Supporting Guidance: employer compliance: guidance by subject: settlement: time limit for recovery: NIC
There is nothing in the NICs legislation that specifies any time limit for recovery.
However NICs are a civil debt and collection of arrears of NICs is subject to the
- Limitation Act 1980 for employers in England and Wales
- Limitation (Northern Ireland) Order 1989 for employers in Northern Ireland
- Prescription and Limitation (Scotland) Act 1973 for employers in Scotland.
These acts restrict the time allowed to enforce payment of a debt by civil proceedings to
- 6 years in England, Wales and Northern Ireland
- 20 years in Scotland.
These acts covers all civil debts, not only NICs, and are general law.
They do not remove a liability; they restrict the power to enforce payment of a debt by civil proceedings. These are two separate issues.
The acts provide a defence against collection of the debt.
It is no more than a defence, and as such may be overcome in cases where there is evidence of fraud or deliberate concealment.
There are two situations to consider:
- where there is no evidence of fraud or deliberate concealment of a NIC liability
- where there is evidence of fraud or deliberate concealment of a NIC liability.
No evidence of fraud or deliberate concealment
Here we have to consider whether we can enforce the debt, and need to look at the time constraints. The limitation acts prevent legal enforcement of a debt if proceedings are instigated more than 6 years (or 20 in Scotland) after the liability first arose.
Note: The limits are not based on tax years.
For example (where employers are based in England, Wales or Northern Ireland):
Bonus payments were paid in the one month period to 30 June 2011. The payments were subjected to tax but NIC was not deducted:
- the due date for payment to HMRC was 19 July 2011
- the six-year period starts 20 July 2011
- the six-year period ends 19 July 2017
- enforcement of the NICs charge is not possible from 20 July 2017.
If there is a concern that the limitation period may expire because the level of liability is either still under negotiation, or there are appeal proceedings, then it will become necessary to take protective action in accordance with COG915225.
Evidence of fraud or deliberate concealment
Bonus payments were paid in the one month period to 30 Dec 2009, and all subsequent years, payments were recorded in the employer’s records as purchases of stock and were subjected neither to tax nor NIC.
During a compliance check carried out in June 2017 you query these payments and uncover their true nature.
The NIC debt for Dec 2009 can be enforced, provided enforcement action is taken within 6 years (for England, Wales and Northern Ireland) or 20 years (for Scotland) of HMRC discovering the fraud or concealment.
Interest - retrospection
There is no restriction on retrospection on the recovery of interest provided that the liability on which it is charged can be formalised by a
- Regulation 80 determination
- Regulation 13 determination or
- Section 8 decision
and the circumstances in COG915070 apply.