NIC case re: fortnightly pay periods
The Upper Tribunal have upheld the decision of the First-Tier Tribunal in Edinburgh and found in favour of HMRC. The taxpayer in this case 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 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 taxpayer disagreed with the decision of the First Tier Tribunal which said that the taxpayer was not entitled to challenge past contribution levels. However, the taxpayer was ultimately unable to persuade the Upper Tribunal Judges of any error in law by the First Tier Tribunal and the decision of the First Tier Tribunal was upheld.