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Peter Arrowsmith FCA highlights a selection of NIC matters, and points out that for some people wishing to pay Class 3 NIC, they should consider doing so sooner rather than later.  

Class 1A on cars for motor traders, etc.

Unless you have a client in the trade, you may not know that special arrangements currently exist for dealing with car benefits to employees in the car trade who may take home many different vehicles over the course of a tax year. However, the procedures can operate in ways that vary from one area of the country to another. HM Revenue and Customs will therefore introduce a standard method of calculation for the trade with effect from 6 April 2009. Details will be included in the Employment Income Manual from April but the new pages can in the meantime be accessed at www.hmrc.gov.uk/cars/averaging.pdf

Medical check ups

If you have clients who provide annual check-ups to their employees then you may well recall the new tax and NIC regulations in 2007 and subsequent furore. Subsequently, HM Revenue and Customs announced that the previous concessionary treatment would continue - at first just for the rest of 2007/08 and then subsequently also for 2008/09.

HMRC has now confirmed that legislation will be included in the 2009 Finance Bill, effective from 6 April 2009, to exempt from tax (and NIC) the provision of yearly health screening and medical check-ups without the need for these to be provided generally to all employees. It is expected that in practice the same outcomes will arise as was the case prior to summer 2007. The existing statement regarding the concessionary treatment continues to apply for the remainder of 2008/09. I know that some employers only provide these checks every other year, and we shall presumably have to wait for the precise wording of the Finance Bill provisions to see just how such employers and their employees will be affected.

Appeals - changes

We are still on schedule for the replacement of the current NIC and tax appeals system involving the tax Commissioners with the new unified appeals tribunals. It is expected that the change for NIC and general tax matters will take place on 1 April 2009. But the new system is up and running in other respects.

There will ultimately be six Chambers in the First-tier tribunal:

• Social Entitlement
• Health, Education and Social Care
• War Pensions and Armed Forces Compensation
• Taxation
• Land, Property and Housing
• General Regulatory

The first three listed above commenced on 3 November 2008 - the Social Entitlement Chamber handles appeals about state benefits, statutory payments and tax credits.

There will be three Upper Tribunal Chambers:

• Administrative Appeals
• Lands
• Finance and Tax

Tip of the month - January 2009

A number of years ago the usual time limit on the payment of Class 3 voluntary contributions was extended for the years 1996/97 to 2001/02 inclusive. The penalty rate that generally applies where payment is made more than two years after the end of the year to which contributions relate was also suspended. There were some additional extensions along the way and changes for some later years too.

It may be that some people who have noted previously that they need to pay Class 3 for some or all of the years in question have deferred doing so in order to earn interest on the money in the meantime. Now is the time to get those old deficiency notices dug out and a cheque written!

There are some exceptions (see below), but in general terms such people have until only 5 April 2009 to make payment for those six years. At the same time the normal six year time limit expires in respect of 2002/03 (though in this case the penalty rate has been in point since 6 April 2005).

Exceptions are:

• those who reached state pension age on or before 24 October 2004. They have until 5 April 2010 to pay for 1996/97 to 2001/02
• those who were wrongly awarded credit for either incapacity or full time education for any of the years 1993/94 to 2007/08 inclusive. These people should have been written to a year or more ago advising of the withdrawal of those credits and of the opportunity to pay Class 3.They have until 2014 to pay any desired Class 3 with no penalty rate, and so may want to take a bit longer before rushing into action.

Whilst a late insertion in the Pensions Act 2008 gives an additional opportunity for some people who reach state pension age between 6 April 2008 and 5 April 2015 (to pay for up to any six years from 1975 in fact), the Act contains no provision for the penalty rate not to apply and given that the way in which this opportunity is to be self-funded (by substantially increasing the Class 3 rate from April 2009) I would not have expected so. Further, this provision in the Pensions Act does not come into force until 6 April 2009 i.e., the same time that the Class 3 rate increases to over £12 per week, and by which time the date for paying penalty-rate free for 1996/97 to 2001/02 has passed. It is also subject to further regulations yet to be issued by the Treasury - and I expect them to leave this until as near to 6 April 2009 as they dare.

Where people have gaps from 1996/97 to 2001/02 inclusive but are within the category who might be helped by the Pensions Act 2008 change, I would recommend that they still pay for any or all of the six years 1996/97 to 2001/02 by 5 April coming. This guarantees payment at historical rates. If there are further gaps and the Pensions Act may be of further help, then that can be considered separately as a future exercise. In fact, since the new opportunity is for only six years, payment where appropriate for 1996/97 to 2001/02 (and in time) potentially doubles that to twelve in any event.

It should be noted that there are some special provisions for some later years too, in certain circumstances. The most recent addition is Social Security (Contributions) (Amendment No. 6) Regulations 2008 (SI 2008/3099) which extend the time limit in certain circumstances (and also the time from which the penalty rate will be charged) as regards 2006/07. The penalty rate would ordinarily have applied from 6 April 2009 - and will still do so where the circumstances below do not apply.

The extension - which is to 5 April 2013 - is available in cases where the contributor will reach pensionable age on or after 6 April 2010 and they have ever received any Home Responsibilities Protection (HRP).

The above is taken from 'NIC Newsletter' (05/01/2009), and is reproduced with the kind permission of Peter Arrowsmith FCA, who retains the copyright.