NIC case re: fortnightly pay periods
An interesting case recently heard by the First-Tier Tribunal in Edinburgh examined a taxpayer’s liability to National Insurance contributions. He typically worked on offshore drilling rigs for two weeks and then returned to Aberdeen or elsewhere on the mainland for a two week rest period. This working pattern occured throughout the period from 1983 to 1998.
The court case revolved around the unusual way in which the taxpayer was paid which resulted in two payments per month. The payments were split into one large payment immediately following the time offshore and one small retainer payment following the two weeks on the mainland. The Tribunal gave an example whereby if the taxpayer earned exactly £2,000 per month, the first payment would be for £1,931 and the second for £69. This practice, which was commonly used for offshore workers, resulted in the taxpayer paying significantly less National Insurance contributions than if he had been paid monthly.
It transpired that this approach also affected the taxpayer’s entitlement to a state pension which was significantly reduced. This was the issue about which the taxpayer appealed. The Tribunal Judge in an interim decision gave the taxpayer hope that if he could demonstrate that he had four-weekly pay periods then a higher state pension would be due.
Ultimately, however the taxpayer was unable to demonstrate that the second ‘retainer’ payment was aggregated with the salary received earlier in the month. The Tribunal Judge whilst expressing his feelings that the taxpayer did have a valid grievance ultimately dismissed the appeal.