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Peter Arrowsmith FCA outlines a selection of NIC matters, and highlights the potential implications of gender reassignment for NIC purposes. 

New appeal system

The new tax and NIC appeals system went live on Wednesday 1 April 2009. The new service is run by the Tribunals Service (part of the Ministry of Justice) and appeals will now be sent direct to them at:

The Tribunals Service
Tax
2nd Floor
54 Hagley Road
Birmingham
B16 8PE.

Appeals will be allocated into one of four streams:

• paper
• basic (no further documents needed)
• standard (need documents and other preparation), and
• complex

Most of the last are likely to be heard in the first instance by the Upper Tribunal.

As regards costs, there will be no awards in the First-tier Tribunal except where either side has acted unreasonably or the case is a complex one. Costs can be awarded in complex cases though the appellant (not HMRC) can opt out of this before the hearing. In contrast the Upper Tribunal will have a full costs regime.

Disclosure of avoidance schemes

The National Insurance Contributions (Application of Part 7 of the Finance Act 2004) (Amendment) (No. 2) Regulations 2009 (SI 2009/612) make further amendments to bring the NIC requirements into line after the Finance Act 2008 (and associated tax regulations). The changes are mainly in connection with the notification of Scheme Numbers to users of avoidance schemes, but also require users to specify the particular NIC earnings period in which the benefit of use of the scheme is obtained.

Aggregation - CWG2 error

Employers for whom aggregation is in point (where there are businesses being carried on in association) should beware the new 2009 edition of CWG2 (Employer Further Guide to PAYE and NICs).

Example 4 on pages 46 and 47 is incorrect as it wrongly charges 11% employee contributions on all not contracted-out earnings even above the Upper Earnings Limit. The illustrations on page 47 are similarly wrong and in fact would cause an electronic filing rejection as column 1d on the P11 cannot exceed  £319 per month (£3,828 per annum on the P14) in 2009/10 as is correctly illustrated in examples 5 and 9. I understand that either a supplement or a complete new issue of CWG2 is on the horizon.

Car trade - averaging for benefits in kind

HM Revenue and Customs has further simplified the proposal on car averaging published late last year. It will now no longer be necessary to group cars at each of the employer's locations - the averaging can be done on a national basis.

Further details are at www.hmrc.gov.uk/cars/averaging.pdf

New HMRC adjudicator

Dame Barbara Mills' ten year stint as the Adjudicator will come to an end on 20 April, when she will hand over to Judy Clements OBE. Judy is at present Director of the Customer Services and Communication Directorate at the Independent Police Complaints Commission and can therefore look forward to the pleasure of a shorter job title!

Class 3 Contributions

The Social Security (Additional Class 3 National Insurance Contributions) Amendment Regulations 2009 (SI 2009/659) make further provision with regard to the new facility from next Monday to pay Class 3 contributions - in certain circumstances - for ANY six years from 1975/76 onwards.

Note, though, that there will be no re-working of pension arrears where any such payments are made on or after 6 April 2011. Note also that - whatever the year(s) in question - the rate due will be the current rate (i.e., £12.05 per week from Monday and no doubt further increasing in future years).

Revised March tip

If you are involved with paying Statutory Sick Pay (SSP) either to your own employees or to clients' employees you need to note that with the replacement of Incapacity Benefit (IB) last October by the Employment and Support Allowance (ESA), the SSP linking period in the early days of a new employment is now twelve weeks in the case of ESA claimants, rather than the eight weeks that still applies to IB claimants. In either case they should present you with a suitable DWP 'linking letter'. Employers will come across either situation for some time as ESA applies initially only to new claimants - IB claimants will be switched over a year or two. The key point for employers is to pay SSP if there is no linking letter - those employers who choose to check with new employees where there has only been a few weeks of work before an absence now need to initiate their query and phrase their question in terms of a twelve week gap, even though for a while a 9-12 week link will be ineffective as regards any new employees who had previously received IB rather than the new ESA. (The linking rule referred to here is the rule whereby if the employee was receiving the benefit within the previous specified number of weeks, they would resume that state benefit rather than you having to pay SSP.It should be noted that the eight week link between spells of sickness during the employment itself - rather than before - remains at eight weeks).

It also remains the case that in some special circumstances there can be a 104-week linking period. This continues unchanged and will continue to be authorised by a BF220 (or similar) linking letter for IB cases - but for ESA claimants will now become an ESA220 (etc.) letter.

Tip of the Month - April 2009

Gender reassignment can produce odd National Insurance effects so employers and those carrying out payroll functions on their behalf need to be aware of all possibilities.

For example, where a woman 60 or over and under 65 presents a full gender reassignment certificate so that thereafter he is recognised as a man, employee National Insurance contributions will once again be due up to the male state pension retirement age. The same will apply as regards Class 2 and Class 4 for the self employed.

In addition if the former woman is a director, the directors' earnings period (annual, unless only recently appointed) is split in two and the earnings in each period subjected to their own separate pro-rated limits and thresholds.

The above is taken from 'NIC Newsletter' (03/04/2009), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.