NIC avoidance problem

Between 1983 and 1998 the taxpayer worked on offshore drilling rigs. He worked offshore for a two-week period followed by a two-week rest period on land.

An artificial pay practice was commonly used for such workers whereby the bulk of his salary was paid and then a small ‘retainer’ was paid two weeks later.

This meant that he had two-weekly pay periods resulting in a reduced liability to National Insurance contributions for the taxpayer and employer.

The upper earnings limit for employer’s contributions was removed in 1986 but the employee’s contributions were still artificially reduced. However this pay practice then significantly reduced the state pension that the taxpayer might have expected.

In an interim decision ([2008] STC (SCD) 1231) the special commissioner held that if it could be demonstrated that the taxpayer did have four-weekly pay periods then under

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