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Forum Home  →  Discussion  →  Work capability issues and ESA  →  Thread

Who checks the contribution records?

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Patrick Joseph Hill
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Ruth_T - 19 December 2014 08:04 PM

The fact that an employee has paid NI contributions does not guarantee that these have been paid over by the employer.  Employers pay the NI they have collected at the end of a tax year, and mistakes are sometimes made.  I have personal experience of non-transfer of contributions after leaving a job during the tax year, during which the employer was also taken over.  Several former employees were in the same position, and the error only came to light when one of them claimed a contributory benefit.

However, the DWP should accept that the relevant contributions were paid by the employee on the basis of wage slips, P60 or P45.

And while we’re on the subject, I remember many years ago querying why a person wasn’t getting a certain contributory benefit.  I was told that this was because she [the claimant] had been on SSP for part of the qualifying year and that SSP credits were not automatically credited to a person’s qualification history.  I was told that she would have to telephone the contributions agency and claim them.  Was that just then or is it still the case do you think?

Season’s greetings.

Thank you.

Patrick

Mick Quinn
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Had one several years ago exactly the same with SSP not being recorded against claimants record. Apparently NHS payroll has (has?) major major problem of not including SSP contributions at that time.

Had to get DWP Longbenton team, NHS payroll and HMRC all speaking together!
Don’t think anything has changed and this ‘black hole’ is costing claimants dearly.

Best wishes

Edmund Shepherd
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From memory, contributions for periods on SSP need to be claimed.

1964
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Flipping ‘Eck, all these years and I didn’t know that….

Thanks for the heads-up. Could easily be significant couldn’t it?

Patrick Joseph Hill
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1964 - 05 January 2015 02:02 PM

Flipping ‘Eck, all these years and I didn’t know that….

Thanks for the heads-up. Could easily be significant couldn’t it?

Yes, I think you’re right, it may well have previously unknown implications for many others. 

I often think that we all know fiddly bits that we assume everyone else knows, so we don’t bother spreading the news; this of course is incorrect as we can’t all know it everything.  Thank goodness for the likes of “Rightsnet” for providing the forum to let others know stuff others don’t know.  And sometimes I think that some folk won’t post their fiddly bits, being uncomfortable in the thought that they may be scorned by thinking that everybody already knows that don’t they?  But they often don’t know that though.

Thank you.

Patrick

Patrick Joseph Hill
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This matter has moved on and opinions would be helpful.

The case went before a Directions hearing recently and I proffered the question, and didn’t get an answer which is proper as it was purely a directions hearing, if a reconvened tribunal would have authority to determine a matter concerning decisions on contributions.  I say this as previous experience has revealed contribution questions/decisions are Secretary of State Decisions and NOT appealable via the normal route but only be Judicial Review.  The case at point here, however, is that although the DM has used the correct legislation, his calculations of income have been incorrect by s/he deciding that earnings should be divided by 4 as income is paid 4 weekly.  By doing this, weekly earning fall lower that the Lower Earnings Level for particular weeks are not met and, therefore, they are removed from the annual figure for LEL satisfaction of the second contributions conditions to be met.  My argument is that the earnings in these periods should be calculated by the weeks worked in any 4 week cycle and not divided by 4.  For example, should a person earn £95 a week for two weeks work, his earnings would be treated as falling within the LEL and would satisfy the condition.  However, should that earnings calculation be divided by 4, it would result in £47.50 and not satisfy the LEL.

Basically, the question is: can this an issue that can be dealt with at first tier or will it be treated as having no jurisdiction?

Thank you.

Patrick.

unhindered by talent
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I’ve never had a client have to provide proof. I have, on the other hand, had a client awarded CBESA then had it removed 6 months later when they realised the client hadn’t, in fact, got the requisite contributions!

Tom H
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Patrick Joseph Hill - 02 June 2015 04:52 PM

...previous experience has revealed contribution questions/decisions are Secretary of State Decisions and NOT appealable via the normal route but only be Judicial Review.  The case at point here, however, is that although the DM has used the correct legislation, his calculations of income have been incorrect by s/he deciding that earnings should be divided by 4 as income is paid 4 weekly.  By doing this, weekly earning fall lower that the Lower Earnings Level for particular weeks are not met and, therefore, they are removed from the annual figure for LEL satisfaction of the second contributions conditions to be met.  My argument is that the earnings in these periods should be calculated by the weeks worked in any 4 week cycle and not divided by 4.  For example, should a person earn £95 a week for two weeks work, his earnings would be treated as falling within the LEL and would satisfy the condition.  However, should that earnings calculation be divided by 4, it would result in £47.50 and not satisfy the LEL.

