A taxpayer has lost her case at the First-tier Tribunal (FTT) concerning the allocation of national insurance contributions to differing tax years, but the FTT helpfully pointed out that her desired outcome could be achieved under a differing part of the relevant regulations.  The regulations discussed in the case hadn’t been discussed at any tribunal or court previously.

The taxpayer’s employer had enrolled the taxpayer in an income protection insurance policy that was part of their standard employee benefits package.  The policy provided that where employees to sick leave then (very broadly) the employee would receive at least 75% of their normal income, typically way above the statutory sick pay rates.  The taxpayer took sick leave but initially the insurance company refused to pay out against the policy.  The taxpayer took the insurance company to the Financial Ombudsman who sided with the taxpayer that the insurance policy should payout, along with interest.

This process took some time and when a payment was eventually made to the taxpayer it included 15 months of back sick pay.  For national insurance contribution (NIC) purposes this was treated by the employer as a single payment and HMRC agreed with this treatment.

The taxpayer disagreed with HMRC and appealed its decision.  The FTT found that the payments were indeed payments that should be treated for NIC purposes as when they should have been paid rather than when it was actually paid, siding with the taxpayer under one part of the regulations.  The FTT then found that another part of the regulations also stated that where payments were made regarding an earlier tax year then these payments were to considered part of the current tax year.  The net result of this was that HMRC was correct to allocate the payments in way that they did, despite the incorrect reasoning.

The taxpayer’s appeal was dismissed.

The decision can be found at: The Finance & Tax Tribunal (tribunals.gov.uk)

The FTT helpfully pointed out to the taxpayer that despite losing the case, although she was correct on the initial treatment, that another regulation helped her achieve her desired outcome.  For benefits purposes it was helpful to the taxpayer where the payments were considered in the earlier tax year and the FTT pointed out there is another regulation within the same regulations under discussion that allows the taxpayer to apply to HMRC to allocate the payments in the periods required by the taxpayer.

Please contact us if you have any questions about the national insurance contributions, we are experienced with these matters.