Accountant blamed for client's NIC oversight
A self-employed man who didn’t pay national insurance contributions for 17 years wasn’t to blame because of poor advice from his accountant, a tribunal has ruled.
The first-tier tribunal ruled in Murphy v HMRC  UKFTT 734 (TC) that although Sean Murphy had been registered as self-employed with HMRC since 1995 he had not paid any Class 2 National Insurance contributions until 2012 because he had not told the then Department of Social Security of his self-employment.
Murphy had relied on his accountant to register his self-employment, the tribunal heard.
When Murphy tried to pay the arrears he was advised that he could only pay for the period from 9 April 2006 unless he could show that his failure to register and pay was due to his ignorance or error and that the oversight was not due to any failure on his part to exercise due care and diligence.
The tribunal’s decision to allow Murphy’s appeal was guided by a previous decision in a similar tribunal (Dr Jeremy Schonfield vs HMRC, TC/2011/02613).
This tribunal found that before Schonfield appointed his accountant he had “exercised due care and diligence”.
In Murphy’s case, the tribunal heard that he had been recommended an accountant who had gone with him to three interviews with his bank when he was setting up in practice. As well as helping Murphy to obtain approval from his professional body the adviser dealt with all his tax affairs and arranged his registration for VAT.
HMRC accepted that Murphy’s failure to pay Class 2 NICs from the start of his self-employment was due to his ignorance.
Tribunal judge Alastair Rankin followed the Schonfield precentent and ruled that Murphy’s failure to pay Class 2 NICs from was “attributable to his ignorance which was not due to his failure to exercise due care and diligence as he had relied on his accountant to advise him on all aspects of his tax affairs”.
The accountant involved was not named in the decision.