated at some point. There were periods when NICs had not been paid, on one occasion because of problems with a direct debit which were rectified, and on other occasions despite reminder letters being sent no payment was recorded.
Porter said she believed that her agent or manager or accountant or bank manager from time to time was doing everything necessary so far as her financial obligations were concerned. She did not retain any documentation from the disputed periods.
The FTT identified the critical question as being whether or not Porter had opted to make a married women’s contribution, which she strongly denied.
The FTT noted that given the lapse of time, it was difficult to provide evidence of what actually happened, but based on evidence it found that Porter had made a married women’s election and accordingly had no obligation to pay NICs or full rate NICs during the period up to 1979-80. As a result, she was not able to make Class 3 voluntary contributions in relation to this period.
The FTT accepted HMRC’s decision that the failure to make the Class 3 payments was a result of ignorance or error
The FTT accepted HMRC’s decision that the failure to make the Class 3 payments was a result of ignorance or error, so it then had to consider whether this was due to a failure to exercise due care and diligence.
The FTT decided that an intelligent and capable person who was aware that they had financial obligations but who devolved all responsibility onto others, assumed they were doing what they were supposed to and made no checks or enquires as to whether the right things were being done could not be said to be exercising due care and diligence.
If, as a result, that person was ignorant of the fact that they needed to make additional contributions or in error in this respect, that ignorance or error arose from a failure to exercise due care and diligence. The FTT found that this was the situation in this case and therefore concluded that Porter’s failure to make the Class 3 payments in time was a result of her ignorance or error, so she could not now make backdated contributions.
Meg Wilson, CCH tax writer, said: ‘It was with some regret that the FTT came to its decision that the appellant was not entitled to the full state pension and could not make voluntary contributions to enable her to become so entitled. It recognised the importance of this decision to the appellant who, as a result, was only entitled to a pension of £85 per week instead of £155, but this was the conclusion it reached based on the law and evidence.
‘The case demonstrates the importance of considering a person’s NICs record well in advance of them reaching state pension age.’
