HM Revenue and Customs Brief 28/12
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Issued: 17th October 2012
The Social Security (Categorisation of Earners) Regulations
1978 in relation to lecturers, teachers, instructors or those in a
Applications for refunds of National Insurance contributions
paid in error or claims for financial redress
Who should read this?
Those who engage lecturers, teachers, instructors or trainers
in a similar capacity, particularly, vocational and recreational
training providers, including First Aid Training Providers.
Trainers particularly in the vocational and recreational
fields who were engaged by their training provider under contracts for
services (self-employment contracts) but who had Class 1 (employees’)
National Insurance contributions deducted.
1. The Social Security (Categorisation of Earners)
Regulations 1978 (the Regulations) made provision for treating
lecturers, teachers, instructors or those in a similar capacity in
traditional educational establishments, such as schools, colleges or
universities etc, who were not employed under a contract of service (an
employment contract) as employees for NICs purposes.
2. With effect from 6 April 2012 the relevant provisions of
the Regulations were repealed so that the Regulations no longer apply
to lecturers, teachers, instructors or those in a similar capacity.
3. However, prior to repeal, it is possible that earlier
published HMRC guidance may have led some training providers
particularly in the vocational or recreational sector to incorrectly
apply the Regulations to payments made to trainers engaged under
self-employment contracts. If the Regulations were incorrectly applied,
Class 1 NICs may have been accounted for and paid to HMRC in error.
HMRC will now consider claims for the refund of any incorrectly paid
contributions. Such claims are limited by statute so that refunds may
only be made in respect of the last two tax years or, where a decision
was requested/challenged and this remains undetermined, the tax year in
which the challenge was made and the preceding tax year.
Arrangements for claiming refunds of Class 1 National
Insurance contributions paid in error
Who can claim refunds?
4. Refunds may be made by trainers or instructors, or those
who engaged them, and where amounts of NICs were paid in error
following HMRC’s guidance. This is primarily going to affect those
engaged in the provision of vocational or recreational training as set
out in HMRC’s guidance prior to repeal of the relevant provisions of
5. Refunds are not due where educational training providers
applied the Regulations. This is because there is no dispute or doubt
that the Regulations prior to 6 April 2012 applied to the providers of
educational training. In this context educational training provider
means a school, college, university or any such similar educational
6. Refunds are also not due where any trainer or instructor
was engaged under an employment contract and Income Tax (PAYE) and
Class 1 NICs were correctly accounted for.
7. Where a training provider owes HMRC any outstanding sums
(including Income Tax, National Insurance contributions or VAT) any
secondary Class 1 NICs refundable will, in the first instance, be set
against those outstanding sums and only the balance repaid.
How do I know if I am entitled to apply for a refund?
Vocational and Recreational Training Providers
8. We believe there are likely to be three categories of
training provider who may be eligible to apply for refunds:
- First Aid training providers who were subject to a
compliance intervention by HMRC and Class 1 NICs were recovered under
the Regulations where those amounts of NICs were paid in error
following HMRC’s guidance: HMRC is corresponding directly with these
training providers. However, if you fall into this category and have
not received a letter you should contact HMRC in writing at the address
- Other vocational and recreational training providers who
were subject to a compliance intervention by HMRC, Class 1 NICs was
recovered under the Regulations and where those amounts of NICs were
paid in error following HMRC’s guidance.
- Any other First Aid training or other vocational and
recreational training providers not the subject of a compliance
intervention but who wrote to HMRC requesting a decision as to the NICs
category under which their trainers should be included.
Applications for refunds from Trainers and Engagers
9. Trainers who were engaged under self-employment contracts
and who were subject to the Regulations by their training provider
engager can choose not to have any primary contributions paid in error
refunded to them but to let them count instead towards their
contributory benefit entitlement as if they had been correctly paid. If
a successful refund claim is received from a training provider which
meets the statutory criteria, HMRC will write to the affected trainers
asking them whether they wish the contributions refunded or not.
10. This does not prevent the engager from seeking a refund of
the wrongly paid secondary contributions where one is due or the
trainer notifying HMRC before they reach pension age that they now wish
to apply for a refund. Any such claim in these circumstances would be
subject to the statutory conditions for the claiming of refunds of
erroneously paid contributions including those noted in paragraph 3
11. Where trainers elect to have Class 1 contributions
refunded, HMRC will offset the contributions refundable against the
Class 2 and 4 National Insurance contributions correctly payable by
virtue of the trainer’s self-employed status. Additionally, where a
trainer owes HMRC any outstanding sums (including Income Tax, NICs or
VAT) any contributions refundable will be set against those outstanding
sums and only the balance repaid.
How to apply for a refund
12. Training providers who engaged trainers under
self-employment contracts and accounted for Class 1 NICs under the
Social Security (Categorisation of Earners) Regulations 1978 and who
think that they fall into any of the categories identified above should
contact HMRC in writing. When writing they should provide the
information detailed below. This will help us to check that their
particular circumstances meet the statutory qualifying rules governing
the refunding of Class 1 NICs.
Please write to:
The Employment Status Team
HM Revenue & Customs
PT (Product & Process)
Area 1E 09
100 Parliament Street.
Please provide the following information:
- training provider’s name
- whether a company, partnership or sole trader
- PAYE reference
- Accounts Office reference
- precise nature of business
- the years for which a refund is claimed
- the amount of refund being claimed
- the name, NI number and address of the actual training
provider’s trainers in respect of whom a refund is being sought
- full details of any written request made by the provider
or the trainer to an officer of HMRC (including the date of the
request) asking for a decision, or a variation of a previous decision,
as to the category of earner under which any of the training providers
workers should be included - this should be accompanied by a copy of
any decision received from HMRC
HMRC can make Financial Redress payments under its complaints
policy. Our guiding principle when making such payments is to ensure
that the customer is not out of pocket as a direct result of our
mistake. In the majority of cases, this will mean reimbursing the
additional costs incurred as a direct result of our mistake, to the
extent that they are reasonable. Common examples include the cost of
telephone calls, postage, and any additional professional fees
incurred, again to the extent that they are reasonable and
proportionate. We will also consider payments for demonstrable
financial loss, but not for any loss which is hypothetical, speculative
or insubstantial, or the value of any refundable Class1 NICs paid in
Further information about our complaints processes can be
found within the 'Complaints' factsheet from the link below.
About the Author
© Crown Copyright 2012.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
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Article Published/Sorted/Amended on Scopulus 2012-10-18 12:20:01 in Tax Articles