Navin Joshi v The Commissioners for HMRC

Mr Joshi worked in the United Kingdom from April 1971 to August 1977 before he emigrated to Canada where he continues to reside. The appeal is concerned with his entitlement to the UK State Pension arising from those years when Mr Joshi had paid National Insurance Contributions (‘NICs’) through his employment in electronic servicing and repairs, mainly of television sets, at a time when it was still common for television sets to be hired by households.

After he emigrated to Canada, Mr Joshi continued to work in similar capacity in electronic servicing and repairs until the mid-1990s when he went to university and did a degree in finance. He then worked in banking in Canada from 2006 to 2010, before becoming self-employed as a financial consultant in Canada, from 2010 to 2016, when he retired.

Apart from a brief period from October 2005 to February 2006 when Mr Joshi was working in the UK for a mortgage corporation based in Bournemouth, there had been no other periods of UK employment since 1977.

On 27 January 2017, Mr Joshi reached the State Pension age for UK purposes. At some point prior to reaching pensionable age, Mr Joshi had applied to the DWP to establish his entitlement to a UK State Pension.

The correspondence that ensued in relation to Mr Joshi’s claim for entitlement to a State Pension included the following:

Following the receipt of the explanation from the DWP, it would appear that Mr Joshi decided to pay a voluntary contribution to make up for the shortfall in the number of qualifying years. From HMRC’s records, it is noted that:

Mr Joshi’s claim in August 2018 for his State Pension to commence from 27 January 2017 was not agreed by the DWP.

There was no referral to HMRC at this stage in October 2018 under reg 11A of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 to request if the voluntary contribution paid by Mr Joshi could be treated as paid on an earlier date.

Following the Directions Notice from Judge Wolfenden of 24 February 2021, the DWP referred Mr Joshi’s case to HMRC on 4 March 2021. HMRC reviewed the evidence provided and considered that the delays caused by both HMRC and DWP were unreasonable.

In cross-examination, Mr Joshi was asked about the dates that are shown on the form CF83 submitted. Mr Joshi explained that his brother, who is an accountant in the UK, submitted the form on his behalf as his agent; that there were enquiry phone calls made to HMRC at the time of completing the form (although HMRC could not trace these calls); that the enquiry was in the nature of checking whether reliance on cross-border provisions between the UK and Canada could be placed in Mr Joshi’s case to rectify the shortfall in qualifying years; that between 15 May 2017 when the form was first completed and 5 July 2017 when the form was received by HMRC, Mr Joshi was awaiting a possible response that might address the shortfall other than by way of a voluntary contribution and form CF83.

At the hearing, Ms Khan for HMRC indicated that 15 May 2017 would be ‘the earliest date’ for which HMRC can exercise their discretion and that Mr Joshi had not exercised due diligence and care between 23 January 2017 and 15 May 2017.

It is submitted the NIC contributions were voluntary in nature, and the burden lies with the appellant to make the necessary enquiry to establish his entitlement.

Mr Joshi has a degree in finance, is ‘literate in legislation’, had made a claim for State Pension, but incorrectly relied on the possibility that cross-border provisions between Canada and United Kingdom might breach the gap in his contribution shortfall.

Pursuant to reg 6(1)(b), the only discretion that HMRC could exercise was to treat the payment as having been made from the earliest possible date of 15 May 2017 that was scored through on form CF85, notwithstanding the receipt of the application by HMRC being in July 2017, and the actual payment of the contribution being in April 2018.

Mr Joshi ‘objects to the respondents’ assertion that the effective date for the commencement of State Pension be 15 May 2017’. In his submissions, Mr Joshi stated:

The issue for determination is whether the appellant’s entitlement to the State Pension accrued from the date he attained pensionable age on 27 January 2017, or from the date that HMRC deemed the voluntary payment as having been made to qualify for State Pension entitlement. In the light of the relevant statutory provisions, we make the relevant findings of fact as follows to determine the appeal.

In the present case, the determination of the date from which the pension benefit entitlement accrues is by the application of reg 4(7)(b), which means ‘the date on which the payment of the contribution is made’. We find as a fact that the voluntary payment was made by a cheque enclosed with the appellant’s agent’s letter to the IPC dated 5 April 2018, and was considered to have been processed as paid on 18 April 2018 – the date on which the payment of the contribution is made – thereby making it the date of entitlement by virtue of reg 4(7)(b).

