NIM17070 | Class 1A National Insurance contributions: Refunding Class 1A NICs: Definition of an ‘error’

Regulation 52 of the Social Security (Contributions) Regulations 2001 (SSCR 2001) (SI 2001 No 1004)

The word ‘error’, as used in the context of Class 1A NICs refund legislation, means an error which:

• is made at the time of payment, and

• relates to some past or present matter.

A refund arising from an error can only be made if the contributions were paid as the result of an error which caused a miscalculation at the time Class 1A NICs were calculated. The error must also relate to something which occurred before the date by which payment of Class 1A NICs must be made.

Examples of the type of refund arising from an error include:

• incorrect information supplied by official sources

• mathematical mistakes

• human error.

Where an employer alleges that Class 1A NICs have been incorrectly calculated because of incorrect advice given by a Government Department, obtain full details of the advice. If the case is not justified, tell the applicant. If the case is justified and misdirection is accepted, explain to the applicant that a refund is due.

Most refunds arising from an error will occur because of an incorrect calculation made in relation to a specific benefit. Two examples of typical errors are:

• including in a Class 1A NICs calculation a benefit which is exempt from Class 1A NICs

• using the wrong Class 1A NICs percentage rate in a calculation.

Events which occur after Class 1A NICs have been paid, which may alter the taxable benefit, for example an employee making good the cost of a benefit, do not alter the amount on which Class 1A NICs were originally calculated and no refund can be made, see NIM17130.

If, however, when calculating the amount of Class 1A NICs due, an employer simply forgets to take into account a payment the employee made towards the cost of the benefit and, as result, overpays Class 1A NICs, a refund can be made.