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HMRC internal manual

Debt Management and Banking Manual

Debt and return pursuit: NIC: class 1 NICs: avoidance schemes - NICs paid without interest

Interest in National Insurance avoidance scheme cases

Employers who appeal against a Section 8 Transfer of Functions Act (ToFA) decision relating to Class 1 NICs may pay the NICs before settlement of the appeal. This is to minimise accrual of interest in the event that the appeal is determined in HMRC’s favour. It is rare for the employer to pay the accrued interest at the same time and so HMRC must issue a protective claim for interest within six years of the due date.

Due date for interest

Statutory interest on Class 1 is due within 14 days of the tax year to which it relates (paragraph 17 of Schedule 4 to the Social Security (Contributions) Regulations 2001) and accrues daily until payment. Each day’s interest provides a separate cause of action for the purposes of S9 of the Limitation Act 1980.

Cases under appeal where NICs have been paid without interest

Where NICs have been paid and only interest in excess of £250 remains outstanding, the Protective Claims Team (PCT) in Longbenton will issue a protective claim for the interest at the request of the compliance office responsible for the case.

Where a protective claim was not originally issued for the interest, and some of the earlier years are now over six years old, PCT will issue a protective claim for interest for the period from the later of either:

  • the statutory due date
  • a date six years back from the date the claim is issued in court

until the date the NICs were paid.

Example 1

NICs for 2003-04 were paid on 20 October 2009 (before protective action was taken for the NICs themselves) and PCT enter the claim in court on 4 March 2012.

The claim will relate to interest from 5 March 2006 (six years back from the date of claim) until 20 October 2009 (the date the NICs were paid).

Example 2

NICs for 2005-06 were paid on 17 July 2011, and a claim entered 4 March 2012.

The claim will be from 19 April 2006 (the statutory due date is still within six years of the claim date) to 17 July 2011 (the date the NICs were paid).

Cases not under appeal where NICs paid without interest

Where the NICs are not under appeal but have been paid without interest, the DTO should issue a claim in the county court for interest calculated as above.