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HMRC internal manual

National Insurance Manual

Class 3 NICs: time limits for paying class 3 NICs: ignorance or error

Regulation 50(2)(a) Social Security (Contributions) Regulations 2001

NIM25030 explains that the time limits for the payment of Class 3 NICs may be extended when the two tests set out in regulation 50 are satisfied. The first test is that failure to pay the Class 3 NICs within the time limits was due to the contributor’s ignorance or error.

There is no legal definition of ignorance or error so the words must be given their normal meaning.

Various dictionaries define:

  • “ignorance “ as meaning a lack of knowledge or unawareness of something.
  • “error” as meaning a blunder or mistake.

The meanings of ignorance and error were considered by the High Court in Revenue and Customs Commissioners v Thompson [2007] STC 240. The issue before the (then) General Commissioners was whether the (then) Inland Revenue was correct in deciding, for the purposes of regulation 6 of the of the Social Security (Crediting and Treatment of Contributions, and National Insurance Numbers) Regulations 2001, that Mr Thompson’s failure to pay Class 2 (self-employed) NICs during the period from 1972 to 1983 within the prescribed times was:

  • attributable to ignorance or error on his part
  • which was due to a failure on his part to exercise due care and diligence.

Although the case was about regulation 6 and not regulation 50(2)(b), the two tests in the above bullets are the same as those in regulation 50(2)(a).

The Inland Revenue accepted - wrongly - that Mr Thompson’s failure to pay was attributable to his ignorance or error. Having accepted this however, it considered this ignorance or error to be attributable to his failure to exercise due care and diligence. Allowing Mr Thompson’s appeal, the General Commissioners disagreed and found that his failure to pay timeously was not due to his failure to exercise due care and diligence.

On appeal, the High Court allowed the Inland Revenue’s appeal. Although it was not necessary for him to consider whether there was ignorance or error - because the Inland Revenue had accepted there was - Mr Justice Patten said that, on the material that appears to have been before the Inland Revenue and the General Commissioners,,”…it is by no means clear that Mr Thompson did satisfy the first of the two sets of conditions.” He then said this about the meaning of ignorance or error:

“[15] It seems to me that, in order for a taxpayer to be able to demonstrate that a failure to pay national insurance contributions was attributable to ignorance or error, in broad terms he needs to prove one of two things: either he must show that he had a total ignorance of the existence of the national insurance regulations and of his statutory obligation to make payment, or he must be able to point to particular circumstances existing at the time when the payments fell due which in effect robbed him of a knowledge and understanding that the payments fell due at that time. There may of course be cases where that test would be satisfied. One can easily imagine that, in the case of somebody who suffers, for example, a serious mental breakdown or some physical or mental difficulties of that kind, they may be robbed of any real sense or appreciation of the need to make the payments which fall due. But those cases, by their very nature, are likely to be rare and there is no suggestion that those conditions applied in the present case.”

In Mr Thompson’s case, he was aware of the requirement to pay Class 2 NICs when self-employed, having previously done so, and could not demonstrate either of the things referred to by Mr Justice Patten. This is why Inland Revenue was wrong to accept that this failure to pay was due to his ignorance or error.

If there is no ignorance or error then there is no need to go any further and establish whether there was a failure to exercise due care and diligence.

For guidance on:

  • regulation 6, see NIM23004 
  • the meaning of due care and diligence, see NIM25032. The guidance previously provided on this page is currently under review.