New rules permit recovery of unpaid Class 2 National Insurance via PAYE Coding Notice

Employees should be aware of new rules that enable HM Revenue and Customs (HMRC) to collect unpaid Class 2 National Insurance Contributions (NICs) through an individual’s PAYE tax code as of April 2014.

Payment requests for unpaid Class 2 NICs have been sent out by HMRC since April 2013.  These payment requests make it clear that HMRC can collect the debt through PAYE codes from April 2014, or pass it to a private debt collection agency for recovery on their behalf.

Taxpayers are being urged to act on the payment requests, either by making the required payment, or if they believe the request is incorrect they should contact HMRC to explain why - for example, if they have stopped being self-employed.

If they fail to do so, they are likely to receive an Annual Coding Notice (P2) between January and March 2014.  This will indicate that the Class 2 NICs debt will be collected through their PAYE code from April 2014.

In order to prevent the outstanding debt being reflected in their tax code, affected individuals should ensure they agree and settle the correct amount owed as soon as possible.

For further information, please contact Paul Wilkinson at the office.