NIM20605 - Class 2 National Insurance contributions liability: Payment methods: Collection of Class 2 NIC Debts through the PAYE code

Regulation 63A of the Social Security (Contributions) Regulations 2001 (SI 2001 No. 1004)

This regulation allows for unpaid Class 2 National Inusrance contributions (NICs) to be collected through a person’s PAYE code. This was introduced as an additional method of collection and operated alongside and in addition to the other collection methods.

The PAYE code was used to collect Class 2 debts where the individual has a PAYE source of income for the following tax year.

The first debts to be collected in this way were included in the coding notices for 2014/15 and were issued in January 2014. Because the coding notices were produced prior to the start of the tax year in which they operated, the regulations provided that the rate to be applied was the rate in force at the time the PAYE code was determined.

This means, for example, that although the collection of the debt took place during the 2014/15 tax year, the rate to be applied was the rate in place for the 2013/14 tax year. This was in line with what happened where a time to pay arrangement was agreed.

In addition, changes were made by DWP to regulations so that any contributions collected by this method were treated as paid on 5 April of the tax year in which they were collected. In addition, where applicable the contributions were also subject to the “late” paid provisions when they were posted.

Information on the new collection method was included on Class 2 bills issued from the start of the 2013/14 tax year. Where a debt was included in an individual’s PAYE Code, the coding notice showed the amount of the Class 2 NICs debt that was included for the forthcoming tax year and the period to which it related.