By the operation of reg 4(7)(b), the DWP therefore advised that the commencement date of the appellant’s pension entitlement was 18 April 2018, and that would have been the end of the matter but for the discretionary power under reg 6(1), which enables HMRC to exercise their discretion to treat an earlier date as the payment date for the purposes of the Regulations.

The effect of reg 6(1) is to vest HMRC with the discretion to deem an earlier date as the date of payment of the late contribution for the purpose of determining the commencement date of the benefit entitlement to which the late payment relates. For the avoidance of doubt, it is not mandatory for HMRC to exercise their discretionary power under reg 6(1) as indicated by the express statutory wording ‘may direct’ that ‘the contribution shall be treated as paid on such earlier day as the officer considers appropriate in the circumstances’.

In the present case, HMRC did choose to exercise their discretionary power on referral from the DWP following the Directions Notice from the SEC. The review officer had considered it appropriate to exercise the discretionary power vested on HMRC to treat the payment as having been made on 5 July 2017 when the form CF38 was received by HMRC, notwithstanding the fact that no actual payment of voluntary contribution had actually been made at that juncture in July 2017.

At the hearing, HMRC have indicated that the earlier date of 15 May 2017 that was scored through would be accepted as an earlier date that the CF38 were intended to be submitted, and this concession to adopt the earlier date of 15 May 2017 is confirmed in writing post-hearing.

HMRC have set out the basis whereby this Tribunal has jurisdiction over a discretionary decision by HMRC pursuant to reg 6(1) of the 2001 Regulations. When the appealable decision concerns a discretionary decision, the Tribunal should be slow to interfere with the executive body’s exercise of discretion unless it can be shown to be ‘flawed’ in the judicial review sense. The normal grounds of challenge in a judicial review action include: (a) illegality (where a decision has involved an error/errors of law or fact), (b) irrationality (Wednesbury unreasonableness from the Court of Appeal precedent in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1KB 223), (c) procedural impropriety, (d) fettering of discretion, and (e) proportionality.

We have considered the facts and the related statutory provisions in detail. We are satisfied that HMRC’s exercise of discretion under reg 6(1) has gone as far as the evidence allows to treat 15 May 2017 as the earliest possible date of the contribution payment for the purposes of the 2001 Regulations to set the commencement date of entitlement. There is no evidence upon which HMRC could have exercised their discretion to deem the payment date of the voluntary contribution as 27 January 2017.

The appellant’s argument that the effective date of the benefit entitlement should be the date when he reached pensionable age on 27 January 2017 has no factual or statutory basis.

As a matter of fact, the appellant had no entitlement to the State Pension at the point in time on 27 January 2017, due to the shortfall in the number of qualifying years. When there was insufficient contribution for the claimant to qualify at the date of reaching pensionable age, the determination of the commencement date of entitlement is no longer by reference to the date a claimant reaches pensionable age.

The remedy for the appellant was to make a payment of voluntary contribution to make up the shortfall – but the statute does not provide for the remedy of a late payment to effect a commencement date for the entitlement by backdating it automatically to the date when the claimant reaches pensionable age, as argued by the appellant.

Instead, the late payment remedy brings into force the operation of Regulation 4, and the date of commencement of the benefit entitlement is set by the statute as the date of the payment of the late contribution.

The application of reg 4 means that the date of commencement of the appellant’s entitlement should have been 18 April 2018, as originally advised by the DWP, and that decision was in accordance with reg 4. It was by HMRC’s exercise of discretion under reg 6(1) that the date of commencement of the appellant’s entitlement is brought forward by 11 months to 15 May 2017, and is a decision that the Tribunal is fully satisfied to uphold.

For the reasons stated, the appeal is dismissed, save for the amendment noted below.

The respondents’ Formal Notice of Decision issued on 28 July 2021 is upheld with an amendment to the date from 19 July 2017 to 15 May 2017, in the light of the verbal representations made by the appellant during the hearing of 15 May 2023.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.