Enter Your E-mail

Peter Arrowsmith FCA highlights a selection of NIC matters, and provides a useful tip for small employers claiming the recovery of Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP) paid.

National Insurance Contributions Act 2008

This Act received Royal Assent on 21 July.

The Lords amendments made previously were, as anticipated, rejected by the Commons on the grounds that 'they involved charges on the public revenue and were therefore subject to Commons financial privilege' This seems rather feeble given that the changes did no more than limit future powers to increases of the Upper Earnings Limit (UEL) - no restriction was being put on the changes announced in Budget 2007. As it is, the UEL can now be effectively abolished at any time with only cursory examination by Parliament and with little chance of being overturned.

Pensions Bill

The Lords Committee stages were at last completed on 17 July and Third Reading is expected on 7 October.

Finance Act 2008

This Act received Royal Assent on 21 July containing provisions affecting National Insurance contributions as follows:

• New appeals procedures (s 124)
• Taking control of goods (s 127)
• Setting off repayments against other amounts due (s 130)
• Remission of interest and surcharges in the case of national disasters (s 135).

With regard to the latter, the floods of June and July 2007 have been retrospectively designated by the Finance Act Section 135 (Disaster or Emergency) Order 2008 (SI 2008/1936) in line with the announcement made on 25 July 2007.

Salary sacrifice and canteen cards

Contacts may be aware of a card charging arrangement in respect of canteens and a salary sacrifice opportunity. A number of card suppliers exist.

HM Revenue and Customs is, perhaps not surprisingly, concerned about such schemes and doubts their efficacy. It is understood that they are currently in the course of obtaining legal advice.

In the meantime they say that their guidance is limited to that at Employment Income Manual EIM21671. Strangely, the relevant page cannot be found by entering the Manual at the front page and following the links but can nonetheless still (at the time of writing) be obtained by going to the page direct -
http://www.hmrc.gov.uk/manuals/eimanual/EIM21671.htm

Tips

The government has announced that National Minimum Wage (NMW) legislation will be changed so that tips will not be able to be counted under any circumstances as part of an employee's NMW entitlement. This is expected to take effect sometime in 2009.

I presume that no changes will be required to the existing NIC legislation.

Changes to Statutory Sick Pay paperwork

The Statutory Sick Pay (General) (Amendment) Regulations 2008 (SI 2008/1735) make changes that will come into effect from 27 October 2008, ie at the same time as the introduction of the employment support allowance that replaces (inter alia) incapacity benefit. It paves the way for an amended SSP1 containing less information. The following details will no longer be required on a new version of the form yet to be made available:

• First date of sickness
• Number of weeks and days of SSP paid
• Qualifying days for SSP
• Details of any linking spells (see also below).

These regulations also abolish the little used leavers statement SSP1(L) together with the link with any periods of sickness with a previous employer.

NIRS2 transfer delayed

The proposed transfer of PAYE records onto NIRS2 had been planned for this coming October but it was announced last month that implementation has now been deferred. A new implementation date has not yet been set nor has any reason been offered for this delay. It means that the prospect of better service for those with more than one employment or who are both employed and self-employed is also delayed.

Tip of the month - August 2008

Where an employer has paid £45,000 or less gross (*) NIC for the previous tax year, they can recover ALL Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP) paid, plus 4.5% compensation, instead of only recovering 92%. For this purpose Class 1A and Class 1B are excluded. So if for example an employer paid £3,000 Class 1 NIC per month for 11 months, £10,000 in the final month of the year (when some bonuses were paid) and then £3,000 Class 1A (in the following July) the total payments of NIC for the year are £46,000.

However, only the £43,000 Class 1 NIC paid on the monthly remittances counts towards the £45,000 limit and so the greater rate of SMP, etc recovery is due. Special rules apply for new employers.

(*) Gross means before deductions of any Statutory Sick Pay, SMP, SPP or SAP recoveries made in that earlier reference year.

The above is taken from 'NIC Newsletter' (01/08/2008), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.