In Mark Gadsden v HMRC [2026] TC09884, the First Tier Tribunal (FTT) found that a taxpayer had exercised due care and diligence. It allowed his appeal against HMRC's refusal to treat his late-paid Class 2 National Insurance contributions as paid for State Pension purposes.
Mr Gadsden, a barrister practising primarily in criminal law, had been self-employed since April 1981.
- He consistently filed annual Self Assessment returns and paid Income Tax and Class 4 National Insurance Contributions (NICs) throughout his career. He did not register for or pay Class 2 NICs during the period 26 April 1981 to 5 April 2014.
- From the outset of his self-employment, Mr Gadsden engaged a professional accountant to handle all aspects of his tax and National Insurance (NI) affairs.
- Mr Gadsden believed that his accountant's engagement encompassed all compliance obligations arising from self-employment, including NI registration. All official correspondence relating to tax or NI would be passed to his accountant for action.
- Mr Gadsden had no specialist knowledge of tax or social security law. He did not appreciate that Class 2 and Class 4 NICs were distinct, or that Class 4 contributions conferred no entitlement to contributory benefits, including the State Pension.
- He believed that payment of Class 4 NICs satisfied his NI liability in full.
- HMRC's records showed entries indicating that deficiency notices (said to be Class 1) had been generated for several consecutive years in the 1980s.
- No copies of any actual notices were available, their wording was unknown, and Mr Gadsden had no recollection of receiving them. He explained that if he had received them, they would have been passed on to his accountants with other correspondence.
- From the 2015-16 tax year, Class 2 NICs were integrated into Self Assessment. This caused small Class 2 amounts to appear in Mr Gadsden's returns. Still, neither he nor his accountant appreciated the significance of this or that it revealed a historic absence of registration.
- HMRC subsequently amended those returns to remove the Class 2 liabilities on the basis that Mr Gadsden was not registered.
- The resulting correspondence in early 2020 was the first occasion on which Mr Gadsden became aware of the historic Class 2 shortfall.
- Upon discovering the issue, Mr Gadsden acted promptly. He queried HMRC's amendments, sought to pay the outstanding contributions, arranged reallocation of available credits and made voluntary Class 3 contributions where permitted.
Regulation 6 of the Social Security (Crediting and Treatment of Contributions, and National Insurance Numbers) Regulations 2001 allows a contribution paid after the statutory time limit to be treated as paid for contributory benefit purposes where the failure to pay in time was attributable to the contributor’s ignorance or error and where that ignorance or error was not due to any failure on the contributor’s part to exercise due care and diligence.
- HMRC accepted that Mr Gadsden's failure to pay was due to ignorance or error, but refused to exercise discretion under Regulation 6 on the basis that the ignorance was caused by a failure to exercise due care and diligence.
- HMRC were satisfied that the actions of Mr Gadsden were not deliberate or intended.
- Mr Gadsden appealed to the First Tier Tribunal (FTT).
The FTT found that:
- Mr Gadsden's engagement of professional advisers from the commencement of self-employment constituted the taking of positive and reasonable steps.
- This was not a case of doing nothing; it was a deliberate and sustained course of conduct which amounted to due care and diligence.
- Mr Gadsden's engagement with his advisers was genuine and ongoing.
- He did not delegate matters and disengage entirely: he reviewed returns, discussed liabilities and paid what he was advised to pay
- Mr Gadsden's general awareness that NI was linked to benefit entitlement did not, in the circumstances, impose a duty to make independent enquiries.
- Confusion between Class 2 and Class 4 contributions was genuine and understandable, particularly given the historically fragmented and complex administrative structure of the NIC system, a complexity later acknowledged by Parliament through successive reforms.
- The deficiency notices relied upon by HMRC did not carry sufficient evidential weight to displace Mr Gadsden's case.
- No copy of any notice was available. Their content and wording could not be established, and HMRC's own witness accepted that consecutive issuance over many years was unusual and that historic records depended on manual input and could contain errors.
- There was no evidence that any notice clearly warned that State Pension entitlement was at risk or that it would have alerted a reasonable person to a failure by their advisers.
- Even if notices had been received, passing official correspondence to a professional adviser was itself a reasonable and appropriate response for a lay person and was not evidence of neglect.
- The prolonged duration of non-payment did not demonstrate a lack of diligence.
- The failure persisted because it was hidden by the system's structure, not because it was ignored.
- Mr Gadsden's prompt and responsible conduct once the issue was identified in 2020 was consistent with, and corroborative of, the genuineness of his earlier ignorance, rather than indifference.
- Taking all matters together and applying a multifactorial approach, Mr Gadsden satisfied the conditions in Regulation 6.
- His failure to pay Class 2 NICs in time was attributable to ignorance or error, and that ignorance or error was not due to any failure on his part to exercise due care and diligence.
- It was stated, 'This is not a case of doing nothing. It is a case of doing something, which on the authorities, can amount to due care and diligence'.
The appeal was allowed, and HMRC was directed to treat the relevant Class 2 contributions as paid for contributory benefit purposes.
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