Home > Publications > Selected cases — Parliamentary > Selected Cases and Summaries of Completed Investigations - November 1997 - April 1998 > C.1134/95
Summary of Selected Cases
DEPARTMENT OF SOCIAL SECURITY
Delay in refunding national insurance contributions to a trainee probation officer
Matters Considered
Mrs X complained that, following a reinterpretation of the law, the Contributions Agency (CA) of the Department of Social Security had taken over four years to refund the class 1 national insurance contributions (NICs) which she had paid while she was a Home Office (HO) sponsored trainee probation service student between 1979 and 1982; and that they had refused to pay interest on the refund.
Summary of case
On 2 October 1991 HO wrote to CA asking for guidance on whether HO sponsored students were liable for the payment of class 1 NICs as a Special Tax Commissioner had held that payments made to such students were not liable to income tax. On 31 October CA told HO that the Tax Commissioner's decision would apply to liability for NICs. An officer in DSS policy section C1 considered the implications of the decision and sought legal advice; on 24 March 1992 she sought guidance from her line manager. In July C1 advised CA to process any applications which they had received for refunds of NICs and asked HO for details of the sponsored students involved. In September HO supplied details of 2,600 students who had been sponsored since 1986 but C1 later established that the HO student sponsorship scheme had started in 1970. On 20 October C1 asked solicitors branch (SOL) of the Department of Social Security (DSS) for advice on the periods for which NICs could be refunded. On 17 November SOL provided advice. On 1 December 1992 the officer in C1 made her recommendations for action to her line manager, but he did not reply. On 26 February 1993 C1 told CA technical services that refunds could be made on application for NICs paid or after April 1975. On 29 September, after further debate and legal advice about the date from which refunds could be made, C1 authorised CA to refund any NICs wrongly paid since 1970. In October 1993 C1 asked CA to consider how best to identify all students who might be entitled to a refund of NICs. In June 1994, after discussions with CA, and with DSS finance and information divisions, C1 obtained Ministerial approval for a publicity campaign to identify those students not already identified as entitled to refunds. In October Mrs X's case was identified. In March 1995 CA refunded £418.82 NICs which Mrs X had paid between 1979 and 1981, but refused to compensate her for the loss in value of that payment.
Findings
Although DSS's long-time acceptance of class 1 status for HO students was reversed I found no evidence that the earlier decision had been reached maladministratively. DSS's task in deciding what action to take on the revised ruling and in identifying those entitled to refunds was a difficult one but there were substantial periods of inactivity during the process and their well-meaning efforts were on occasion lacking in focus and planning. I considered that DSS Ministers could have been consulted some 12 months earlier than was the case, which delayed the identification of those entitled to refunds. I found that the time taken to process Mrs X's application for a refund was reasonable.
Remedy
The Chief Executive of CA agreed to make Mrs X an ex gratia payment equivalent to one year's interest on the amount of her refund. He also agreed to have examined an estimated 6,500 other cases with a view to affording them similar treatment.
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