NIC refund indicator on an Earlier Year Update (EYU) - April 2016 will see change to the guidance

29 March 2016

Do you need to submit an Earlier Year Update (EYU)?

If you need to make a correction to the PAYE data you have submitted and you don’t discover this until after 19 April 2016, you will need to use an Earlier Year Update. In line with previous years, do not send corrected year to date figures, instead you should provide the difference between the last report and the final figures for the tax year.

If you need to submit an EYU with a negative amount of employee National Insurance contributions (NICs) you also need to indicate on your submission whether you have refunded the NICs to your employee and you will do this by setting the NIC refund indicator to report ‘Yes’ or ‘No’.

From April 2016, the circumstances in which you should set the indicator to ‘Yes’ will change. If you submit an EYU with a negative amount of employee NICs, from April 2016, there will be two circumstances when you should set the NIC refund indicator to ‘Yes’.

  • Where the overpayment of employee NICs has been refunded to the employee, or
  • To confirm that the EYU will amend the data shown on a previous submission but no refund of employee NICs is due for example due to a clerical error.

When to say no?

The guidance on when to set the NICs refund indicator to ‘No’ remains the same from April 2016 and will therefore only need to be used if there is an overpayment of employee NICs that hasn’t been refunded to the employee.

Setting the NIC refund indicator incorrectly will impact on the employer charge.

HMRC Employer Bulletin issue 58 includes an article on issues that may arise during the end of year process for 2015/16 tax year and confirms that guidance on GOV.UK on how to correct errors will be updated to incorporate the changes coming in from April 2016.

Alternatively detailed guidance can be found in HM Revenue & Customs CWG2 (2016) Employer Further Guide to PAYE and NICs