ECH22130 - Settlement: Time Limit for Recovery - Normal Time Limits (NTL) and Extended Time Limits (ETL)

TAX

Regulation 80(5) and Regulation 13(5) apply the assessing provisions of TMA 1970 to the making of Regulation 80 determinations and Regulation 13 determinations.

All determinations and assessments require ‘Discovery’ of further liability, Section 29 TMA. ETLs require the making good of a loss of tax due to the fraudulent or negligent conduct of the employer/contractor or a person acting on his behalf.

UP TO 1995/96

The NTL is

• six years after the end of the tax year.

The ETL is

• twenty years after the end of the tax year.

FROM 1996/97

The NTL is

• five years after 31 January next following the tax year

The ETL is

• twenty years after 31 January next following the tax year.

For example

Consideration should be given to issuing protective assessments for any additional liabilities when the NTL deadline approaches.

NICs

There is nothing in the NICs legislation that specifies any time limit for recovery.

However NICs are a civil debt, and collection of arrears of NICs is subject to the Limitations Act 1980. The Limitations Act restricts the time allowed to enforce payment of a debt by civil proceedings to 6 years . The act covers all civil debts, not only NIC, it is general law.

It does not remove a liability; it restricts the power to enforce payment of a debt by civil proceedings. These are two separate issues.

The Act provides a defence against collection of the debt.

It is no more than a defence, and is a defence which can be overcome in cases where there is evidence of fraud or deliberate concealment.

We therefore have two situations:

1. where there is no evidence of fraud or deliberate concealment of a NIC liability
   
   
2. where there is evidence of fraud or deliberate concealment of a NIC liability.
   
   

NO EVIDENCE OF FRAUD OR DELIBERATE CONCEALMENT

Here we have to consider whether we can enforce the debt, and need to look at the time constraints. The Limitation Act 1980 prevents legal enforcement of a debt if proceedings are instigated more than 6 years after the liability first arose.

Note: the six-year limit is not based on tax years.

For example:

Bonus payments were paid in the 1 month period to 30 June 2002, the payments were subjected to tax but NIC was not deducted.

• The due date for payment to the Inland Revenue was 19 July 02
• The six-year period starts 20 July 2002
• The six-year period ends 19 July 2008
• Enforcement of the NICs charge is not possible from 20 July 2008

If there is a concern that the limitation period may expire, because the level of liability is either still under negotiation or there are appeal proceedings it will become necessary to take protective action in accordance withECH22003.

EVIDENCE OF FRAUD OR DELIBERATE CONCEALMENT

For example:

Bonus payments were paid in the 1 month period to 30 Dec 2001, and all subsequent years, payments were recorded in the Employers records as purchases of stock and were subjected neither to tax nor NIC.

During a compliance check carried out in June 2008 the ECO queried these payments and uncovered their true nature.

The NIC debt for Dec 2001 can be enforced, provided enforcement action is taken within 6 years of HMRC discovering the fraud or concealment.

INTEREST - RETROSPECTION

There is no restriction on retrospection on the recovery of interest provided

• that the liability on which it is charged can be formalised by a

• the year involved is not earlier than 1992/93.

Note: Under no circumstances should interest for years before 1992/93 be included in Employer Compliance settlements.