TAX CASES - 25.01.2022

HMRC made to refund Class 3 NI payments

Bradley v HMRC. Bradley (B) was 46 and had just six qualifying years of NI contributions to ensure a full entitlement to the state retirement pension (SRP). However, in 2015 she ceased employment due to apparent workplace bullying, and suffered from anxiety about finding a new job out of fear this would continue. Having no income, and being keen to secure the remaining years, she contacted HMRC in 2017 who suggested she pay £733.20 in Class 3 NI for 2016/17, which she duly did. B then became self-employed as a pet sitter in 2018. As such she was entitled to make Class 2 NI contributions. She asked HMRC to refund the money she had paid, or alternatively to credit it to future years as Class 2 NI. HMRC refused.

Law. Class 3 NI can be paid if they enhance the contributor’s entitlement to benefit, i.e. they could not be paid if the contributor has already secured the maximum entitlement. It was clear that the payment enhanced B’s entitlement, so there was no automatic right to repayment and it had to be demonstrated that the payment had been made in error.

Decision. The First-tier Tribunal showed sympathy with B’s circumstances, and concluded that, had she been in a state of mind to exercise a rational decision, she would have realised that it was highly likely that she would have been able to secure the additional six years in the 20-year period before reaching retirement age. It was held to be an error of judgement, and the appeal was allowed.