SPC00552

NATIONAL INSURANCE CONTRIBUTIONS – whether discriminatory that contributions for the employed cease at age 65 whereas Class 4 contributions for the self-employed cease if the person has attained that age at the beginning of the tax year – no – appeal dismissed

THE SPECIAL COMMISSIONERS

	H E  MANNING	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S 
	REVENUE AND CUSTOMS	Respondents

			Special Commissioner:	DR JOHN F AVERY JONES CBE

Sitting in public in London on 28 June 2006

J M Feldman, Feldman & Co, accountants and auditors, for the Appellant

Nicky Parslow, HM Revenue and Customs Appeals Unit—London & Anglia, for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	Mr H E Manning appeals against a decision dated 31 March 2006 “that you are not exempted from paying Class 4 contributions in respect of your profits for the year 6 April 2003 to 5 April 2004.  That the amount you are liable to pay is £1,021.36.”  The Appellant was represented by Mrs Feldman, and the Revenue was represented by Mrs Parslow.
2.	The following facts are agreed:
(1)	The Appellant was born on 19 April 1938 and attained 65 on 19 April 2003.
(2)	He was self-employed during the period 6 April 2003 to 5 April 2004 and filed a self-assessment tax return showing a profit from his self-employment of £17,382.
3.	Mrs Feldman, for the Appellant, contends that as a self-employed person the Appellant was discriminated against compared to employed persons who cease paying their National Insurance contributions on attaining 65 whereas the Appellant has to pay Class 4 contributions throughout the year in which he attained 65.
4.	Mrs Parslow, for the Revenue, contends that the charge is in accordance with the law, which was correctly summarised in the notes on self-employment accompanying the tax return (note to box 3.94); Leaflet CA 72 on deferring payment (page 9); and Manual NIM 24510.
5.	Section 17 of the Social Security Contributions and Benefits Act 1992 provides:
“(1) The Inland Revenue may by regulations provide—
(a) for excepting persons from liability to pay Class 4 contributions, or any prescribed part of such contributions, in accordance with sections 15 and 16(1) to (3) above [those sections provide for payment of Class 4 contributions];…
(2) Exception from liability…under subsection (1) above may, in particular, be by reference—
(a) to a person otherwise liable for contributions being under a prescribed age at the beginning of a tax year;…”
6.	Regulation 91 of the Social Security (contributions) Regulations 2001 made pursuant to that Act provides:
“Any earner who—
(a) at the beginning of a year of assessment is over pensionable age…
shall be excepted from liability for contributions under section 15 of the Act (Class 4 contributions).”
7.	There is therefore no doubt that Parliament has permitted the exception from Class 4 contributions for those of a prescribed age at the beginning of a tax year and the Revenue have done just that, specifying the age as pensionable age (65 for men).  Since Class 4 contributions are payable “in the same manner as any income tax which is, or would be, chargeable in respect of those profits…in accordance with assessments made from time to time under the Income Tax Acts” (s 15(2) of the Social Security Contributions and Benefits Act 1992) this is entirely logical as it would not be possible to have different rules for Class 4 applicable to part of a tax year when the income tax assessment must relate to the whole tax year.
8.	Mrs Feldman made reference to the Human Rights Act 1998 without being more specific.  She did not serve a skeleton argument in accordance with the agreed directions and accordingly Mrs Parslow did not have any notice that such a point would be raised and did not reply to it.  The point of directing skeleton arguments in advance is to avoid this situation occurring.  
9.	I have considered whether the charge is contrary to Article 1 of Protocol 1 to the Human Rights Convention:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions.  No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions of penalties.”
read with article 14:
“The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”
10.	An argument that Class 4 contributions discriminated against self-employed persons on the ground that no benefits were received from such contributions was put forward in National Federation of the Self-Employed v United Kingdom, Application No.7995/77, which the European Commission on Human Rights held was inadmissible on the ground that the difference in treatment between employed and self-employed were justified:  
“The Commission finds, however, that this difference, insofar as it can be said to amount to an inequality of treatment between Class 4 contributors and the other classes of contributors is justified as being based on the legislator’s appreciation of the way in which the costs of the national insurance scheme should be shared between the person eligible to the different benefits available under the scheme.  Such a difference which is to be found in many spheres of the law is legitimate and any inequality in the present case is not out of proportion to the purposes of the national insurance scheme concerned.  Consequently, there cannot be in this respect, any discrimination within the meaning of Article 14 of the Convention.” 
Application No.9793/82 complained about the non-deductibility of National Insurance contributions by the self-employed, which was also declared inadmissible on the ground that a self-employed person was not in a comparable position to an employer.  Juby v United Kingdom, Application No.11592/85, was similarly treated.  I have not found any later decisions.  It seems therefore that the authorities in Strasbourg have already considered similar arguments and found them to be inadmissible.  By section 2 of the Human Rights Act I am bound to take these decisions into account.  If, in the National Federation of the Self-Employed case, the Commission has found the whole system of Class 4 contributions not to be discriminatory, it is inconceivable that they would regard one aspect of it as discriminatory.  In any event, as that decision shows, in order to determine whether the difference in treatment between the employed and self-employed concerning when contributions cease is discriminatory it would be necessary to take into account all differences in contributions and benefits to determine whether there is any discrimination.  I do not have any evidence of this, but it is relevant that the Treasury’s figures show “reduced contributions for self-employed not attributable to reduced benefit eligibility” of £1,700m for 2003-04 (Tax Ready Reckoner and Tax Reliefs, December 2004, Table 7).  It seems likely that if there is any discrimination in relation to National Insurance as a whole it is in favour of the self-employed.
11.	I can think of no other possible arguments against the charge, which is clearly in accordance with the law.  Accordingly I dismiss the appeal and uphold the decision.

JOHN F. AVERY JONES

SPECIAL COMMISSIONER
RELEASE DATE: 3 July 2006

SC 3089/06

££HE Manning v  Revenue & Customs [2006] UKSPC SPC00552 (03 July 2006)