Peter Arrowsmith, FCA, looks at some of the recent National Insurance developments including Budget 2012 and some NIC tips for employers for the new tax year.
Budget 2012
The Government announced some details of tax rates and allowances for 2013/14. The Basic Rate and Higher Rate will remain at 20% and 40% respectively, but the Additional Rate of 50% will reduce to 45%. The Personal Allowance will increase to £9,205 for those under 65 and the 40% rate will apply from taxable income of £32,245. In line with this, the NIC Upper Earnings Limit (and the Upper Profits Limit for Class 4) will decrease to £41,450 (approx £797 per week, down from £817).
The car fuel benefit charge for 2012/13 will be calculated on a multiplier of £20,200. Van benefit and van fuel benefit rates will not change. The car fuel benefit multiplier will increase again for 2013/14 by 2 percentage points more than the annual rate of inflation. The van fuel benefit charge for 2013/14 will increase by inflation. From 6 April 2014, the applicable car benefit percentages for cars with CO2 emissions of more than 75g/km will be increased by one percentage point (up to the existing maximum of 35%). In both 2015/16 and 2016/17, the applicable car benefit percentages will increase by two percentage points, to a maximum of 37%. From 6 April 2016, the Government will remove the 3% diesel supplement so that diesel cars will be subject to the same level of tax as petrol cars. These changes will also apply to Class 1A National Insurance contributions.
Regulation Changes
The Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations 2012 (SI 2012/804) amend with effect from 6 April 2012 the Class 1 Lower Earnings Limit and Earnings Thresholds to the figures announced last autumn – see UK National Insurance Rates and Limits 2012/2013.
Likewise, the Social Security (Contributions) (Re-rating) Order 2012 (SI 2012/807) increases the Class 2 and Class 3 rates, the Small Earnings Exception limit and the Class 4 Lower Profits Limit. The Social Security (Contributions) (Re-rating) Consequential Amendment Regulations 2012 (SI 2012/867) increase the Share Fishermen’s rate to £3.30 from 6 April 2012.
Away from rates and limits, the Social Security (Contributions) (Amendment No. 2) Regulations 2012 (SI 2012/817) make various amendments consequential upon the removal of COMPS contracted-out rebates from close of business on 5 April 2012, abolish three reliefs on the recommendation of the OTS (*) and amend and extend the exceptions from earnings for HM Forces’ allowances and council tax payments (all with effect from 6 April 2012).
(*) these are the pre-1998 relocation relief, certain payments to mariners and relief for students coming to the UK.
The Social Security (Contributions) (Amendment No. 3) Regulations 2012 (SI 2012/821) introduce record keeping requirements (and penalty provisions) for employers testing the Real Time
Information filing system from 6 April 2012 (as well as for those joining testing from April 2013 and, by compulsion, virtually all employers from October 2013). They also provide for the previously announced possibility of non-paying or late-paying employers being required to provide security in the future. There are also some incidental tidying-up provisions included.
Teachers and Lecturers are Normal!
From 6 April 2012, at any rate.
The previously announced removal of lecturers, teachers and instructors from the 1978 Categorisation of Earners Regulations is achieved by the Social Security (Categorisation of Earners) (Amendment) Regulations 2012 (SI 2012/816).
Auto Enrolment
The limits for 2012/13 will be that pension contributions are due on all earnings in the band from £5,564 (LEL for NIC) to £42,475 (UEL for NIC), provided earnings equal or exceed £8,105 (the personal tax allowance). All figures stated in annual terms.
More PA Holdings
Manthorpe Building Products Ltd (TC1778) is a case very similar to PA Holdings (see most recently the NIC Update - February 2012), the decision on which in favour of HMRC was delayed until the latter Court of Appeal case was heard.
I’m rather alarmed, though, by the apparent ignorance of the FTT judge who seems not to know that there are only 90 days to recover PAYE on employment related securities charges without attracting another tax and NIC charge on that tax element (even if later refunded but after the expiry of the time limit). He refers, in a completely unnecessary comment, to HMRC not advancing ‘the understandable, but somewhat extraordinary, contention that [the payment of the tax] constitutes yet a further benefit of employment, chargeable to tax’. On the false assumption that there is no such statutory provision he considers that the employer has half-won the case!!
Tips of the Month
Two end of year (or rather start of new tax year) reminders.
First, for those who haven’t yet got the message and are wondering whether their new software is faulty or where the missing HMRC Tables are – there is no contracting-out through money purchase schemes with effect from 6 April 2012. Employees previously covered by COMPS will now have to pay the relevant full not contracted-out rate (unless, perhaps rather unusually, they have been able to join a salary related scheme instead).
Secondly, those benefiting from the NIC Regional Holiday will need to make a “mirror” return otherwise they will be chased for non payment of the contributions they have been able to save. However, despite the intention to provide electronic filing for this need, the return is on paper yet again this year. That paper return should be received from HMRC by 16 April. Chase them if you do not receive yours, as it will need to be submitted by 19 May (whether they have sent you one or not).
The above is taken from 'NIC Newsletter' (01/04/2012), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.
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