Basically, the question is: can this an issue that can be dealt with at first tier or will it be treated as having no jurisdiction?

HMRC decides whether contributions have been “paid” – see section 8(1)(e) of the Transfer of Functions Act 1999.  Section 6A Contributions and Benefits (C&B) Act 92 treats a person as having actually paid contributions if his earnings are not less than the LEL but not greater than the primary threshold.  So I’m assuming that the reference to “paid” in section 8(1)(e) above includes “treated as paid”.  R(JSA)8/02, albeit in a slightly different context, held that it did.  As we know, only earnings on which contributions are paid or treated as paid count for the purpose of satisfying the contribution conditions for benefits.

In order to assess whether contributions have been paid/treated as paid, HMRC obviously has to decide the relevant level of earnings in any period – see Reg 2 of the Contributions Regs 2001 which, I think, are the relevant regs.    The table in Reg 3 suggests that where the pay interval is over a week, eg 4-weekly as in your client’s case, the period over which earnings are assessed is that interval, ie 4 weeks.  Not good then.

HMRC adjusts the LEL so that it matches the pay cycle.  The adjusted LEL is known as the “prescribed equivalent” (see section 5(4) C&B Act and Reg 11(1)&(2) of the above 2001 Regs).  Here it would multiply the LEL (for 2009/10) of £95 by 4 = £380.  As your client’s 4 weekly wage appears to have been £190 (ie £95 x 2) it obviously falls short of the LEL.  Therefore, I don’t think contributions could be “treated as paid” on the £190.  As a result, I don’t think the earnings would even appear on the contributions record seen later by the DM deciding whether your client satisfies the contributions conditions.  It’s not that I don’t understand the argument you’re making about averaging the earnings a different way, it’s just that the regs don’t seem to offer that option.

However, those 2001 Regs are heavy reading and I could be wrong.  I agree it’s worth challenging.  There’s provision in Reg 38A Decisions and Appeals Regs 99 for the First-tier Tribunal of the Social Entitlement Chamber to adjourn your appeal and direct the Dept to refer the matter to HMRC to make a decision on the disputed contributions.  However, SSWP v TB has since held that the FtT may, to speed things up, itself refer the matter to HMRC (cutting out the DWP) – see the very clear procedure set out in paras 15-18 of the judgment.  If the client wanted to appeal the eventual HMRC decision that would have to go to the f-tT in the Tax Chamber and further delay the outcome of the overpayment appeal (which actually might not be a bad thing if recovery of ESA is suspended in the meantime).

Patrick, I’d be interested to know what the “correct legislation” as you call it used by the DM is.  Have they used the Computation of Earnings Regs 1996?  I couldn’t work out whether it was those Regs or the above 2001 Regs which had to be used.  Para 3(1)(c) of Sch1 to the Welfare Reform Act 2007 refers to section 3 & 4 of the C&B Act 92 as the source of the relevant Regs.  The commentary to section 3 in the Legislation book refers to the Computation of Earnings Regs.  However, section 3 was amended by the above Transfer Act.  The 2001 Regs are made under section 3 as amended.  I’m still not sure to be honest.  It would be really useful if you could keep us informed of the outcome, particularly HMRC’s view.

Finally, I’m assuming client is in the support group, otherwise it seems that, at best, the overpayment would be reduced by 365 days, ie the cb-ESA would have been time-limited.

 

[ Edited: 19 Jun 2015 at 07:56 pm by Tom H ]
Patrick Joseph Hill
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[/quote]

HMRC decides whether contributions have been “paid” – see section 8(1)(e) of the Transfer of Functions Act 1999.  Section 6A Contributions and Benefits (C&B) Act 92 treats a person as having actually paid contributions if his earnings are not less than the LEL but not greater than the primary threshold.  So I’m assuming that the reference to “paid” in section 8(1)(e) above includes “treated as paid”.  R(JSA)8/02, albeit in a slightly different context, held that it did.  As we know, only earnings on which contributions are paid or treated as paid count for the purpose of satisfying the contribution conditions for benefits.

