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HMRC internal manual

Compliance Operational Guidance

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HM Revenue & Customs
Updated
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Supporting Guidance: employer compliance: guidance by subject: settlement posting (allocating) contributions to an employee’s NI account-general

The Contributory Principle

The Contributory Principle is simply the expectation of receiving contributory benefits in return for the payment of National Insurance Contributions.

The most common Contributory Benefits are:

  • Retirement Pension
  • Employment and Support Allowance
  • Maternity Allowance
  • Job Seeker’s Allowance
  • Bereavement Benefit

However, there are other Social Security benefits, which are not dependent on the payment of NICs, for example

  • Income Support
  • Child Benefit

An individual’s right to a Contributory Benefit is dependent on his/her NI record during a particular tax year. After the end of each tax year, the NICs paid by the individuals are recorded on their NI account.

Contributory benefits work on the basis that individuals need qualifying years. A qualifying year is a tax year in which that individual has a minimum amount of earnings and, usually paid NICs.

Although the Department for Work and Pensions (DWP) is responsible for the administration of the benefit system, HMRC is responsible for the collection and recording of NICs on individuals NI accounts.

Upholding the principle

To uphold the above principle it is necessary for any arrears of NICs recovered from compliance activity to be posted to the contributors NI account on NPS. The mechanics of this are carried out by NIC&EO but the information is supplied by compliance staff using form ECR304 (available on SEES).

To establish the amount of NICs to post, compliance caseworkers or support staff will use

  • the NIRS calculation support tool (NIRS Calc Support) (access to NIRS is not required).

The calculation will enable NIC&EO to post an accurate figure on the individual’s NI account. Normally the NICs should not be posted until it has been confirmed that the employer has paid the arrears of contributions. However to ease the administrative burden for

  • NIC&EO to have to contact compliance for confirmation, and
  • compliance to have to check with the SAFE unit

it has been agreed internally that the contributions will be ‘treated as paid’.

There are different categories of posting that can be made. They are

Before a notification on ECR304 is sent to NIC&EO, you will need to consider whether a posting is necessary (see COG908097).