NIM25008 - Class 3 NICs: Restrictions on the right to pay: precluded Class 3 NICs: earnings factor is less than 25 times the lower earnings limit

Regulation 4 Social Security (Crediting and Treatment of Contributions, and National Insurance Numbers) Regulations 2001

Regulation 4 Social Security (Crediting and Treatment of Contributions, and National Insurance Numbers) Regulations (Northern Ireland) 2001

As explained in NIM25001, a person is not entitled to pay (ie, is precluded from paying) Class 3 NICs in certain circumstances. Subject to the qualification in NIM25011, one of those is that they cannot pay for any tax year for which the aggregate of their earnings factors (“EFs”) derived from:

• earnings on which primary Class 1 NICs have been paid (for the 2003/04 and subsequent tax years, earnings on which primary NICs at the main primary percentage rate have been paid (see NIM01110)); or
• credited earnings; or
• Class 2 NICs paid; or
• Class 3 NICs paid or credited,

is less than 25 times the lower earnings limit (“LEL”) for the tax year in question, and either:

• the period within which any Class 3 NICs may be treated as paid [for the tax year] under regulation 4 has passed; or
• before that date has been reached, the person has applied, under regulation 56 ( NIM38501), for a refund of any Class 3 NICs paid for that year.

For the purposes of the above, “credited” means credited for the purposes of State Pension, widowed mother’s allowance, widowed parent’s allowance, bereavement allowance, and widow’s pension.

Example

Mrs Z pays 10 Class 3 NICs for the 2003/04 tax year. The EF derived from those is £770. But having paid the 10 NICs, she decides, in June 2003, that she doesn’t want to pay the other 42 NICs which would make the year a qualifying one. Instead, at that time, she asks for a refund of the 10 NICs.

The EF of £770 is less than 25 times the LEL for the 2003/04 year. The time by which Class 3 NICs are, for that year, treated as paid for benefit purposes under regulation 4 is 5th April 2010. As Mrs X has applied for a refund of the 10 NICs before that date, those NICs are precluded.

The fact that she was not precluded from paying the NICs in the first place by any of the circumstances in NIM25005 is immaterial. The NICs have, in essence, become precluded.

For details of the other circumstances in which a person is precluded from paying Class 3 NICs, see NIM25006 - NIM25007 and NIM25009 –NIM25017.