The Department for Work & Pensions has published draft regulations about the treatment of class 2 contributions recovered by HMRC through the PAYE tax code for the purposes of social security benefits.

HMRC is extending the use of the PAYE tax code to recover debts of Class 2 NICs, providing another method of collecting such debts. Class 2 NICs count towards certain contributory benefits including basic State Pension, bereavement benefits; Employment and Support Allowance and Maternity Allowance.

Class 2 contributions are paid on time if they are paid by the first Sunday in the year following the end of the tax year in which the contributions were due. Contributions paid after that time but within six years are generally classed as late paid and only count for benefit purposes from the date they are paid, or in certain cases from a future date; they do not count for past periods. Class 2 NICs debts recovered through PAYE will be classed as late paid. These amending regulations set out that such contributions will be treated as paid on the last day of the tax year in which they are recovered. From that date they will be treated in the same way as other late paid contributions.