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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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Class 3 NICs: time limits for paying class 3 NICs: due care and diligence- factors to be taken into account

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

Regulation 65(3), Social Security (Contributions) Regulations 2001

NIM25032 explains that in:

  • Kearney v HMRC [2010] EWCA Civ 288
  • John R Goldsack v HMRC [2010] UKFTT 530 (TC)

the Court of Appeal and the First-tier Tribunal, respectively, gave guidance on the kind of relevant factors to be taken into account in deciding whether or not a person’s failure to pay Class 3 NICs timeously was the result of their failure to exercise due care and diligence. Those factors include the following:

  • the individual’s age
  • the individual’s nationality, including whether they had any language difficulties
  • the individual’s employment history,
  • the individual’s health: do, or did, they have any relevant physical disability
  • the individual’s knowledge of the NI Scheme, including:

    • the source of that knowledge; i.e. whether from the Department, an employer (or former employer), or some other third party (for instance, a friend, a work colleague, another Government department
    • the extent of the knowledge
  • the individual’s NI record including

    • what NICs have been paid or credited
    • what benefit claims, if any, have been made, and, where made, the type of benefit(s) claimed and the outcome of the claim(s)
  • what enquiries the individual made about paying Class 3 NICs, including:

    • when they made the enquiries
    • what information or advice they were given
  • the extent and nature of the action or inaction that the individual took, especially in relation to the making of enquiries about the possibility of paying Class 3 NICs

The above list of factors is not exhaustive. The Court of Appeal made it clear that it didn’t consider it possible to produce a definitive list of relevant factors. So other factors might be relevant depending on the nature of the particular case in question.

Once all the relevant factors have been established, they should be:

“…balanced together to reach an assessment or evaluation on a case-by-case basis as to whether due care and diligence was exercised and, if not, whether the failure was the cause of the contributor’s ignorance…” (Kearney at paragraph 34).

In carrying out that balancing exercise it is important to remember that simply because an individual has some knowledge of the NI Scheme, it does not automatically follow that they can show that they exercised due care and diligence only if they made further enquiries about their entitlement to pay. It will all depend on the facts and circumstances in any particular case. But as the Court of Appeal said, at paragraph 36, in Kearney:

“…it will be an unusual case in which a person is able to show that, while he made no contributions even after learning the basic features of the NIC scheme, he nonetheless exercised due care and diligence.”