Identity theft confuses NIC records
Lynn Terry argued another person had used her NI number while she lived abroad and the married woman’s reduced rate NI election recorded at that time was incorrect.
The single issue to be decided in the first tier tribunal case of Lynn Terry vs HMRC (TC07745) was whether Terry had made a married woman’s election under Reg 91 for 1975/6.
If she had, Terry was liable to pay NIC at the married women’s reduced rate for the period 6 April 1975 to 5 April 1978. However, Terry argued she had not made a Reg 91 election, as HMRC had claimed.
The appeal was relevant as the tax years in which the reduced rate applied did not count as “full” for the purposes of the taxpayer’s state pension.
What is a Reg 91 election?
Under Regulation 91 of the Social Security (Contributions) Regulations 1975, a married woman could elect to pay a reduced rate of primary class 1 NIC liability (5.85%).
This was achieved by giving notice on a form CF9, which could be found on the back of Leaflet NI1. Form CF9 could be completed at, or sent to, an office of the Department of Health and Social Security. Once in place, a Reg 91 election would apply to subsequent tax years until revoked.
The married women’s reduced rate of NIC was abolished from 11 May 1977, although elections made prior to then continued to be effective until revoked or ended by other events. From 6 April 1978, a Reg 91 election automatically lapsed if the woman did not pay class 1 NIC for two consecutive years.
Metal Box Co Ltd (Metal Box Co) filed deduction cards for a “Lynn Margaret Terry” for 1975/76 and 1976/77, which showed married women’s reduced rate NIC deducted for both years. Her leaving date was given as 2 April 1976.
The deduction cards showed Terry’s National Insurance number, but misspelt her middle name (“Margaret” instead of “Margarete”).
Terry married on 7 January 1975. Later that month, she left the UK to live with her husband, who was in the British Army and stationed in Germany.
Terry returned to the UK for about three weeks around the time her first child was born in October 1975. She then returned to Germany and lived there until early 1979. Terry did not work during her time in Germany.
Terry argued that she was never employed by Metal Box Co and was living in Germany at the time. She speculated that someone else may have used her details to get work with Metal Box Co.
No definitive evidence
Two documents would have provided direct evidence of a Reg 91 election for 1975/6: a copy of the CF9 that contained Terry’s signed declaration, or a copy of the certificate that the Secretary of State was required to issue following a Reg 91 election.
However, neither document was available. In line with HMRC’s document retention policy, forms CF9 were destroyed after six years.
As to the certificate that would have been issued, neither HMRC nor Terry could attest to its whereabouts. HMRC pointed to copies of Terry’s RF1 (a national insurance record form) and deduction cards from Metal Box Co that showed deductions at the married women’s reduced rate. Terry, on the other hand, argued that the RF1 and deduction cards were incorrect due to bureaucratic error.
The FTT found as fact that Terry was living in Germany in 1975/76 and 1976/77, and was not working at the time.
Further, the FTT noted that if Terry had made a Reg 91 election for 1975/76, she would have had to do so between 7 January 1975 and 11 May 1975 (the latest date she could have made an in-year election). Terry was only in the UK for about three weeks during this period.
The FTT found it “inherently unlikely” that Terry would have visited a DHSS office to make the election during the first weeks after her wedding, when she was preparing to move to Germany.
The alternative scenario – that, after arriving in Germany, Terry obtained a Leaflet NI1, completed the CF9 form, and posted it back to the DHSS – was also inherently unlikely.
The FTT found that Terry did not sign a Reg 91 election for the 1975/6 year. This meant that HMRC’s decision under appeal was incorrect. The appeal was allowed.
The FTT had to weigh up conflicting evidence to determine whether, on a balance of probabilities, the taxpayer had made a Reg 91 election.
As the FTT noted, while the form RF1 was independent evidence, it was subject to bureaucratic error, particularly in an age of hand-written records. As a result, the FTT preferred the taxpayer’s account of events.