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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
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Class 1 NICs : Earnings of employees and office holders : Funded Unapproved Retirement Benefit Schemes (FURBS) up to 5th April 2006: Refunds where NICs paid in respect of a period for which a scheme subsequently receives tax approval

Regulation 53 of the Social Security (Contributions) Regulations 2001

Regulation 53 allows a refund only where:

  • a payment is made in respect of a bona fide retirement benefits scheme established for the sole purpose of providing relevant benefits (see SE15020 for guidance on the meaning of ‘relevant benefits’);
  • Class 1 NICs have been paid by a person or secondary contributor in respect of any such payment;
  • the payment is made prior to the approval of that scheme for the purposes of Chapter I of Part XIV of the Income and Corporation Taxes Act 1988; and
  • the scheme is subsequently approved by the Board of Inland Revenue.

This means that if a scheme is eventually approved, a refund can be made for the periodfor which approval is given if NICs have been paid in respect of payments to an unapproved scheme:

  • either at the interim approval stage (because the scheme fails to meet the key criteria), or
  • before the application for approval is made.

Example

In May 2000, payments are made to an unapproved scheme prior to submitting an applicationfor tax approval. NICs are due.

In September 2000, an application for tax approval is submitted and the scheme meets the key criteria for NICs purposes. No NICs are due.

In June 2001, the scheme receives approval backdated to May 2000. A refund is available for the period May to September 2000.

If the scheme had failed to meet the key criteria in September, a refund would be due for the whole period from May 2000 to June 2001 once approval was received.

The NICs which can be refunded in accordance with regulation 53 are refundable to the person or secondary contributor who paid them. The refund is subject to an application for refund being made within six years from the date from which the Board of Inland Revenue’s approval of the scheme operates.