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NIC Contributions for ILR Application

Posted: Mon Jan 07, 2013 1:31 pm
by deaconblues1
Hello,

I tried searching for the specific query but there wasn't much discussion about this. I am enquiring about minimum NI Contributions required to b shown for ILR - SET (O) Application. My situation:

- Living in the UK for 5 years on HSMP (2 years) and Tier 1 General Visa (3 years)
- Self-employed for 3.5 years as the Director of a Limited Company
- The company pays me a salary and I draw dividends regularly as well, a combination of which helps me comfortably clear the points requirement.

My queries are:

1. Is there a minimum class 2 NI Contribution I need to make? I've read experiences of people where the ILR form has been questioned because of no or insufficient NI contributions. Are there any (good or bad) personal experiences you can share with me?
2. I also filed a RTI request about this with UKBA and they've gotten back to me with the following response:
MY QUESTION1. As per first point above, the applicant 'must provide evidence that he/she was paying Class 2 National Insurance contributions during the period/s of self-employment used to claim points.': Is there a policy/directive on minimum NIC contribution required? What is the minimum NIC requirement for Tier 1 (General) applicant?

ANSWER: There is no UKBA policy directive on the minimum NIC contribution required, as it is a statutory requirement that those claiming to be self employed pay Class 2 NIC contributions which are proportionate to the earnings that they claim they have earned. If the level of NIC contributions appeared disproportionate to the state earnings for which the applicant is claiming points for, then the deciding officer would contact HMRC for verification.

MY QUESTION 2. How is the Class 2 NIC contributions taken into account by UKBA for making a decision on settlement applications?

ANSWER: If there is no evidence that Class 2 NIC contributions have been paid, then this would bring into question the amount of earnings that the applicant is claiming points for.

MY QUESTION 3. In the last 1 year, how many cases of Settlement Applications specifically through Tier 1 (General) route Form Set (O) have been rejected because of

a) Absence of NIC Contributions?
b) Inadequate NIC Contributions (if applicable)?

ANSWER: In the 12-month period from 1 December 2011 to 30 November 2012, a total of 180 Tier 1 general settlement applications were rejected.

We are unable to specify the reasons for rejection
Specifically,
... it is a statutory requirement that those claiming to be self employed pay Class 2 NIC contributions which are proportionate to the earnings that they claim they have earned. If the level of NIC contributions appeared disproportionate to the state earnings for which the applicant is claiming points for, then the deciding officer would contact HMRC for verification
I am a bit worried about this. Would any body share their wisdom, thoughts and advice?

Thanks
Satish

Posted: Tue Sep 10, 2013 5:59 pm
by itsprithvi
If you trade through a Limited Company then you will be treated as an employee for NI purposes. Self-employed NI is only for those who trade in their own personal name and have registered with HMRC as such.

You will notice that only employees and the self-employed pay NI. One of the advantages of owning your own Limited Company is that you can receive dividend income which, because it is treated as a return on your investment in the shares of the company, is not subject to NI.

As the company is free to pay its directors whatever they want (directors’ income is not subject to minimum wage legislation), it makes sense to maximise the amount paid by dividend and therefore avoid paying employees and employers NI.

Posted: Tue Sep 10, 2013 9:52 pm
by silverline
It appears that you are receiving salary as employed person and your salary is lower than NI threshold, so paying no NI is perfectly fine & LEGAL as long as your salary doesn't exceed threshold which is around £7k.

Class 2 NI is for self-employed registered as Self-Employed with HMRC. They normally receive UTR # to file return. Your income APPEARS to be employment + dividend income.

You should not be worried.

Posted: Tue Sep 10, 2013 9:53 pm
by silverline
It appears that you are receiving salary as employed person and your salary is lower than NI threshold, so paying no NI is perfectly fine & LEGAL as long as your salary doesn't exceed threshold which is around £7k.

Class 2 NI is for self-employed registered as Self-Employed with HMRC. They normally receive UTR # to file return. Your income APPEARS to be employment + dividend income.

You should not be worried.