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HMRC are also responsible for maintaining and safeguarding individuals' National Insurance (NI) accounts, both in the UK and for the benefit of customers working overseas.
In the year to March 2005, we received a number of complaints about HMRC's Centre for Non Residents (CNR) and their handling of NI contributions paid by customers working overseas. So far, none of these complaints have been upheld and the following summary is typical of those complaints that we have investigated.
National Insurance case summary
Mr F is British and lives abroad. In order to safeguard his UK Retirement Pension, he has been paying Class 3 NI contributions since 1997. As an employed earner, however, Mr F has always had the choice to elect to pay either:
- voluntary Class 2 NI contributions (which the self-employed are legally obliged to pay in the UK), or
- voluntary Class 3 NI contributions (which may be paid by the non-employed in the UK to safeguard their pension rights in the absence of contributions paid through employment).
Up until April 2000, Class 2 NI contributions were slightly more expensive than their Class 3 equivalents. From April 2000 onwards, however, the cost of Class 2 NI contributions was significantly reduced.
Mr F only realised the change in rates in November 2003, when he requested a Retirement Pension forecast. The information supplied with the forecast alerted him to the change in rates. He subsequently contacted the CNR, requesting that he be allowed to pay Class 2 NI contributions instead of Class 3. The CNR agreed to this change but would not allow Mr F to convert the Class 3 NI contributions that he had paid from April 2000 to Class 2 and refund the excess paid.
We did not uphold this complaint.
We agreed with the CNR's view that there were no grounds for providing a refund of the Class 3 NI contributions already paid by Mr F since April 2000.
Where a NI contributor has a choice concerning which class of contribution to pay, it follows that it is their responsibility to choose the appropriate class based on their individual needs and circumstances. There is, of course, no legal liability for an individual to pay 'voluntary' classes of NI and no enforcement to pay. It is simply a matter of individual choice. The responsibility of HMRC in such circumstances is rightly limited to ensuring that contributors are made aware of changes to the rate that they are paying.
In this case, the Office collected Mr F's contributions in keeping with his original choice. They could not refund the difference between the Class 3 NI contributions that he had paid and the Class 2 contributions that he subsequently began paying. This is because voluntary contributions can only be refunded in quite limited circumstances. An example of this could be where an individual has paid Class 3 NI contributions when they have already paid, or been credited with, sufficient contributions for the year to qualify for pension purposes. They cannot be refunded in circumstances such as this, where the underlying issue concerns cost alone.
There was considerable media coverage at the time the Class 2 rate was lowered and HMRC makes the rates of NI available through a variety of sources, including their website. On that basis, we did not conclude that the actions of the CNR were unreasonable.
