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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: 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 Limitations Act 1980. The Limitations Act restricts the time allowed to enforce payment of a debt by civil proceedings to 6 years. The act covers all civil debts, not only NIC, it is general law.

It does not remove a liability; it restricts the power to enforce payment of a debt by civil proceedings. These are two separate issues.

The Act provides a defence against collection of the debt.

It is no more than a defence, and is a defence which can be overcome in cases where there is evidence of fraud or deliberate concealment.

We therefore have two situations:

  • 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 Act 1980 prevents legal enforcement of a debt if proceedings are instigated more than 6 years after the liability first arose.

Note: The six-year limit is not based on tax years.

For example:

Bonus payments were paid in the 1 month period to 30 June 2004, the payments were subjected to tax but NIC was not deducted.

  • The due date for payment to the Inland Revenue was 19 July 2004.
  • The six-year period starts 20 July 2004.
  • The six-year period ends 19 July 2010.
  • Enforcement of the NICs charge is not possible from 20 July 2010.

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 it will become necessary to take protective action in accordance with COG915225.

Evidence of fraud or deliberate concealment

For example:

Bonus payments were paid in the 1 month period to 30 Dec 2002, and all subsequent years, payments were recorded in the Employers records as purchases of stock and were subjected neither to tax nor NIC.

During a compliance check carried out in June 2009 you query these payments and uncover their true nature.

The NIC debt for Dec 2002 can be enforced, provided enforcement action is taken within 6 years 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 or
  • Regulation 13 determination or
  • Section 8 decision

and the circumstances in COG915070 apply.