ECH17015 – Directors: NIC for Company Directors - How to Check

NIC is normally calculated by reference to the interval at which an employee is paid. However director’s NIC is calculated on an annual earnings basis. The lower and upper limits still apply.

Further information is contained at NIM12021 onwards.

It is important that the NIC calculation is checked for each director. To do this the ECO or ACO should

• determine the NIC due on the total earnings for the last closed deduction year, using the limits and percentages on card ECR106
• pay particular attention to new directors or those who have resigned during the year
• compare the figures of NIC due with the NIC paid
• record full details of the check on the ECR2000
• seek the employer’s explanation of any differences (ignore small discrepancies arising from the employer using the printed NIC tables to calculate the NIC).

Where an underpayment is discovered the ECO should

• refer the employer to booklet CA44 ‘National Insurance for Company Directors’
• seek recovery for earlier years, where appropriate.