Overpaid National Insurance

briskly_2

I often have a problem with overpaid national insurance in a manner which I haven't seen mentioned much anywhere - it only affects low paid or part-time workers with erratic earnings but maybe someone could help and add any thoughts?

I have to submit monthly pay claims for my job as a researcher. These usually fall just below the tax and NI thresholds, of £650 or so per month, so I don't have to pay very much tax or NI. But sometimes my employer will mess up and not pay me for the month I worked and instead add these earnings to the next month's pay. This then means that I have to pay tax and NI on the whole of the previous month's earnings, as the total for that month is £1280 and NI is charged on a monthly basis. The tax eventually gets refunded, but the NI doesn't - I've effectively lost my previous month's allowance due to an error on their part.. I called the revenue about this and they say that my employer could refund the NI but that the revenue cannot force them to - it depends on the pay software the employer uses. I think this is disgraceful and that a proper NI refund system should apply, as it does for tax. I would have thought that a number of part-time workers are being caught out by this but don't realise it because of the complexity of the NI system. For example, some people may earn most of their income in a few months of the year and nothing much for the rest of it and have paid NI without exceeding the annual threshold.

Nicola_Ed

Hi Briskly

Below is the guidance from HMRC. The key is payment of earnings at reguar intervals - which seems to apply to you. I think the problem does lie with your employer not HMRC. For all employees except directors there is not an annual earnings period for NIC.


NIM08020 - Earnings Periods: Earnings paid at regular intervals: Interval of payment: General

Regulations 3(1) SS(C)R 2001

If the employer pays the earnings at regular intervals, only the interval of payment matters, not the period over which the earnings accrued. Regard is given to the period in which an employee is paid rather than the period the earnings cover. The most commonly applicable provisions can be summarised as follows:
- where any part of an employee’s earnings are normally paid at regular intervals of:

• one week or less, the length of the earnings period is a week; or
• more than one week, the length of the earnings period is the length of the intervals.

The definition of ‘regular interval’ for the purposes of regulation 3 includes only such intervals as are:

• in accordance with an express or implied arrangement between an employed earner (the employee) and the secondary contributor (normally the employer) which provides the intervals at which payments of earnings normally fall to be made and
• the intervals are of substantially equal length.
• The contract of employment will normally specify the period between which the payment of earnings will be made.

Example

For an earner whose pay is calculated by reference to a weekly wage but who is paid regularly every second week, the earnings period is 2 weeks, the first such period beginning on the first day of the tax year.

The following table sets out examples of how the earnings period rules work if the employee is paid regularly:
Paid same day each weekThe earnings period is a weekPaid twice weekly, eg on Tuesday and FridayThe earnings period is a tax week and the earnings must be aggregatedPaid once a monthThe earnings period is a monthPaid once every fortnightThe earnings period is two weeklyPaid once every two monthsThe earnings period is two monthlyPaid once a yearThe earnings period is annual

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briskly_2

Thanks Nicola,

The trouble is, my employer won't refund the overpaid NI, claiming that their payroll system isn't set up to do that. I'm not sure how - or anyone in this situation - and there may be thousands of us - can go about claiming the money back. I'm probably owed a lot from the last 6 or 7 years.

McKneff

Your employer cannot refund your NI, once it is paid. That is in the rules of HMRC, so not your employers fault.
NI is not refundable, it isnt the same as tax.

briskly_2

Yes they can refund the NI - I checked this out with the Revenue and they were quite clear about it. The problem lies with whether the employer can be bothered to - and as things stand they cannot be forced to. This is the problem I am highlighting.

McKneff

I stand corrected then, sorry.

june.elizabeth

In my past life as a Payroll Clerk I have refunded National Insurance Contributions. Mainly when someone has reached Retirement Age but not submitted their exemption card. I have also done it in the circumstances you describe. I gave them a Company Cheque and then made a manual alteration to their Tax and NI record. You can make amendments to records whether they be manual or computer records. I would write a letter to your Employer requesting they refund your overpaid contributions.

