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HMRC internal manual

National Insurance Manual

Appendix 1: Draft letters: Draft Letter 1

Letter telling employer of the intention to issue a Notification under regulation3(2B) of the Social Security (Contributions) Regulations 2001

Dear

[A] At a recent visit to you an officer of this Department found that the earnings of [Dor E] …………. are paid regularly but at intervals of different length. The officer also found that the greater part of the earnings are paid at the longer interval but that you are calculating National Insurance contributions (NICs) using an earnings period which reflects the shorter interval.

[B] You recently asked this Department to consider whether the earnings period of [D or E] should be changed because the earnings are paid regularly but at intervals of different length and the greater part of the earnings are paid at the longer interval.

[C] Your employee [D]…….. recently asked this Department to consider whether theearnings period applied to his/her earnings should be changed because the earnings arepaid regularly but at intervals of different length and the greater part of the earningsare paid at the longer interval.

Although NICs are being assessed in accordance with Social Security legislation, the longterm effect of such a pay practice is that the earnings are subject to less NICs thanwould be due if all of the earnings were paid over the longer interval. Where such instances occur this Department is able to notify you, under regulation 3(2B) of theSocial Security (Contributions) Regulations 2001, that for the purposes of calculating the amount of NICs due the earnings period to be applied should be that of the longer orlongest interval.

The purpose of this letter is to explain that, in order to ensure that the amount of NICs due is proportionate to the total earnings paid, it is our intention to issue a decision which gives you notice to change the earnings period to the longer pay interval. This means that with effect from [F] …………………. you should calculate NICs using a [G]…………… earnings period for [D or E]. Those earnings that are paid at the shorter interval should be aggregated with the earnings paid at the longer interval and NICs calculated on the total figure.

You will receive this decision in 30 days. In the meantime, if you think there are any reasons why the earnings period should not be changed, please let me know as soon as possible.

A similar letter has been sent to [D or E].

Notes Explanation

[A] Use this paragraph if the case originated internally

[B] Use this paragraph if the employer has requested a regulation 3(2B) decision

[C] Use this paragraph if the employee has requested a regulation 3(2B) decision

[D] insert the name of the employee

[E] Use ‘the employees on the enclosed list’ if more than one employee is involved

[F] Insert operative date

[G] Insert earnings period to be applied, eg monthly, quarterly