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HMRC internal manual

Decisions and appeals for National Insurance Contributions and Statutory Payments

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Decision types: Failure to pay Class 3 National Insurance contributions within time limits due to ignorance or error: Modification of higher rate provisions

Regulations 65(4) and 155A(2)(l) of the Social Security (Contributions) Regulations 2001

Regulation 155A(2)(l) of the Social Security (Contributions) Regulations 2001 (the Regulations) provides for HMRC officers to decide whether

  • the reason for a contributor’s failure to pay a Class 3 contribution, falling to be computed under section 13(6) of the Social Security Contributions and Benefits Act 1992 or 13(6) of the Social Security Contributions and Benefits Act (Northern Ireland) Act 1992, and which remains unpaid after the end of the second year following the contribution year, is his ignorance or error; and
  • if so, whether that ignorance or error was due to his failure to exercise due care and diligence, as mentioned in regulation 65(4) of the Regulations.

NIM25029 explains that Class 3 National Insurance contributions (NIC) are payable at a higher rate if paid more than two tax years after the end of the contribution year for which they are being paid. For example, Class 3 NIC for the 2004/2005 year were due at the higher rate if paid on or after 6 April 2007. The rate that has to be paid is the highest rate in force between the payment year and the year in which payment is made.

Regulation 65(4) covers a situation where the period in question (“the relevant period”) begins on or after the date that payment became due at the higher rate.

Example

A contributor contacted HMRC in July 2008 to pay Class 3 NIC for the 2004/2005 year. The higher rate for that year was payable from 6 April 2007, and on that date the rate payable was the 2007/2008 rate of £7.80 per week. From 6 April 2008 the higher rate became the 2008/2009 rate of £8.10 per week.

If the failure to pay within the relevant period was due to ignorance and error which was not caused by the contributor’s failure to exercise due care and diligence, then regulation 65(5) allows that the payment can be made at the rate that was in force at the beginning of the relevant period. The relevant period is from 6 April 2007 to 5 April 2008. If the NIC had been paid in the relevant period the higher rate that had to be paid for the 2004/2005 year was the 2007-2008 rate of £7.80.

For guidance about

  • time limits to pay Class 3 NIC, see NIM25028
  • when Class 3 NIC are payable at the higher rate, see NIM25029
  • ignorance or error and due care and diligence, see NIM25031.

For guidance about the wording of such a decision see DANSP39800.