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HMRC internal manual

National Insurance Manual

Appendix 1: Draft Letter 7

Letter telling employer of the intention to issue a direction under regulation 31 of the Social Security (Contributions) Regulations 2001

Dear

[A] At a recent visit to you an officer of this Department found that your pay practice in respect of the earnings paid to [D or E] …………. is one which results in liability for National Insurance contributions (NICs) being reduced or avoided by means of irregular or unequal payments.

[B] You recently asked this Department to consider whether the earnings period of [D or E] should be changed because the pay practice used is one which results in liability for National Insurance contributions (NICs) being reduced or avoided by means of irregular or unequal payments.

[C] Your employee [D]…….. recently asked this Department to consider whether the earnings period applied to his/her earnings should be changed because the pay practice used is one which results in liability for National Insurance contributions (NICs) being reduced or avoided by means of irregular or unequal payments.
Although NICs are being assessed in accordance with Social Security legislation, where such a pay practice exists this Department may, under regulation 31 of the Social Security (Contributions) Regulations 2001, direct what earnings period should be used for the purposes of calculating the amount of NICs due.

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 directs you to change the earnings period. The direction will advise that with effect from [F] …………………. you should calculate NICs using a [G]…………… earnings period for [D or E].

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 31decision

[C] Use this paragraph if the employee has requested a regulation 31 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