Nicola_Ed

briskly wrote: »

Thanks Nicola,

The trouble is, my employer won't refund the overpaid NI, claiming that their payroll system isn't set up to do that. I'm not sure how - or anyone in this situation - and there may be thousands of us - can go about claiming the money back. I'm probably owed a lot from the last 6 or 7 years.

It does not seem right that your refund is dependent on the software your employer uses. However, if as you say you are out of pocket due to your employers error, I would raise this with someone other than the payroll dept. When you are paying more NIC your employer is too so I am surprised if this happens alot? Or you could write to HMRC for a written response - they tend to be more careful in their written advice. A word of warning - do you want to be seen to be drawing the attention of HMRC to your employer? Just a thought but worth considering.

chrisbur

briskly wrote: »

I often have a problem with overpaid national insurance in a manner which I haven't seen mentioned much anywhere - it only affects low paid or part-time workers with erratic earnings but maybe someone could help and add any thoughts?

I have to submit monthly pay claims for my job as a researcher. These usually fall just below the tax and NI thresholds, of £650 or so per month, so I don't have to pay very much tax or NI. But sometimes my employer will mess up and not pay me for the month I worked and instead add these earnings to the next month's pay. This then means that I have to pay tax and NI on the whole of the previous month's earnings, as the total for that month is £1280 and NI is charged on a monthly basis. The tax eventually gets refunded, but the NI doesn't - I've effectively lost my previous month's allowance due to an error on their part.. I called the revenue about this and they say that my employer could refund the NI but that the revenue cannot force them to - it depends on the pay software the employer uses. I think this is disgraceful and that a proper NI refund system should apply, as it does for tax. I would have thought that a number of part-time workers are being caught out by this but don't realise it because of the complexity of the NI system. For example, some people may earn most of their income in a few months of the year and nothing much for the rest of it and have paid NI without exceeding the annual threshold.

In the case of a full month's wage being carried forward to the next month I would have thought that it would be covered by the section
Late notification of marginal items of pay
on page 6 of the CWG2(2012) the Employer further guide to PAYE and NICs. at
http://www.hmrc.gov.uk/guidance/cwg2.pdf

Part of this says that

"If an item of pay is not marginal and your payroll section does not find out about the item in time to include it in the correct earnings period, the pay records must be adjusted to allocate the item to the correct earnings period."

I have never been able to find out exactly what is considered marginal but surely a full month's pay is not marginal, so should be adjusted.

I would be very surprised if your employer's payroll system does not have a way to adjust these figures I think it is far more likely that it is a case of them not knowing how to do it; but I am sure they have an instruction manual somewhere.

Nicola_Ed

chrisbur wrote: »

In the case of a full month's wage being carried forward to the next month I would have thought that it would be covered by the section
Late notification of marginal items of pay
on page 6 of the CWG2(2012) the Employer further guide to PAYE and NICs. at
http://www.hmrc.gov.uk/guidance/cwg2.pdf

Part of this says that

"If an item of pay is not marginal and your payroll section does not find out about the item in time to include it in the correct earnings period, the pay records must be adjusted to allocate the item to the correct earnings period."

I have never been able to find out exactly what is considered marginal but surely a full month's pay is not marginal, so should be adjusted.

I would be very surprised if your employer's payroll system does not have a way to adjust these figures I think it is far more likely that it is a case of them not knowing how to do it; but I am sure they have an instruction manual somewhere.

Hi

I think this refers to situations to charging NIC on amounts in the week/month after the payment has been made. The first paragraph in the section you refer to mentions this.

chrisbur

Nicola_Ed wrote: »

Hi

I think this refers to situations to charging NIC on amounts in the week/month after the payment has been made. The first paragraph in the section you refer to mentions this.

Having re-read this I agree with you and don't think it would cover this situation.