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HMRC internal manual

Compliance Operational Guidance

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HM Revenue & Customs
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Supporting Guidance: employer compliance: guidance by subject: settlement: time limits for recovery: Limitation Act 1980 and Limitation (Northern Ireland) Order 1989

NICs are a civil debt. Recovery of NICs is subject to the restrictions of

  • The Limitation Act 1980 for employers in England and Wales
  • The Northern Ireland Limitations Order 1989 for employers in Northern Ireland.

The time allowed to enforce payment of a debt by civil proceedings in England Wales and Northern Ireland is restricted to six years from the date on which the cause of action accrued. So, unless there is evidence of fraud or deliberate concealment or mistake (section 32 of the Act or section 71 of the Order) NICs are subject to the restrictions of the Act or Order.

Employers in Scotland are governed by the Limitation (Scotland) Act 1973 which provides for a time limit of 20 years.

The calculation for the six year limit is not tax year based, for example, recovery of earnings paid to 30 June 2008 would be timed barred from 20 July 2014, as follows:

  • tax month ends 5 July 2008
  • date due for payment to HMRC by 19 July 2008
  • six year period starts 20 July 2008
  • six year period ends 19 July 2014
  • NICs time barred from 20 July 2014.

Action by Caseworker

You should be aware that in the majority of cases, NIC will become time barred on a monthly basis during the working of a case. You should therefore be alert to this and plan to avoid the NIC becoming time barred by

  • seeking an early payment on account of the ‘specific’ NIC liability and accrued interest due in each year before it becomes time barred
  • asking the employer to confirm in writing that it was the intention to cover the ‘specific’ NIC liability due in each year when a general payment on account has been received.

Note: Where the employee is liable to pay their own primary Class 1 NIC, for example Embassies, interest is not due, see DMBM520110.

In the absence of the above and depending on when the NIC will become time barred you should give the employer as much warning as possible and

  • send letter EC23 (available via SEES- forms and letters) to the employer

    • invite the employer to make a payment specifically on account of the identified NICs and associated interest
    • advise the employer that if a specific payment on account is not made the Department will seek to protect its ability to recover the arrears by taking court action, and will seek to recover any court fees incurred from the employer (COG915230 - Court fees included in a settlement).

Note: Where it is not possible to give any advance warning (because the NIC is about to become time barred imminently) you should

  • send the letter but adapt it to advise that protective action will be commenced simultaneously.

If the employer fails to make a specific payment on account as requested you should refer the case to the Senior Manager to consider:

  • the issue of NICs Decisions for all NICs arrears identified (COG915155 - Settlement by NIC Decision)
  • the issue of Protective Claims for all NICs arrears identified and the interest thereon.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

  • (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
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Where a Protective Claim is appropriate the Senior Manager should arrange to

  • send a schedule of the NIC due, interest thereon and details of payments on account made, to the employer
  • send a completed stencil directly by email (This content has been withheld because of exemptions in the Freedom of Information Act 2000)  EIS-BFD, Protective Claims Team (DMB).

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

The stencil includes a list of information and documentation which should be attached.

A separate record of the request for action should be maintained to make sure the claim is lodged and appropriate follow up action taken.

Where it has not been possible to prevent the NIC from becoming time barred:

See COG915015 - Voluntary Restitution.