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HMRC internal manual

National Insurance Manual

Refunds: refund of NICs paid on contractual maternity pay


Contractual Maternity Pay (CMP) is a term used to describe payments made to women on maternity leave from their employment. ‘Contractual’ in this context stems from an agreement between the employer and the employee whereby the:

  • employer agrees to pay CMP on condition that the employee returns to work after an agreed period; and
  • employee agrees to repay the CMP if she does not return to work.

Where a woman does not return to work at the end of the agreed period, the employer may require repayment of the CMP. Where this is repaid, the general rule has always been that because NICs were properly paid at the time CMP was paid originally, liability stands. This meant that neither the employer nor the employee were entitled to a refund of NICs on the amount of CMP paid.

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Refunds of National Insurance contributions on Contractual Maternity Pay repayable after 31 March 1990

With effect from 31 March 1990, regulations provide that refunds of NICs may be made on that part of CMP repaid or due to be repaid after that date:

  • to both the employer and the employee where CMP has been repaid; or
  • where the employee has not repaid CMP but the employer has taken all reasonable steps to recover it, to the employer only.

A woman who is due to repay CMP but does not do so is not entitled to a refund because the earnings on which she paid NICs originally are still in her possession.

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Refund of part of National Insurance contributions

There will be some instances where, as a result of paying Class 1 NICs on CMP originally, a woman may qualify for and receive, contributory benefit. Where she receives CMP and then becomes entitled to a refund of NICs, this may affect her entitlement to contributory benefit already paid. Therefore, where benefit has already been paid on the strength of any NICs now due for a refund, but which would not have been paid had the NICs not been paid in the first instance, benefit must be recovered from the employee’s refund before a refund is made. The employer’s refund is not affected.