Navin Joshi v The Commissioners for HMRC
[2023] UKFTT 903 (TC)
Kirin Kalia v The Commissioners for HMRC
4 October 2023
[2023] UKFTT 875 (TC)
First-tier Tribunal
Ms. Kalia got a big late sick pay check. The tax office said it was taxed correctly, even though it was paid late. The judge agreed, and Ms. Kalia lost her appeal, but she might still get some help with benefits.
Key Facts
- •Ms. Kalia received 15 months of backdated sick pay in a lump sum in June 2020.
- •The sick pay was due under an income protection plan after a dispute with the insurer.
- •HMRC assessed Class 1 NICs based on the single payment in June 2020.
- •Ms. Kalia appealed, arguing the payment should be treated as 15 separate monthly payments.
- •The payment included arrears of sick pay and interest for delayed payment.
Legal Principles
Liability to Class 1 NICs arises when earnings are paid.
s6, Social Security Contributions and Benefits Act 1992
Regulation 7(1) of the Social Security (Contribution) Regulations 2002 modifies the basic rule on NICs payment timing, addressing payments made at irregular intervals.
Regulation 7, Social Security (Contribution) Regulations 2002
Regulation 7(3) disapplies Regulation 7(1) and (2) where a payment made in one year would be treated as made in another year.
Regulation 7(3), Social Security (Contribution) Regulations 2002
Regulation 58 allows reallocation of NICs payments for the purposes of claiming state benefits.
Regulation 58, Social Security (Contribution) Regulations 2002
Outcomes
Appeal dismissed.
While the lump sum payment represented 15 simultaneous monthly payments ('mistimed' under HMRC guidance), Regulation 7(3) excluded payments relating to the tax year preceding the payment year from Regulation 7(1). Therefore, the NICs allocation was correct, though not for the reasons given by HMRC.
HMRC decision notice was correct.
Regulation 7(3) resulted in the correct NICs allocation despite the lump sum payment representing multiple missed payments.