In order to assess whether contributions have been paid/treated as paid, HMRC obviously has to decide the relevant level of earnings in any period – see Reg 2 of the Contributions Regs 2001 which, I think, are the relevant regs.    The table in Reg 3 suggests that where the pay interval is over a week, eg 4-weekly as in your client’s case, the period over which earnings are assessed is that interval, ie 4 weeks.  Not good then.

HMRC adjusts the LEL so that it matches the pay cycle.  The adjusted LEL is known as the “prescribed equivalent” (see section 5(4) C&B Act and Reg 11(1)&(2) of the above 2001 Regs).  Here it would multiply the LEL (for 2009/10) of £95 by 4 = £380.  As your client’s 4 weekly wage appears to have been £190 (ie £95 x 2) it obviously falls short of the LEL.  Therefore, I don’t think contributions could be “treated as paid” on the £190.  As a result, I don’t think the earnings would even appear on the contributions record seen later by the DM deciding whether your client satisfies the contributions conditions.  It’s not that I don’t understand the argument you’re making about averaging the earnings a different way, it’s just that the regs don’t seem to offer that option.

However, those 2001 Regs are heavy reading and I could be wrong.  I agree it’s worth challenging.  There’s provision in Reg 38A Decisions and Appeals Regs 99 for the First-tier Tribunal of the Social Entitlement Chamber to adjourn your appeal and direct the Dept to refer the matter to HMRC to make a decision on the disputed contributions.  However, SSWP v TB has since held that the FtT may, to speed things up, itself refer the matter to HMRC (cutting out the DWP) – see the very clear procedure set out in paras 15-18 of the judgment.  If the client wanted to appeal the eventual HMRC decision that would have to go to the f-tT in the Tax Chamber and further delay the outcome of the overpayment appeal (which actually might not be a bad thing if recovery of ESA is suspended in the meantime).

Patrick, I’d be interested to know what the “correct legislation” as you call it used by the DM is.  Have they used the Computation of Earnings Regs 1996?  I couldn’t work out whether it was those Regs or the above 2001 Regs which had to be used.  Para 3(1)(c) of Sch1 to the Welfare Reform Act 2007 refers to section 3 & 4 of the C&B Act 92 as the source of the relevant Regs.  The commentary to section 3 in the Legislation book refers to the Computation of Earnings Regs.  However, section 3 was amended by the above Transfer Act.  The 2001 Regs are made under section 3 as amended.  I’m still not sure to be honest.  It would be really useful if you could keep us informed of the outcome, particularly HMRC’s view.

Finally, I’m assuming client is in the support group, otherwise it seems that, at best, the overpayment would be reduced by 365 days, ie the cb-ESA would have been time-limited.
[/quote]

Well Tom, sorry about the long, long delay in getting back to you.  This matter has been adjourned for this, that and t’other reasons; and adjourned again today.  I must admit that your response as per above, was really very helpful indeed.  Without it I was struggling a bit.  Anyway, the fly in the ointment here has turned out to be the fact that for the two periods of 4 weeks in the relevant contribution year when the earnings fall short of the LEL, there was also payable SSP credits for at least two of the weeks in those 4 week periods.  The argument is, therefore, that despite what the regulations say, the 4 week periods in question cannot be both divided by 4 and be 2 weeks when SSP credits are awarded.  It must be that the earnings will attract a 2 week division, as the other 2 weeks have been taken from the division by the award of the credits.  That being the case, the earnings for those 2 weeks will be in excess of the LEL of £90 and should, therefore, be added to the annual income.

Your, and other’s further input most welcome.

Thank you again.

Patrick

Tom H
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Thanks for the update Patrick.

I completely understand the argument you’re making and think it represents a reasonable and fair way of treating the earnings in these circs.  It’s just that I’m struggling to reconcile it with the law.  Reg 9(3) of the Contribution Regs 2001 (which I provided a link to in my last post) suggests that there can be a separate earnings period for SSP but only in those rare cases where SSP is paid by HMRC.  The implication is that any SSP that is paid by an employer in the normal way is added to any other wages due for the normal pay period concerned, here 4 weekly.  That seems very unfair and appears to penalise those who are paid less frequently than weekly.

Whilst HMRC’s decision on the amount of earnings on which contributions are paid or treated as paid is, as we know,  only one part of the calculations carried out by the DWP DM in deciding the earnings factor for the given tax year, I don’t think the latter has jurisdiction to alter HMRC’s calculations, effectively making them binding on him/her.  In the present case, whilst the DWP can add 4 weeks of credited earnings at £90 p/w (ie, the rate of the LEL) in recognition of the 4 weeks of SSP received over 2 separate pay periods, if there’s still a shortfall, which there would appear to be, then it seems there’s nothing further the DWP DM can do.  If that were not the case, you could ask the DWP DM (or the tribunal standing in its shoes) to consider adding the two weeks of credited earnings of £90 p/w awarded in one of the pay periods (ie, in recognition of the SSP) to the 2 weeks of actual wages also of £90 p/w in that same pay period to make £360 for the 4 weekly pay period concerned so that it equalled the LEL prescribed equivalent for those 4 weeks, ie £360.  That would allow the whole of the £360 quid to count towards the earnings factor as opposed to just the £180 of credited earnings in that period.  Your argument about removing completely the 2 lots of 2 weeks’ SSP from the affected pay periods to allow the wages in each of those periods to be divided by two would achieve the same result.  But as I say I suspect the DWP don’t have jurisdiction to do that. 

To the extent that you’re saying that HMRC have the power to do that, I’m struggling as I say to see where that power is in the Contribution Regs. 

Very best of luck anyway. 

By the way, I think that should be an option in the drop down list of reasons available to tribunals when drawing up adjournment notices: this, that and t’ other:)

[ Edited: 18 Feb 2016 at 07:22 pm by Tom H ]
Patrick Joseph Hill
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Tom H - 18 February 2016 05:02 PM

Thanks for the update Patrick.

I completely understand the argument you’re making and think it represents a reasonable and fair way of treating the earnings in these circs.  It’s just that I’m struggling to reconcile it with the law.  Reg 9(3) of the Contribution Regs 2001 (which I provided a link to in my last post) suggests that there can be a separate earnings period for SSP but only in those rare cases where SSP is paid by HMRC.  The implication is that any SSP that is paid by an employer in the normal way is added to any other wages due for the normal pay period concerned, here 4 weekly.  That seems very unfair and appears to penalise those who are paid less frequently than weekly.

Whilst HMRC’s decision on the amount of earnings on which contributions are paid or treated as paid is, as we know,  only one part of the calculations carried out by the DWP DM in deciding the earnings factor for the given tax year, I don’t think the latter has jurisdiction to alter HMRC’s calculations, effectively making them binding on him/her.  In the present case, whilst the DWP can add 4 weeks of credited earnings at £90 p/w (ie, the rate of the LEL) in recognition of the 4 weeks of SSP received over 2 separate pay periods, if there’s still a shortfall, which there would appear to be, then it seems there’s nothing further the DWP DM can do.  If that were not the case, you could ask the DWP DM (or the tribunal standing in its shoes) to consider adding the two weeks of credited earnings of £90 p/w awarded in one of the pay periods (ie, in recognition of the SSP) to the 2 weeks of actual wages also of £90 p/w in that same pay period to make £360 for the 4 weekly pay period concerned so that it equalled the LEL prescribed equivalent for those 4 weeks, ie £360.  That would allow the whole of the £360 quid to count towards the earnings factor as opposed to just the £180 of credited earnings in that period.  Your argument about removing completely the 2 lots of 2 weeks’ SSP from the affected pay periods to allow the wages in each of those periods to be divided by two would achieve the same result.  But as I say I suspect the DWP don’t have jurisdiction to do that. 

To the extent that you’re saying that HMRC have the power to do that, I’m struggling as I say to see where that power is in the Contribution Regs. 

Very best of luck anyway. 

By the way, I think that should be an option in the drop down list of reasons available to tribunals when drawing up adjournment notices: this, that and t’ other:)

Hello Tom,

MY final update on this.

I’ve just come back from the 1st tier appeal which, at last was finally heard.  I argued that the calculation methodology [ dividing by 4] was merely an administrative convenience (Thomas v Others) and was denying client her right of property under Article 1 of the first protocol.

The decision notice contained the following comment:

2.  ... “On the balance of probabilities the appellant was entitled to contributory ESA.  The tribunal does not consider that the division by 4 is a sound basis for the assessment of this issue.  It does not properly consider issues such as annual leave or unpaid leave within a 52 week period…

5.  For these reasons the appeal is allowed…”

Okay, I know it is probably the case that the DWP will be sending for the Statement of Reasons as I write this.

Thank you Tom et al.

Patrick

 

Tom H
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Well done Patrick.  Great result.